-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F5fIONcy2qkW62trdYxvU+V+PQxxZH4zkFfVmiqFiPPx7wMJjqvIQENxwUnMcuDb Qtnkatp00RotF/jmvbu80A== 0000049071-99-000045.txt : 19990630 0000049071-99-000045.hdr.sgml : 19990630 ACCESSION NUMBER: 0000049071-99-000045 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUMANA INC CENTRAL INDEX KEY: 0000049071 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 610647538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-05975 FILM NUMBER: 99654947 BUSINESS ADDRESS: STREET 1: 500 W MAIN ST CITY: LOUISVILLE STATE: KY ZIP: 40202 BUSINESS PHONE: 5025801000 FORMER COMPANY: FORMER CONFORMED NAME: EXTENDICARE INC DATE OF NAME CHANGE: 19740404 FORMER COMPANY: FORMER CONFORMED NAME: HERITAGE HOUSE OF AMERICA INC DATE OF NAME CHANGE: 19671129 11-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGON, D.C. 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5975 A. Full Title of Plan: Humana Puerto Rico 1165(e) Retirement Plan B. Name of Issuer of the Securities held Pursuant to the Plan and the Address of its Principal Executive Office: Humana Inc. 500 West Main Street Louisville, Kentucky 40202 I N D E X Pages Report of Independent Accountants 2-3 Financial Statements: Statements of Net Assets Available for Benefits, December 31, 1998 and 1997 4 Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 1998 and 1997 5 Notes to Financial Statements 6-20 Supplemental Schedules: Line 27a - Schedule of Assets Held for Investment Purposes, December 31, 1998 21 Line 27d - Schedule of Reportable Transactions for the year ended December 31, 1998 22 Signatures 23 Exhibit Index 24 Consent of Independent Accountants 25 Report of Independent Accountants To the Plan Administrator Humana Puerto Rico 1165(e) Retirement Plan In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits presents fairly, in all material respects, the net assets available for benefits of the Humana Puerto Rico 1165(e) Retirement Plan (the Plan) (formerly PCA Puerto Rico 165(e) Retirement Plan) at December 31, 1998 and the changes in net assets available for benefits for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, investment assets held by Merrill Lynch, formerly Barclays Global Investors, N.A., the custodian of the Plan, and transactions in those assets were excluded from the scope of our audit of the Plan's 1997 financial statements, except for comparing the information provided by the custodian, which is summarized in Note 3, with the related information included in the financial statements and supplemental schedules. Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the Plan's financial statements as of December 31, 1997. The form and content of the information included in the 1997 financial statements and supplemental schedules, other than that derived from the information certified by the custodian, have been audited by us and, in our opinion, are presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. Our audit of the Plan's financial statements as of and for the year ended December 31, 1998 was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and of reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the notes to the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. These supplemental schedules and fund information are the responsibility of the Plan's management. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audit of the basic financial statements for the year ended December 31, 1998 and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Louisville, Kentucky May 14, 1999 Humana Puerto Rico 1165(e) Retirement Plan Statements of Net Assets Available for Benefits December 31, 1998 and 1997 ASSETS 1998 1997 Investments, at fair value: Plan interest in Master Trust $ 1,037,248 - Investments - $ 379,549 Participant notes receivable - 3,384 Total investments 1,037,248 382,933 Cash - 2,477 Other assets allocated from Master Trust: Receivable from participating employers for participant withholdings and employers' contributions 139,143 - Accrued interest and dividend 10,010 - Total assets 1,186,401 385,410 LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS Liabilities allocated from Master Trust: Accrued expenses 136 - Forfeited employers' contributions available to reduce future employers' contributions 3,095 - Total liabilities 3,231 - Net assets available for benefits $ 1,183,170 $ 385,410 The accompanying notes are an integral part of the financial statements. Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 1998 and 1997 1998 1997 Additions: Investment income: Plan interest in Master Trust investment income: Interest and dividend income $ 1,631 - Net appreciation in fair value of investments 19,125 - Net appreciation in fair value of investments 40,157 $ 30,239 Interest and dividend income 6,723 6,808 Contributions: Contributions allocated from Master Trust: Participants 218,968 - Employers 607,126 - Forfeited employers' contributions (1,929) - Participants - 132,689 Employers - 61,699 Forfeited employers' contributions 896 (7,129) Total additions 892,697 224,306 Deductions: Deductions allocated from Master Trust: Benefits paid to participants 6,457 - Administrative expenses 376 - Benefits paid to participants 85,547 65,247 Administrative expenses 2,557 288 Total deductions 94,937 65,535 Net increase 797,760 158,771 Net assets available for benefits: Beginning of year 385,410 226,639 End of year $ 1,183,170 $ 385,410 The accompanying notes are an integral part of the financial statements. Notes to Financial Statements 1. Summary of Plan: The Humana Puerto Rico 1165(e) Retirement Plan (the Plan), formerly the PCA Puerto Rico 165(e) Retirement Plan, is a qualified, trusteed plan established for the benefit of the employees of Humana Health Plans of Puerto Rico, Inc., and who are residents of Puerto Rico. The Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA). Physicians Corporation of America Inc. (the Company), which is a wholly-owned subsidiary of Humana Inc. (Humana), is the sponsor of the Plan and offers managed health care products that integrate medical management with the delivery of health care services through a network of providers. a. Contributions: Effective January 1, 1998, the Plan maintains two accounts, the Pretax Savings Account and the Retirement Account, a profit sharing account. Contributions made prior to January 1, 1998 were invested in Merrill Lynch until December 1, 1998 when the assets previously held in trust by Merrill Lynch were transferred to the Humana Retirement and Savings Master Trust (Master Trust) at National City Bank of Kentucky (the Trustee) and are maintained in a separate account, the Prior Trust Account. Effective January 1, 1998, any employee of the Company who is employed with a sponsoring employer is eligible to participate in the Plan's Pretax Savings Account. A participant, through payroll deductions, may contribute not less than 1% nor more than 6% of the participant's compensation pay per period. Effective after January 1, 1998 on the date the Company so elects, an automatic contribution in the amount of 3% of the participant's compensation shall be made beginning on the employee's date of hire, unless the employee elects not to participate in the Pretax Savings Account or elects a different percentage up to 6%. As of December 31, 1998, the Company had not elected to begin this automatic contribution. An amount equal to 50% of the participant's contribution is contributed by the Company for any participating employee who has completed at least one year of service with at least 1,000 hours of service. The Board of Directors of the Company, at its option, may increase this matching percentage up to 100%. Participants who contribute the maximum 6% amount are eligible to make voluntary contributions of amounts which do not exceed an additional 4% of their annual compensation. These voluntary contributions are not subject to employer matching contributions. All matching contributions shall be invested in the Humana Common Stock Fund. Prior to January 1, 1998, employees became eligible to participate in the Plan upon completion of one year of service during which at least 1,000 hours of service were rendered to the Company. Participation in the Plan commenced at inception or on the first January 1, April 1, July 1, or October 1 date coinciding with or immediately following the completion of the eligibility requirements. Each year, a participant could have contributed up to 10% of their annual compensation. The Company,at its discretion, could match up to 50% of the participant's contribution up to 7% of the compensation. All matching contributions shall be invested in the Humana Common Stock Fund. Notes to Financial Statements, Continued 1. Summary of Plan, continued: a. Contributions, continued: Effective January 1, 1998, after an employee completes two years of service with a sponsoring employer and has complied with certain other service requirements, the employee becomes eligible to participate in the profit sharing. For the calendar year ended December 31, 1998, the Company declared a profit sharing contribution of approximately $124,800. This contribution was made into the Retirement Account of the Plan and was allocated to the participants based on an amount equal to 4% of each participating employee's qualifying compensation earned during the plan year, plus 4% of any compensation that exceeds the social security taxable wage base. Contribution amounts are computed as of the end of each plan year and are nonforfeitable. On September 15, 1998 the Company announced a one-time special $1,000 contribution to each eligible employee of the Company, tied to each associate's