Humana 2008 Annual Report Download - page 92

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Auction rate securities are debt instruments with interest rates that reset through periodic short-term
auctions. The auction rate securities we own, which total $74.1 million, or less than 1% of our total invested
assets, primarily consist of tax-exempt bonds, rated AAA by S&P and collateralized by federally guaranteed
student loans. Liquidity issues in the global credit markets led to failed auctions. A failed auction is not a default
of the debt instrument, but does set a new, generally higher interest rate in accordance with the original terms of
the debt instrument. Liquidation of auction rate securities results when a successful auction occurs, the securities
are called or refinanced by the issuer, a buyer is found outside the auction process, or the security matures. We
continue to receive income on all auction rate securities and from time to time full and partial redemption calls.
Given the liquidity issues, fair value could not be estimated based on observable market prices and as such
unobservable inputs were used.
Total gains or losses included in earnings for the year ended December 31, 2008 were included in
investment income.
6. MEDICARE PART D
As discussed in Note 2, on January 1, 2006, we began covering prescription drug benefits in accordance
with Medicare Part D under multiple contracts with CMS. In 2008, we paid $78.7 million related to our
reconciliation with CMS regarding the 2007 Medicare Part D risk corridor provisions. The consolidated balance
sheets include the following amounts associated with Medicare Part D as of December 31, 2008 and 2007:
2008 2007
Risk
Corridor
Settlement
CMS
Subsidies
Risk
Corridor
Settlement
CMS
Subsidies
(in thousands)
Other current assets .................................... $78,728 $ 322,108 $ 30,578 $580,383
Trade accounts payable and accrued expenses ............... (23,311) (219,676) (133,169) (273,045)
Net current asset (liability) .......................... $55,417 $ 102,432 $(102,591) $307,338
7. PROPERTY AND EQUIPMENT, NET
Property and equipment was comprised of the following at December 31, 2008 and 2007:
2008 2007
(in thousands)
Land ................................................................ $ 16,206 $ 16,699
Buildings ............................................................ 360,655 320,180
Equipment and computer software ........................................ 1,468,540 1,256,382
1,845,401 1,593,261
Accumulated depreciation ............................................... (1,133,909) (956,020)
Property and equipment, net ......................................... $ 711,492 $ 637,241
Depreciation expense was $183.3 million in 2008, $162.4 million in 2007, and $128.6 million in 2006.
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