Humana 2015 Annual Report Download - page 90

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to be received as compared to amortized cost and determine if a credit loss has occurred. In the event of a credit loss,
only the amount of the impairment associated with the credit loss is recognized currently in income with the remainder
of the loss recognized in other comprehensive income.
When we do not intend to sell a security in an unrealized loss position, potential other-than-temporary impairment
is considered using a variety of factors, including the length of time and extent to which the fair value has been less
than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or
underlying collateral of a security; payment structure of the security; changes in credit rating of the security by the
rating agencies; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet
date. For debt securities, we take into account expectations of relevant market and economic data. For example, with
respect to mortgage and asset-backed securities, such data includes underlying loan level data and structural features
such as seniority and other forms of credit enhancements. A decline in fair value is considered other-than-temporary
when we do not expect to recover the entire amortized cost basis of the security. We estimate the amount of the credit
loss component of a debt security as the difference between the amortized cost and the present value of the expected
cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at
the implicit interest rate at the date of purchase. The risks inherent in assessing the impairment of an investment include
the risk that market factors may differ from our expectations, facts and circumstances factored into our assessment may
change with the passage of time, or we may decide to subsequently sell the investment. The determination of whether
a decline in the value of an investment is other than temporary requires us to exercise significant diligence and judgment.
The discovery of new information and the passage of time can significantly change these judgments. The status of the
general economic environment and significant changes in the national securities markets influence the determination
of fair value and the assessment of investment impairment. There is a continuing risk that declines in fair value may
occur and additional material realized losses from sales or other-than-temporary impairments may be recorded in future
periods.
The recoverability of our non-agency residential and commercial mortgage-backed securities is supported by
factors such as seniority, underlying collateral characteristics and credit enhancements. These residential and
commercial mortgage-backed securities at December 31, 2015 primarily were composed of senior tranches having high
credit support, with over 99% of the collateral consisting of prime loans. The weighted average credit rating of all
commercial mortgage-backed securities was AA+ at December 31, 2015.
All issuers of securities we own that were trading at an unrealized loss at December 31, 2015 remain current on
all contractual payments. After taking into account these and other factors previously described, we believe these
unrealized losses primarily were caused by an increase in market interest rates in the current markets than when the
securities were purchased. At December 31, 2015, we did not intend to sell the securities with an unrealized loss position
in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before
recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-
than-temporarily impaired at December 31, 2015. There were no material other-than-temporary impairments in 2015,
2014, or 2013.
Goodwill and Long-lived Assets
At December 31, 2015, goodwill and other long-lived assets represented 20% of total assets and 48% of total
stockholders’ equity, compared to 24% and 59%, respectively, at December 31, 2014.
We are required to test at least annually for impairment at a level of reporting referred to as the reporting unit, and
more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. A reporting unit
either is our operating segments or one level below the operating segments, referred to as a component, which comprise
our reportable segments. A component is considered a reporting unit if the component constitutes a business for which
discrete financial information is available that is regularly reviewed by management. We are required to aggregate the
components of an operating segment into one reporting unit if they have similar economic characteristics. Goodwill is
assigned to the reporting unit that is expected to benefit from a specific acquisition. The carrying amount of goodwill
for our reportable segments has been retrospectively adjusted to conform to the 2015 segment change discussed in Note
2 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.