United Healthcare 2010 Annual Report Download - page 84

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Commercial Paper and Bank Credit Facility
Commercial paper consists of senior unsecured debt sold on a discount basis with maturities up to 270 days. As
of December 31, 2010, the Company’s outstanding commercial paper had a weighted-average annual interest rate
of 0.4%.
The Company has a $2.5 billion five-year revolving bank credit facility with 23 banks, which matures in May
2012. This facility supports the Company’s commercial paper program and is available for general corporate
purposes. There were no amounts outstanding under this facility as of December 31, 2010. The interest rate is
variable based on term and amount and is calculated based on the London Interbank Offered Rate (LIBOR) plus
a spread. As of December 31, 2010, the annual interest rate on this facility, had it been drawn, would have ranged
from 0.5% to 0.7%.
Debt Covenants
The Company’s bank credit facility contains various covenants including requiring the Company to maintain a
debt-to-total-capital ratio, calculated as debt divided by the sum of debt and shareholders’ equity, below 50%.
The Company was in compliance with its debt covenants as of December 31, 2010.
Long-Term Debt
In October 2010, the Company issued $750 million in senior unsecured notes under its February 2008 S-3
shelf registration statement. The issuance included $450 million of 3.875% fixed-rate notes due October 2020
and $300 million of 5.700% fixed-rate notes due October 2040.
In February 2010, the Company completed cash tender offers for $775 million in aggregate principal of certain of
its outstanding fixed-rate notes to improve the matching of interest rate exposure related to its floating rate assets
and liabilities on its balance sheet.
In February 2008, the Company issued a total of $3.0 billion in senior unsecured debt, which included: $250
million of floating-rate notes due February 2011, $550 million of 4.9% fixed-rate notes due February 2013, $1.1
billion of 6.0% fixed-rate notes due February 2018 and $1.1 billion of 6.9% fixed-rate notes due February 2038.
Interest Rate Swap Contracts
During 2010, the Company entered into interest rate swap contracts to convert a portion of its interest rate
exposure from fixed rates to floating rates to more closely align interest expense with interest income received on
its cash equivalent and investment balances. The floating rates are benchmarked to LIBOR. The swaps are
designated as fair value hedges on fixed-rate debt issues maturing between March 2011 through March 2016 and
June 2017 through October 2020. Since the specific terms and notional amounts of the swaps match those of the
debt being hedged, they were assumed to be highly effective hedges and all changes in fair value of the swaps
were recorded on the Consolidated Balance Sheets with no net impact recorded in the Consolidated Statements of
Operations.
The following table summarizes the location and fair value of fair value hedges on the Company’s Consolidated
Balance Sheet as of December 31, 2010:
Notional Amount Balance Sheet Location Fair Value
(in millions) (in millions)
$ 5,725 Other assets ........................ $46
Other liabilities ..................... 104
82