vesting, who was employed on September 15, 1998. The total employer cost for the special contribution was $401,000. Contributions to the Plan by or on behalf of employees may be restricted in amount and as to timing so as to meet various requirements of the Internal Revenue Code (IRC) of 1986 as amended. Each participant's account is credited with the participant's contributions and the Company's contributions and the allocations of plan earnings and charged with an allocation of administrative expenses. Allocations are based on participants' account balances. Effective January 1, 1998 contributions to the Plan are invested by the Trustee in nine separate participant directed investment funds as follows: Interest Income Fund: Invests primarily in contracts with banks and insurance companies. The fund may also invest in cash and cash equivalents. Stock Index Fund: Invests primarily in units of the State Street Flagship Domestic Index Commingled Trust Fund which invests exclusively in securities which make up the Standard and Poor's 500 Stock Price Index. Humana Common Stock Fund: Invests primarily in Humana's common stock, or in U.S. Treasury bills, commercial paper, certificates of deposit and money market funds as determined by the Trustee. All employer contributions to the Pretax Savings Account are invested in this fund. Employer contributions may be made in cash, in shares of Humana common stock, or a combination thereof. At December 31, 1998, this fund included $489,411 of nonparticipant directed funds related to the 401(k) employer match. Aggressive Growth Fund: Invests primarily in shares of Fidelity Contrafund which invests in common stocks and securities convertible into common stock which are undervalued in comparison to their future growth potential. The Fidelity Contrafund may also invest in preferred stocks, foreign securities, covered call options, put options, repurchase agreements, and cash equivalent securities. Notes to Financial Statements, Continued 1. Summary of Plan, continued: a. Contributions, continued: Balanced Fund: Invests primarily in shares of Invesco Value Trust which invests in a diversified mix of securities including common and preferred stocks, corporate and U.S. Government bonds, and cash and cash equivalents, the objective of which is to emphasize current income while secondarily striving to attain capital growth. International Fund: Invests primarily in shares of Harbor International Fund which invests in equity securities, American Depositary Receipts, European Depositary Receipts, securities convertible into common stock, government securities, and nonconvertible preferred stocks of issuers domiciled outside the United States, so as to achieve long-term growth of capital. The Harbor International Fund may also invest in cash equivalent securities, such as U.S. Treasury bills,commercial paper and certificates of deposit. Small Capitalization Fund: Invests primarily in shares of Blackrock Small Cap Fund which invests in equity securities consisting primarily of emerging growth companies and companies with high growth potential. The Blackrock Small Cap Fund may also temporarily invest in cash and cash equivalents. Long-Term Bond Fund: Invests primarily in shares of Pimco Fund which invests primarily in fixed income securities with average maturities of 9 to 12 years. These may include bonds issued by corporations and the U.S. Government, mortgage-backed securities, certificates of deposit, foreign securities and other types of fixed income investments. Large Capitalization Fund: Invests primarily in shares of IDS New Dimensions Fund which invests primarily in common stocks of U.S. companies that operate in fields where dynamic economic or technological changes are taking place or that have excellent technologies, marketing or management. Prior to the transfer of assets previously held in trust by Merrill Lynch, a participant could direct contributions in any of the following investment options: Asset Allocation Fund: This fund invested in a mix of stocks, bonds and money market instruments. Bond Index Fund: This fund invested in bonds issued by the U.S. Treasury, U.S. Government agencies, and investment grade bonds issued by U.S. corporations. Notes to Financial Statements, Continued 1. Summary of Plan, continued: a. Contributions, continued: Growth Stock Fund: This fund invested in stocks of established companies and newly issued stocks of smaller companies. Income Accumulation Fund: This fund invested primarily in guaranteed investment contracts and synthetic guaranteed investment contracts. International Equity Fund: This fund invested in the stocks of established companies based in Europe, Australia, and the Far East. S&P 500 Stock Fund: This fund invested in stocks included in the S&P 500. LifePath Funds: These funds were asset allocation funds