Humana 2007 Annual Report Download - page 121

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Humana Inc.
SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
Based on the most recent statutory financial statements as of December 31, 2007, we maintained aggregate
statutory capital and surplus of $2,905.2 million in our state regulated subsidiaries. This compares to applicable
statutory requirements which aggregated $1,810.5 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 their required levels of equity
discussed above. 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
the remaining states and Puerto Rico at December 31, 2007, we would have $966.3 million of aggregate capital
and surplus above any of the levels that require corrective action under RBC, or individual state requirements
based on the most recent statutory financial statements as of December 31, 2007.
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 reduction 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 9 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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