Humana 2008 Annual Report Download - page 59

Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were
$188.7 million higher than claims payments during 2008 and $185.1 million less than the corresponding claim
payments during 2007. See Note 2 to the consolidated financial statements included in Item 8.—Financial
Statements and Supplementary Data for further description.
In exchange for terminating interest-rate swap agreements in 2008, we received cash of $93.0 million.
The remainder of the cash used in or provided by financing activities in 2008, 2007, and 2006 primarily
resulted from the change in the securities lending payable, common stock repurchases, the excess tax benefit
from stock compensation, and proceeds from stock option exercises. The decrease in securities lending in 2008
resulted from the tightening of the credit markets while the increase in 2007 and 2006 coincides with higher
average balances of investments to lend. During 2008, we repurchased 2.1 million common shares for $92.8
million under the stock repurchase plan authorized by the Board of Directors. We also acquired common shares
in connection with employee stock plans for an aggregate cost of $13.3 million in 2008, $27.4 million in 2007,
and $26.2 million in 2006.
Future Sources and Uses of Liquidity
Stock Repurchase Plan
On February 22, 2008, the Board of Directors authorized the repurchase of up to $150 million of our
common shares exclusive of shares repurchased in connection with employee stock plans. During the year ended
December 31, 2008, we repurchased 2.1 million shares in open market transactions for $92.8 million at an
average price of $44.19. On July 28, 2008 (announced August 4, 2008), the Board of Directors increased the
authorized amount to $250 million, excluding the $92.8 million used prior to that time in connection with the
initial February 2008 authorization. The shares may be purchased from time to time at prevailing prices in the
open market, by block purchases, or in privately-negotiated transactions, subject to certain restrictions on
volume, pricing and timing. Due to continued volatility and turmoil in the financial markets, we have not yet
repurchased any shares under the July 2008 authorization. The presently-authorized share repurchase program
expires on December 31, 2009.
Senior Notes
During 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15%
senior notes due June 15, 2038. The 7.20% and 8.15% senior notes are subject to an interest rate adjustment if the
debt ratings assigned to the notes are downgraded (or subsequently upgraded) and contain a change of control
provision that may require us to purchase the notes under certain circumstances. We also previously issued $300
million of 6.30% senior notes due August 1, 2018 and $500 million of 6.45% senior notes due June 1, 2016. All
four series of our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the
principal amount plus accrued interest and a specified make-whole amount. Concurrent with the senior notes
issuances, we entered into interest-rate swap agreements to exchange the fixed interest rate under these senior
notes for a variable interest rate based on LIBOR. During 2008, we terminated all of our swap agreements. We
may re-enter into swap agreements in the future depending on market conditions and other factors. Our senior
notes and related swap agreements are more fully discussed in Notes 11 and 12 to the consolidated financial
statements included in Item 8.—Financial Statements and Supplementary Data.
Credit Agreement
Our 5-year $1.0 billion unsecured revolving credit agreement expires in July 2011. Under the credit
agreement, at our option, we can borrow on either a revolving credit basis or a competitive advance basis. The
revolving credit portion bears interest at either a fixed rate or floating rate based on LIBOR plus a spread. The
spread, currently 35 basis points, varies depending on our credit ratings ranging from 27 to 80 basis points. We
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