Humana 2009 Annual Report Download - page 62

Regulatory Requirements
Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash
transfers to Humana Inc., the 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.
Although minimum required levels of equity are largely based on premium volume, product mix, and the
quality of assets held, minimum requirements can vary significantly at the state level. 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.
Contractual Obligations
We are contractually obligated to make payments for years subsequent to December 31, 2009 as follows:
Payments Due by Period
Total
Less than
1 Year 1-3 Years 3-5 Years
More than
5 Years
(in thousands)
Debt ................................ $1,587,528 $ 540 $ 614 $ 291 $1,586,083
Interest(1) ............................ 1,311,551 111,734 222,109 220,073 757,635
Operating leases(2) ..................... 598,913 133,634 218,684 136,415 110,180
Purchase obligations(3) ................. 139,369 65,879 57,808 15,682 —
Future policy benefits payable and other
long-term liabilities(4) ................ 1,484,989 45,656 219,446 133,645 1,086,242
Total ........................ $5,122,350 $357,443 $718,661 $506,106 $3,540,140
(1) Interest includes the estimated contractual interest payments under our debt agreements.
(2) We lease facilities, computer hardware, and other equipment under long-term operating leases that are
noncancelable and expire on various dates through 2019. We sublease facilities or partial facilities to third
party tenants for space not used in our operations which partially mitigates our operating lease
commitments. An operating lease is a type of off-balance sheet arrangement. Assuming we acquired the
asset, rather than leased such asset, we would have recognized a liability for the financing of these assets.
See also Note 16 to the consolidated financial statements included in Item 8.—Financial Statements and
Supplementary Data.
(3) Purchase obligations include agreements to purchase services, primarily information technology related
services, or to make improvements to real estate, in each case that are enforceable and legally binding on us
and that specify all significant terms, including: fixed or minimum levels of service to be purchased; fixed,
minimum or variable price provisions; and the appropriate timing of the transaction. Purchase obligations
exclude agreements that are cancelable without penalty.
(4) Includes future policy benefits payable ceded to third parties through 100% coinsurance agreements as more
fully described in Note 18 to the consolidated financial statements included in Item 8.—Financial
Statements and Supplementary Data. We expect the assuming reinsurance carriers to fund these obligations
and reflected these amounts as reinsurance recoverables included in other long-term assets on our
consolidated balance sheet. Amounts payable in less than one year are included in trade accounts payable
and accrued expenses in the consolidated balance sheet.
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