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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2004, we maintained aggregate statutory capital and surplus of $1,185.5 million in our
state regulated health insurance subsidiaries. Each of these subsidiaries was in compliance with applicable
statutory requirements which aggregated $717.2 million. Although the 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. Certain states rely on risk-based capital requirements, or RBC, to define the
required levels of equity. RBC is a model developed by the National Association of Insurance Commissioners to
monitor an entity’s solvency. This calculation indicates recommended minimum levels of required capital and
surplus and signals regulatory measures should actual surplus fall below these recommended levels. If RBC were
adopted by all states at December 31, 2004, each of our subsidiaries would be in compliance and we would have
$405.6 million of aggregate capital and surplus above any of the levels that require corrective action under RBC.
14. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Leases
We lease facilities, computer hardware, and other equipment under long-term operating leases that are
noncancelable and expire on various dates through 2023. We sublease facilities or partial facilities to third party
tenants for space not used in our operations. Rent with scheduled escalation terms are accounted for on a straight-
line basis over the lease term. Rent expense and sublease rental income, which are recorded net as an
administrative expense, for all operating leases was as follows for the years ended December 31, 2004, 2003 and
2002:
2004 2003 2002
(in thousands)
Rent expense ................................. $78,222 $ 70,815 $ 81,292
Sublease rental income .......................... (11,291) (12,007) (14,417)
Net rent expense ........................... $66,931 $ 58,808 $ 66,875
Future annual minimum payments due subsequent to December 31, 2004 under all of our noncancelable
operating leases with initial terms in excess of one year are as follows:
Minimum
Lease
Payments
Sublease
Rental
Receipts
Net Lease
Commitments
(in thousands)
For the years ending December 31:
2005 ................................. $ 65,088 $ (4,310) $ 60,778
2006 ................................. 45,729 (2,770) 42,959
2007 ................................. 39,202 (2,496) 36,706
2008 ................................. 28,089 (1,145) 26,944
2009 ................................. 24,686 (90) 24,596
Thereafter ............................. 29,860 — 29,860
Total ............................. $232,654 $(10,811) $221,843
Purchase Obligations
We have agreements to purchase services, primarily information technology related services, or to make
improvements to real estate 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. We have purchase obligation commitments of $27.7 million in 2005,
$8.1 million in 2006, $5.1 million in 2007, $1.2 million in 2008, $0.8 million in 2009 and $0.9 million thereafter.
Purchase obligations exclude agreements that are cancelable without penalty.
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