Humana 2009 Annual Report Download - page 91

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. 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 commercial fully-insured
and ASO presence as well as our Medicare HMO presence in eastern Tennessee. During 2009, we continued our
review of the fair value estimate of certain other intangible and net tangible assets acquired. This review resulted
in a decrease of $27.1 million in the fair value of other intangible assets, primarily related to the fair value
assigned to the customer contracts acquired. There was a corresponding adjustment to goodwill and deferred
income taxes. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired
by approximately $110.9 million of which we allocated $52.3 million to other intangible assets and $58.6 million
to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average
useful life of 11.6 years. The acquired goodwill is not deductible for tax purposes.
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.
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,
including the payment of $3.3 million during 2009 to settle a purchase price contingency. 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 total consideration paid exceeded our estimated fair value of the
net tangible assets acquired by approximately $31.1 million of which we allocated $10.1 million to other
intangible assets and $21.0 million to goodwill. The other intangible assets, which primarily consist of customer
contracts, have a weighted-average useful life of 9.9 years. The acquired goodwill is not deductible for tax
purposes.
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. The total consideration paid exceeded our estimated fair value of the net tangible assets
acquired by approximately $185.3 million of which we allocated $69.3 million to other intangible assets and
$116.0 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a
weighted-average useful life of 10.9 years. The acquired goodwill is not deductible for tax purposes.
The Cariten, OSF, and Metcare purchase agreements contain provisions under which there may be future
contingent consideration paid or received, primarily related to balance sheet settlements associated with medical
claims runout and Medicare reconciliations with the Centers for Medicare and Medicaid Services, or CMS. Any
contingent consideration paid or received will be recorded as an adjustment to goodwill when the contingencies
are resolved.
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
including supplemental health and life products. The acquisition expanded our commercial product offerings
allowing for significant cross-selling opportunities with our medical insurance products. The total consideration
paid exceeded our estimated fair value of the net tangible assets acquired by approximately $204.5 million of
which we allocated $43.0 million to other intangible assets and $161.5 million to goodwill. The other intangible
assets, which primarily consist of customer contracts, have a weighted-average useful life of 19.3 years. The
acquired goodwill is not deductible for tax purposes.
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