and divided their investments among several asset classes (stocks, bonds, and money market instruments). A participant may allocate his/her contributions to the Pretax Savings Account and the Company's contribution to the Retirement Account among the various funds in increments of not less than 1%. In the absence of such allocation, these contributions are invested in the Interest Income Fund. In connection with a change in allocation of a participant's or the Company's future contributions among the nine plan funds and a change in the investment of existing accounts (Transfers), the value of Transfers to or from the Humana Common Stock Fund will reflect the price or prices at which all shares are purchased, sold or transferred before, on or after the participant's monthly election rather than transferring strictly based on the value at the monthly closing price. Employee contributions are nonforfeitable. Participants who withdraw from the Pretax Savings Account prior to being credited with four years of participation or five years of service with the Company are eligible to receive generally the value of employer contributions at the withdrawal date, exclusive of those made during the two years preceding withdrawal. Employer contributions become totally nonforfeitable after the participant is credited with four years of participation in the Plan or five years of service with the Company. However, participants who were in the Plan prior to January 1, 1998 will be eligible to receive the value of employer contributions based on the better of the above vesting or the previously determined vesting where a participant was 100% vested after four years of credited service. Forfeited balances of terminated participants' nonvested accounts are used to reduce future company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Notes to Financial Statements, Continued 1. Summary of Plan, continued: a. Contributions, continued: Employer contributions forfeited as a result of withdrawal following termination of employment will be available to reduce the amount of subsequent employer contributions to the Pretax Savings Account. If a former participant is re-employed prior to five consecutive one-year breaks in service and repays the amount of his/her distribution, then any forfeited employer contributions are restored to his/her account. There were approximately 400 participants at December 31, 1998 who had allocated their contributions to one or more funds as follows: Interest Income Fund 162 Humana Common Stock Fund 407 Aggressive Growth Fund 95 Stock Index Fund 119 Small Capitalization Fund 62 Balanced Fund 51 International Fund 51 Large Capitalization Fund 54 Long-Term Bond Fund 53 b. Withdrawals: The value of a participant's interest, including employer contributions, is generally payable upon the occurrence of one of the following events: (1) the participant's retirement after attaining age 55; (2) a determination by the Company upon competent medical or other evidence that, by reason of permanent and total disability, the participant is incapable of performing the duties of his/her work; or (3) the participant's death. In the event funds are needed because of extreme financial hardship, as defined by law, the participant may be allowed to make a withdrawal of his/her vested account balance. In addition, the Plan contains restrictions relating to minimum withdrawals and the frequency of withdrawals. Benefits under the Plan are payable to withdrawing participants, including retirees, as follows: a. A lump-sum distribution in cash or, in the event of a distribution from the Humana Common Stock Fund, partially or totally in Humana common stock, or b. Monthly, quarterly or annual installments for a period of 5, 10, 15 or 20 years not to exceed the life expectancy of the participant, or the joint and last survivor expectancy of the participant and designated beneficiary Notes to Financial Statements, Continued 1. Summary of Plan, continued: b. Withdrawals, continued: c. A life annuity paid monthly or quarterly, or d. A life annuity with guaranteed payments for a period of 5, 10, 15 or 20 years. The Plan permits the employee to roll over contributions from another qualified plan. An employee must make a written request to the Plan for a rollover contribution. These contributions must comply with certain requirements before the Plan will authorize the rollover contribution. Participants may borrow from their fund accounts. The aggregate of the loans to a participant shall not exceed the lesser of $50,000 or 50% of the vested portion of his/her participant contribution accounts, voluntary contribution accounts, plus his/her employer Pretax Savings Account to which he/she would be entitled to if he/she incurred a termination of employment. The minimum a participant may borrow is $500. Loan transactions are treated as a transfer to (from) the various investment funds from (to) the Participant Notes Fund. Loan terms range from one to four years or up to ten years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a reasonable rate in accordance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA, as determined by the Plan Administrator. Principal and interest are repaid ratably through payroll deductions. 