Humana 2009 Annual Report Download - page 48

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash
transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments
to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without
prior approval by state regulatory authorities, is limited based on the entity’s level of statutory income and
statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if
approval is not required. In 2009, our subsidiaries paid dividends of $774.1 million to the parent compared to
$296.0 million in 2008. In addition, the parent made capital contributions to our subsidiaries of $132.3 million in
2009 compared to $242.8 million in 2008.
Based on the statutory financial statements as of December 31, 2009, we maintained aggregate statutory
capital and surplus of $3.6 billion in our state regulated subsidiaries, $1.2 billion above the aggregate $2.4 billion
in applicable statutory requirements which would trigger any regulatory action by the respective states.
Other Highlights
• Earnings increased 60.6% to $6.15 per diluted common share in 2009 from $3.83 per diluted common
share in 2008, primarily reflecting substantially lower stand-alone PDP claims expenses.
• Cash flows from operations increased $439.3 million to $1,421.6 million for the year ended
December 31, 2009 compared to $982.3 million for the year ended December 31, 2008. The increase
primarily resulted from increased earnings associated with lower stand-alone PDP prescription drug
claims.
We intend for the discussion of our financial condition and results of operations that follows to assist in the
understanding of our financial statements and related changes in certain key items in those financial statements
from year to year, including the primary factors that accounted for those changes.
Recent Acquisitions
On October 31, 2008 we acquired PHP Companies, Inc. (d/b/a Cariten Healthcare), or Cariten, for cash
consideration of approximately $256.1 million. The Cariten acquisition increased our presence in eastern
Tennessee, adding approximately 49,700 commercial fully-insured members, 21,600 commercial ASO members,
and 46,900 Medicare HMO members. This acquisition also added approximately 85,700 Medicaid ASO
members under a contract which expired on December 31, 2008 and was not renewed.
On August 29, 2008, we acquired Metcare Health Plans, Inc., or Metcare, for cash consideration of
approximately $14.9 million. The acquisition expanded our Medicare HMO membership in central Florida,
adding approximately 7,300 members.
On May 22, 2008, we acquired OSF Health Plans, Inc., or OSF, a managed care company serving both
Medicare and commercial members in central Illinois, for cash consideration of approximately $87.3 million.
This acquisition expanded our presence in Illinois, broadening our ability to serve multi-location employers with
a wider range of products, including our specialty offerings. The acquisition added approximately 33,400
commercial fully-insured members, 29,700 commercial ASO members, and 14,000 Medicare HMO and PPO
members.
On April 30, 2008, we acquired UnitedHealth Group’s Las Vegas, Nevada individual SecureHorizons
Medicare Advantage HMO business, or SecureHorizons, for cash consideration of approximately $185.3 million,
plus subsidiary capital and surplus requirements of $40 million. The acquisition expanded our presence in the
Las Vegas market, adding approximately 26,700 Medicare HMO members.
On November 30, 2007, we acquired KMG America Corporation, or KMG, for cash consideration of $155.2
million plus the assumption of $36.1 million of long-term debt. KMG provides long-duration insurance benefits
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