Humana 2011 Annual Report Download - page 119

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
events of default, including financial covenants regarding the maintenance of a minimum level of net worth of
$6.0 billion at December 31, 2011 and a maximum leverage ratio of 3.0:1. We are in compliance with the
financial covenants, with actual net worth of $8.1 billion and actual leverage ratio of 0.6:1, as measured in
accordance with the new credit agreement as of December 31, 2011. In addition, the new credit agreement
includes an uncommitted $250 million incremental loan facility.
At December 31, 2011, we had no borrowings outstanding under the new credit agreement. We have
outstanding letters of credit of $14 million secured under the new credit agreement. No amounts have been drawn
on these letters of credit. Accordingly, as of December 31, 2011, we had $986 million of remaining borrowing
capacity under the new credit agreement, none of which would be restricted by our financial covenant
compliance requirement. We have other customary, arms-length relationships, including financial advisory and
banking, with some parties to the credit agreement.
Other Long-Term Borrowings
Other long-term borrowings of $36 million at December 31, 2011 represent junior subordinated debt. The
junior subordinated debt, which is due in 2037, may be called by us without penalty in 2012 and bears a fixed
annual interest rate of 8.02% payable quarterly until 2012, and then payable at a floating rate based on LIBOR
plus 310 basis points.
12. EMPLOYEE BENEFIT PLANS
Employee Savings Plan
We have defined contribution retirement savings plans covering eligible employees. Prior to 2011, our
contribution to these plans included contributions to our employees’ retirement accounts based on a percentage
of compensation as well as matching contributions based on the amount of our employees’ contributions to the
plans. Beginning in 2011, we ceased making retirement account contributions and increased our matching
contributions. The cost of these plans amounted to approximately $126 million in 2011, $113 million in 2010,
and $109 million in 2009, all of which was funded currently to the extent it was deductible for federal income tax
purposes. The Company’s cash match is invested pursuant to the participant’s contribution direction. Based on
the closing price of our common stock of $87.61 on December 30, 2011, approximately 17% of the retirement
and savings plan’s assets were invested in our common stock, or approximately 3.7 million shares, representing
2% of the shares outstanding as of December 31, 2011. At December 31, 2011, approximately 6.1 million shares
of our common stock were reserved for issuance under our defined contribution retirement savings plans.
Stock-Based Compensation
We have plans under which options to purchase our common stock and restricted stock awards, including
restricted stock units, have been granted to executive officers, directors and key employees. The terms and
vesting schedules for stock-based awards vary by type of grant. Generally, the awards vest upon time-based
conditions. The stock awards of retirement-eligible participants will continue to vest upon retirement from the
Company. Our equity award program includes a retirement provision that treats all employees with a
combination of age and years of service with the Company totaling 65 or greater, with a minimum required age
of 55 and a minimum requirement of 5 years of service, as retirement-eligible. Upon exercise, stock-based
compensation awards are settled with authorized but unissued company stock or treasury stock. The
109