2. Summary of Significant Accounting Policies: a. Basis of Accounting: The financial statements of the Plan are prepared under the accrual method of accounting. Benefits are recorded when paid. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. b. Valuation of Investments: Investments in securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the year; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices. Notes to Financial Statements, Continued 2. Summary of Significant Accounting Policies, continued: b. Valuation of Investments, continued: The Interest Income Fund investments include, among others, investment contracts, collateralized mortgage obligations, bonds, asset-backed securities and other fixed income obligations such as commercial paper. Investment contracts with insurance companies are fully benefit- responsive and are carried at contract value, which represents contributions, plus interest earned at specified rates, less withdrawals and administrative expenses. Investment contracts with banks are carried at fair value. Included in these investment contracts are synthetic GIC's which are fully benefit-responsive and are carried at contract value. The collateralized mortgage obligations, bonds and asset-backed securities are recorded at fair value. These securities are not listed on a national securities exchange. The fair values represent the mean of bid and asked prices obtained from certified investment brokers. The Plan presents in the accompanying statements of changes in net assets available for benefits the net appreciation or depreciation in fair value of investments which consists of both realized gains or losses and unrealized appreciation or depreciation. c. Management Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of additions to and deductions from net assets during the reporting periods. Actual results could differ from those estimates. 3. Investments: Effective January 1, 1998, the Plan's investment assets are held by the Master Trust. Earnings of the Master Trust are allocated between the Plan and the Humana Retirement and Savings Plan based on each plan's investment balance to the total Master Trust investment balance. Earnings are further allocated to the respective participants based on each participant's respective asset total to total plan assets. Notes to Financial Statements, Continued 3. Investments, continued: The following table presents the fair value of investments at December 31, 1998 and 1997. Investments that represent 5% or more of the Plan's assets as of December 31, 1998 and 1997 have been separately identified. December 31, 1998 1997 Number of Number of Shares, Units Shares, Units or Principal or Principal Amount Fair Value Amount Fair Value Plan interest in Master Trust $ 1,037,248 - Asset Allocation - 2,713 $ 71,484 Bond Index - 3,055 49,063 Income Accumulation - 8,666 120,926 Growth Stock - 1,308 26,883 International Equity - 695 9,873 S&P 500 Stock - 2,409 88,634 LifePath Fund 2000 - 69 918 LifePath Fund 2010 - 101 1,522 LifePath Fund 2020 - 161 2,667 LifePath Fund 2030 - 8 135 LifePath Fund 2040 - 396 7,444 Participant notes receivable - 3,384 Total $ 1,037,248 $ 382,933 During the years ended December 31, 1998 and 1997, the Plan's investments (including investments bought, sold, and held during the year)appreciated in value as follows: 1998 1997 Plan interest in Master Trust $ 19,125 - Mutual funds 40,157 $ 30,239 $ 59,282 $ 30,239 As of December 31, 1998, the Plan's interest in the Master Trust was .23%. Investment income, administrative expenses and realized gains or losses related to the Master Trust are allocated monthly to the individual plans based upon the beginning monthly balances invested by each plan. The fair value of the investments carried at contract value in the Master Trust at December 31, 1998 was $65,556,624. The average yield and crediting interest rate approximated 6.7% for 1998. The per share closing price of Humana's common stock was $17.813 on December 31, 1998. On May 14, 1999, the per share closing price of Humana's common stock was $12.875. Notes to Financial Statements, Continued 3. Investments, continued: The fair value of net assets available for benefits of the Master Trust as of December 31, 1998 is described in the following table: ASSETS Investments, at fair value: Common stocks: Humana Inc. Common Stock $105,495,230 State Street Flagship Domestic Index Fund 86,633,614 Pimco Funds 