Humana 2005 Annual Report Download - page 121

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Humana Inc.
SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2005, we maintained aggregate statutory capital and surplus of $1,203.2 million in our
state regulated subsidiaries. Each of these subsidiaries was in compliance with applicable statutory requirements
which aggregated $722.2 million. Although the minimum required levels of equity are largely based on premium
volume, product mix, and the quality of assets held, minimum requirements can vary significantly at the state
level.
Most states rely on risk-based capital requirements, or RBC, to define the required levels of equity. RBC is a
model developed by the National Association of Insurance Commissioners to monitor an entity’s solvency. This
calculation indicates recommended minimum levels of required capital and surplus and signals regulatory
measures should actual surplus fall below these recommended levels. If RBC were adopted by all states and
Puerto Rico at December 31, 2005, we would be required to fund $14.7 million in one of our Puerto Rico
subsidiaries to meet all requirements. After this funding, we would have $378.2 million of aggregate capital and
surplus above any of the levels that require corrective action under RBC.
4. ACQUISITIONS
Refer to Note 3 of the notes to consolidated financial statements in the Annual Report on Form 10-K for a
description of acquisitions.
5. INCOME TAXES
The decrease in 2005 tax expense primarily related to the recognition of a $22.8 million contingent tax
benefit and associated $3.1 million reversal of accrued interest resulting from the resolution of an uncertain tax
position associated with the 2000 tax year during the first quarter of 2005 in connection with the expiration of the
statute of limitations. Refer to Note 8 of the notes to consolidated financial statements in the Annual Report on
Form 10-K for a description of income taxes.
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