Humana 2007 Annual Report Download - page 84

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. ACQUISITIONS
On November 30, 2007, our Commercial segment acquired KMG America Corporation, or KMG, for cash
consideration of $156.3 million including direct transaction costs, plus the assumption of $36.1 million of long-
term debt. KMG provides long-duration insurance benefits including supplemental health and life benefit plans.
On October 1, 2007, our Commercial segment acquired CompBenefits Corporation, or CompBenefits, for cash
consideration of $369.1 million including direct transaction costs. CompBenefits provides dental and vision
insurance benefits. These acquisitions, which were financed through a combination of cash and borrowings under
our credit agreement, expand our commercial product offerings allowing for significant cross-selling
opportunities with our medical insurance products.
The purchase price was allocated to the fair value of KMG’s and CompBenefits’ assets acquired and
liabilities assumed. The excess of the purchase price over the fair value of net assets acquired resulted in $335.8
million of non-deductible goodwill for the Commercial segment.
The preliminary fair values of KMG’s and CompBenefits’ assets acquired and liabilities assumed at the date
of the acquisition are summarized as follows:
KMG CompBenefits
(in thousands)
Current assets ................................................ $ 38,638 $ 55,144
Other intangible assets ......................................... 102,638 54,143
Goodwill ................................................... 36,383 299,439
Other long-term assets ......................................... 733,461 20,960
Total assets acquired ...................................... 911,120 429,686
Current liabilities ............................................. (39,871) (36,365)
Future policy benefits payable ................................... (647,057) —
Long-term debt .............................................. (36,083) —
Other long-term liabilities ...................................... (31,846) (24,178)
Total liabilities assumed ................................... (754,857) (60,543)
Net assets acquired ....................................... $156,263 $369,143
The other intangible assets, which primarily consist of customer and provider contracts, have a weighted
average useful life of 19.6 years for KMG and 11.5 years for CompBenefits. The long-durational nature of
KMG’s customer contracts contributes to a longer useful life and corresponding higher fair value. The purchase
price allocations are preliminary, subject to completion of valuation analyses including, for example, refining
assumptions used to calculate the fair value of other intangible assets and future policy benefits payable.
On March 1, 2007, our Government segment acquired DefenseWeb Technologies, Inc., or DefenseWeb, a
company responsible for delivering customized software solutions for the Department of Defense, for cash
consideration of $27.0 million.
On May 1, 2006, our Commercial segment acquired CHA Service Company, or CHA Health, a health plan
serving employer groups in Kentucky, for cash consideration of $67.5 million.
The results of operations and financial condition of KMG, CompBenefits, DefenseWeb and CHA Health
have been included in our consolidated statements of income and consolidated balance sheets from the respective
acquisition dates. The proforma financial information assuming these acquisitions had occurred as of the
beginning of each respective period was not material to our results of operations.
74