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:
<TABLE>
<S> <C>
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
</TABLE>
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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
Notes to Financial Statements, Continued
7b. Net Assets by Fund at December 31, 1998 (Cont.):
<TABLE>
<S> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
8a. Net Assets by Fund at December 31, 1997:
Participant Directed
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
8b. Net Assets by Fund at December 31, 1997 (Cont.):
<TABLE>
Participant Directed
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
9a. Activity by Fund for the Year Ended December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 - - - - - - - -
</TABLE>
Notes to Financial Statements, Continued
9b. Activity by Fund for the Year Ended December 31, 1998 (Cont.):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
9c. Activity by Fund for the Year Ended December 31, 1998 (Cont.):
<TABLE>
<S> <C> <C> <C> <C> <C>
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
</TABLE>
Notes to Financial Statements, Continued
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
10b. Activity by Fund for the Year Ended December 31, 1997 (Cont.):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
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
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
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
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
