Humana 2010 Annual Report Download - page 107

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
There were no material transfers between level 1 and level 2 during 2010 or 2009. During the years ended
December 31, 2010 and 2009, the changes in the fair value of the assets measured using significant unobservable
inputs (Level 3) were comprised of the following:
For the year ended December 31,
2010 2009
Auction
Rate
Securities
Privates
and
Venture
Capital Total
Auction
Rate
Securities
Privates
and
Venture
Capital Total
(in thousands)
Beginning balance at January 1 ...... $68,814 $ 23,909 $ 92,723 $73,654 $18,272 $91,926
Total gains or losses:
Realized in earnings ....... 16 6,244 6,260 16 74 90
Unrealized in other
comprehensive income . . . 1,901 (4,426) (2,525) 269 4,382 4,651
Purchases, sales, issuances, and
settlements, net ............. (18,925) (11,974) (30,899) (5,125) (2,102) (7,227)
Transfers into Level 3 ..........00003,283 3,283
Balance at December 31 ............ $51,806 $ 13,753 $ 65,559 $68,814 $23,909 $92,723
Our level 3 assets primarily included auction rate securities for the periods presented. Auction rate securities
are debt instruments with interest rates that reset through periodic short-term auctions. The auction rate securities
we own, which had a fair value of $51.8 million at December 31, 2010, or less than 1% of our total invested
assets, primarily consisted of tax-exempt bonds rated AA and above and were collateralized by federally-
guaranteed student loans. From time to time, liquidity issues in the credit markets have 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 (1) a
successful auction occurs, (2) the securities are called or refinanced by the issuer, (3) a buyer is found outside the
auction process, or (4) the security matures. We continue to receive income on all auction rate securities as well
as periodic 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.
Financial Liabilities
Our long-term debt is recorded at carrying value in our consolidated balance sheets. The carrying value of
our long-term debt outstanding was $1,668.8 million at December 31, 2010 and $1,678.2 million at
December 31, 2009. The fair value of our long-term debt was $1,746.5 million at December 31, 2010 and
$1,596.4 million at December 31, 2009. The fair value of our long-term debt is determined based on quoted
market prices for the same or similar debt, or, if no quoted market prices are available, on the current prices
estimated to be available to us for debt with similar terms and remaining maturities.
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