Humana 2010 Annual Report Download - page 60
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The Commercial segment SG&A expenses increased $192.7 million, or 10.3%, during 2010 compared to
2009. The Commercial segment SG&A expense ratio increased 290 basis points from 24.1% for 2009 to 27.0%
for 2010. The increase in SG&A expenses for 2010 primarily was due to a $147.5 million write-down of deferred
acquisition costs associated with our individual major medical policies which increased the SG&A expense ratio
190 basis points in 2010. In addition, the increases in 2010 primarily reflect administrative costs associated with
increased specialty and mail-order pharmacy business, partially offset by our continued focus on administrative
cost reductions.
Depreciation and Amortization
Depreciation and amortization for 2010 totaled $262.9 million compared to $250.3 million for 2009, an
increase of $12.6 million, or 5.0%, primarily reflecting depreciation expense associated with capital
expenditures.
Interest Expense
Interest expense was $105.1 million for 2010, compared to $105.8 million for 2009, a decrease of $0.7
million, or 0.7%.
Income Taxes
Our effective tax rate during 2010 was 37.2% compared to the effective tax rate of 35.1% in 2009. The
increase from 2009 to 2010 primarily was due to the reduction of the $16.8 million liability for unrecognized tax
benefits as a result of audit settlements which reduced the effective income tax rate by 1.0% during 2009. In
addition, the tax rate for 2010 reflects the estimated impact of new limitations on the deductibility of annual
compensation in excess of $500,000 per employee as mandated by recent health insurance reforms. See Note 10
to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data for a
complete reconciliation of the federal statutory rate to the effective tax rate. We expect the 2011 effective tax rate
to be approximately 37%.
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