3,050,622 Invesco Value Trustee Fund 30,449,405 IDS New Dimensions Fund 8,702,265 Harbor International Fund 25,409,546 Blackrock Fund 38,262,087 Fidelity Contrafund 84,561,632 382,564,401 Obligations due within one year: Armada Money Market Fund 3,059,358 Investment contracts - banks: Bankers Trust Co. 5,837,296 Caisse Des Depots (CDC) 7,421,264 13,258,560 Participant notes receivable: Various 8,850,022 407,732,341 Investments, at contract value: Investment contracts - insurance companies: Allstate Life Insurance Co. 3,578,570 Allstate Life Insurance Co. 4,719,627 Continental Assurance Co. 3,056,333 Continental Assurance Co., Synthetic GIC 1,196,714 Jackson National Life GIC 3,365,280 Jackson National Life, Synthetic GIC 14,250,356 John Hancock Mutual Life 4,788,718 Lincoln National Life Insurance Co. 1,000,445 Metropolitan Life Insurance Co., Group Annuity 777,009 Metropolitan Life Insurance Co., Group Annuity 2,051,817 Monumental Life Insurance Co. 2,146,829 Monumental Life Insurance Co., Synthetic GI 15,859,549 New York Life Insurance Co., Group Annuity 3,163,192 New York Life Insurance Co., Group Annuity 3,036,565 Prudential Insurance Co. 2,085,499 TransAmerica Accidental Life Insurance Co. 2,121,043 United of Omaha Life Insurance Co. 1,007,078 Various 5 68,204,629 Total investments 475,936,970 Notes to Financial Statements, Continued 3. Investments, continued: Cash $ 2,919,076 Due from brokers for securities sold 43,684 Receivable from participating employers for participant withholdings and employers' contributions 16,056,246 Accrued interest and dividends 8,803,833 Total assets 503,759,809 LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS Accrued expenses 433,908 Forfeited employers' contributions available to reduce future employers' contributions 602,322 Total liabilities 1,036,230 Net assets available for benefits $502,723,579 The changes in net assets available for benefits of the Master Trust for the year ended December 31, 1998 are as follows: Additions: Investment income: Net appreciation in fair value of investments $ 29,880,366 Interest 6,937,734 Dividends 2,562,800 39,380,900 Transfer from participating plans for contributions: Participants 29,231,431 Employers 41,693,083 Forfeited employers' contributions (1,111,623) Transfer from ChoiceCare Plans 13,438,023 Transfer from Merrill Lynch Trust 345,082 Transfer from PCA 401(k) Retirement Plan 17,348,163 Total additions 140,325,059 Deductions: Transfer to participating plans for benefit payments 94,929,814 Administrative expenses 758,808 Total deductions 95,688,622 Net increase 44,636,437 Net assets available for benefits: Beginning of year 458,087,142 End of year $502,723,579
Notes to Financial Statements, Continued 4. Income Tax Status: The Plan was established pursuant to the provisions of Section 165(e) of the Puerto Rico Income Tax Act of 1954 (the Act). A favorable tax status determination letter dated May 22, 1995 was obtained from the Treasury Department of the Commonwealth of Puerto Rico, which stated that its underlying trust qualifies under the applicable provisions of the Act and,therefore, is exempt from Puerto Rico income taxes. The Plan has been amended since receiving the determination letter; however, the Company and the Plan's tax counsel believe that the Plan is designed and is currently operating in compliance with the applicable requirements of the Act. The Plan was amended to comply with Section 1165(e) of the Puerto Rico Income Tax Act of 1994. 5. Plan Termination: Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. If the Plan is terminated, the interest of each participant would continue to be nonforfeitable and would be distributed as determined by the Company. 6. Related Party Transactions: Administrative expenses of the Plan are paid by the Plan and allocated to the participants' accounts. Notes to Financial Statements, Continued 7a. Net Assets by Fund at December 31, 1998: Participant Directed ----------------------------------------------------------------------------------------------- Humana Interest Stock Common Aggressive Small Income Index Stock Growth Balanced International Capitalization Assets Fund Fund Fund Fund Fund Fund Fund Investments, at fair value: Plan interest in Master Trust $ 218,464 $ 90,425 $ 59,151 $ 49,212 $ 43,384 $ 17,350 $ 28,778 Other assets allocated from Master Trust: Receivable from participating employers for participant withholdings and employers' contributions 123,717 2,473 2,610 1,590 1,140 546 1,393 Accrued interest and dividends 5,681 4,181 28 Total assets 347,862 92,898 61,761 54,983 44,552 17,896 30,171 LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS Liabilities allocated from Master Trust: Accrued expenses 42 27 30 11 9 3 6 Forfeited employers' contributions avail- able to reduce future employers' contributions 1,282 Total liabilities 1,324 27 30 11 9 3 6 Net assets available for benefits $ 346,538 $ 92,871 $ 61,731 $ 54,972 $ 44,543 $ 17,893 $ 30,165
Notes to Financial Statements, Continued Notes to Financial Statements, Continued 7b. Net Assets by Fund at December 31, 1998 (Cont.): Nonparticipant Participant Directed Directed -------------------------------------------- -------------- Humana Long-Term Large Participant Common Bond Capitalization Notes Stock Assets Fund Fund Fund Fund Total Investments, at fair value: Plan interest in Master Trust $ 22,414 $ 16,877 $ 4,621 $ 486,572 $ 1,037,248 Other assets allocated from Master Trust: Receivable from participating employers for participant withholdings and employers' contributions 571 421 4,682 139,143 Accrued interest and dividends 120 10,010 Total assets 23,105 17,298 4,621 491,254 1,186,401 LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS Liabilities allocated from Master Trust: Accrued expenses 5 3 136 Forfeited employers' contributions avail- able to reduce future employers' contributions 1,813 3,095 Total liabilities 5 3 - 1,813 3,231 Net assets available for benefits $ 23,100 $ 17,295 $ 4,621 $ 489,441 $ 1,183,170
Notes to Financial Statements, Continued 8a. Net Assets by Fund at December 31, 1997: Participant Directed Sweep Asset Bond Income Growth International S&P 500 Account Allocation Index Accumulation Stock Equity Stock Investments, at fair value $ 71,484 $ 49,063 $ 120,926 $ 26,883 $ 9,873 $ 88,634 Participant notes receivable Total investments - 71,484 49,063 120,926 26,883 9,873 88,634 Cash $ 2,477 Net assets available for benefits $ 2,477 $ 71,484 $ 49,063 $ 120,926 $ 26,883 $ 9,873 $ 88,634
Notes to Financial Statements, Continued 8b. Net Assets by Fund at December 31, 1997 (Cont.): Participant Directed Participant LifePath LifePath LifePath LifePath LifePath Notes 2000 2010 2020 2030 2040 Fund Total Investments, at fair value $ 918 $ 1,522 $ 2,667 $ 135 $ 7,444 $ 379,549 Participant notes receivable $ 3,384 3,384 Total investments 918 1,522 2,667 135 7,444 3,384 382,933 Cash 2,477 Net assets available for benefits $ 918 $ 1,522 $ 2,667 $ 135 $ 7,444 $ 3,384 $ 385,410
Notes to Financial Statements, Continued 9a. Activity by Fund for the Year Ended December 31, 1998: Participant Directed Sweep Asset Bond Income Growth International S&P 500 Account Allocation Index Accumulation Stock Equity Stock LifePath Additions: Investment income: Plan interest in Master Trust investment income: Interest and dividend income Net appreciation (depreciation) in fair of investments Net appreciation in fair value of investments $ 14,048 $ 3,927 $ 212 $ 1,488 $ 18,534 $ 1,948 Interest and dividend income $ 93 $ 6,630 Contributions: Contributions allocated from Master Trust: Participants Employer Forfeited employer contributions Forfeited employer contributions 896 Total additions 93 14,944 3,927 6,630 212 1,488 18,534 1,948 Deductions: Deductions allocated from Master Trust: Benefits paid to participants Administrative expenses Benefits paid to participants 12,336 15,311 30,960 2,008 167 24,359 406 Administrative expenses 2,249 31 26 137 33 26 47 8 Total deductions 2,249 12,367 15,337 31,097 2,041 193 24,406 414 Interfund transfers (321) (74,061) (37,653) (96,459) (25,054) (11,168) (82,762) (14,220) Net increase (decrease) (2,477) (71,484) (49,063) (120,926) (26,883) (9,873) (88,634) (12,686) Net assets available for benefits: Beginning of year 2,477 71,484 49,063 120,926 26,883 9,873 88,634 12,686 End of year - - - - - - - -
Notes to Financial Statements, Continued 9b. Activity by Fund for the Year Ended December 31, 1998 (Cont.): Participant Directed Humana Interest Stock Common Aggressive Small Income Index Stock Growth Balanced International Capitalization Fund Fund Fund Fund Fund Fund Fund Additions: Investment income: Plan interest in Master Trust investment income: Interest and dividend income $ 1,631 Net appreciation (depreciation) in fair of investments $ 8,827 $ (9,891) $ 6,893 $ 1,609 $ 343 $ 173 Net appreciation in fair value of investments Interest and dividend income Contributions: Contributions allocated from Master Trust: Participants 14,466 57,144 42,079 24,264 25,341 11,213 18,012 Employer 122,958 185 617 93 185 524 Forfeited employer contributions Forfeited employer contributions Total additions 139,055 66,156 32,805 31,250 27,135 11,556 18,709 Deductions: Deductions allocated from Master Trust: Benefits paid to participants 723 1,867 865 50 1,305 132 88 Administrative expenses 47 65 180 34 17 5 7 Benefits paid to participants Administrative expenses Total deductions 770 1,932 1,045 84 1,322 137 95 Interfund transfers 208,253 28,647 29,971 23,806 18,730 6,474 11,551 Net increase (decrease) 346,538 92,871 61,731 54,972 44,543 17,893 30,165 Net assets available for benefits: Beginning of year - - - - - - _ End of year $ 346,538 $ 92,871 $ 61,731 $ 54,972 $ 44,543 $ 17,893 $ 30,165
Notes to Financial Statements, Continued 9c. Activity by Fund for the Year Ended December 31, 1998 (Cont.): Nonparticipant Participant Directed Directed Humana Long-Term Large Participant Common Bond Capitalization Note Stock Fund Fund Fund Fund Total Additions: Investment income: Plan interest in Master Trust investment income: Interest and dividend income $ 1,631 Net appreciation (depreciation) in fair of investments $ 552 $ 1,988 $ 212 $ 8,419 19,125 Net appreciation in fair value of investments 40,157 Interest and dividend income 6,723 Contributions: Contributions allocated from Master Trust: Participants 10,558 15,891 218,968 Employer 185 482,379 607,126 Forfeited employer contributions (1,929) (1,929) Forfeited employer contributions 896 Total additions 11,295 17,879 212 488,869 892,697 Deductions: Deductions allocated from Master Trust: Benefits paid to participants 854 573 6,457 Administrative expenses 10 11 376 Benefits paid to participants 85,547 Administrative expenses 2,557 Total deductions 864 584 - - 94,937 Interfund transfers 12,669 - 1,025 572 - Net increase (decrease) 23,100 17,295 1,237 489,441 797,760 Net assets available for benefits: Beginning of year - - 3,384 - 385,410 End of year $ 23,100 $ 17,295 $ 4,621 $ 489,441 $ 1,183,170
Notes to Financial Statements, Continued 10a. Activity by Fund for the Year Ended December 31, 1997: Sweep Asset Bond Income Growth International S&P 500 Account Allocation Index Accumulation Stock Equity Stock Additions: Net appreciation (depreciation) in fair value of investments $ 10,495 $ 3,565 $ 545 $ (209) $ 14,893 Interest and dividend income $ 177 $ 6,199 Contributions: Participants 20,151 13,406 54,170 11,243 4,822 22,169 Employer 9,144 5,827 25,459 5,309 2,271 10,327 Forfeited employers' contributions (7,129) Total additions (6,952) 39,790 22,798 85,828 17,097 6,884 47,389 Deductions: Benefits paid to participants 52 8,280 4,979 37,620 2,778 1,178 4,833 Administrative expenses 11 49 13 127 24 17 38 Total deductions 63 8,329 4,992 37,747 2,802 1,195 4,871 Interfund transfers 3,639 2,232 (131) (23,944) 1,769 1,907 10,530 Net increase (decrease) (3,376) 33,693 17,675 24,137 16,064 7,596 53,048 Net assets available for benefits: Beginning of year 5,853 37,791 31,388 96,789 10,819 2,277 35,586 End of year $ 2,477 $ 71,484 $ 49,063 $ 120,926 $ 26,883 $ 9,873 $ 88,634
10b. Activity by Fund for the Year Ended December 31, 1997 (Cont.): LifePath LifePath LifePath LifePath LifePath 2000 2010 2020 2030 2040 Loans Total Additions: Net appreciation (depreciation) in fair value of investments $ 19 $ 17 $ 46 $ 4 $ 864 $ 30,239 Interest and dividend income $ 432 6,808 Contributions: Participants 98 211 1,714 48 4,657 132,689 Employer 49 104 857 24 2,328 61,699 Forfeited employers' contributions (7,129) Total additions 166 332 2,617 76 7,849 432 224,306 Deductions: Benefits paid to participants 2,258 3,269 65,247 Administrative expenses 9 288 Total deductions - - - - 2,267 3,269 65,535 Interfund transfers 611 1,190 50 (1,259) 1,570 1,836 - Net increase (decrease) 777 1,522 2,667 (1,183) 7,152 (1,001) 158,771 Net assets available for benefits: Beginning of year 141 - - 1,318 292 4,385 226,639 End of year $ 918 $ 1,522 $ 2,667 $ 135 $ 7,444 $ 3,384 $ 385,410
Humana Puerto Rico 1165(e) Retirement Plan Plan #002 EIN #48-1006287 Line 27(a) - Schedule of Assets Held for Investment Purposes December 31, 1998 Description of Investment Including Maturity Date, Rate of Interest, Collateral, Issuer Par or Maturity Value Cost Fair Value Investments at fair value: Plan interest in Master Trust Various $831,790 $1,037,248
Humana Puerto Rico 1165(e) Retirement Plan Plan #002 EIN #48-1006287 Line 27(d) - Schedule of Reportable Transactions for the year ended December 31, 1998 Current Value Expense of Asset on Identity of Description Purchase Selling Lease Incurred with Cost of Transaction Net Party Involved of Asset Price Price Rental Transactions Asset Date Gain (Loss) No reportable transactions.
Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Humana Puerto Rico 1165(e) Retirement Plan has duly caused this report to be signed by the undersigned thereunto duly authorized. HUMANA PUERTO RICO 1165(e) RETIREMENT PLAN BY: /s/ James E. Murray _________________________ James E. Murray Chief Financial Officer June 28, 1999 Exhibit Index __________ Exhibit 23 Consent of Independent Accountants EX-23 2 Exhibit 23 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-49305) of Humana Inc. of our report dated May 14, 1999 relating to the financial statements and supplemental schedules of the Humana Puerto Rico 1165(e) Retirement Plan as of and for the years ended December 31, 1998 and 1997 which appears in this Form 11-K. /s/ PricewaterhouseCoopers LLP Louisville, Kentucky June 28, 1999 -----END PRIVACY-ENHANCED MESSAGE-----