Humana 2012 Annual Report Download - page 120

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or
liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates
expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our
net deferred tax balances at December 31, 2012 and 2011 were as follows:
Assets (Liabilities)
2012 2011
(in millions)
Future policy benefits payable .................................................. $246 $179
Net operating loss carryforward ................................................ 203 181
Compensation and other accrued expenses ........................................ 174 95
Benefits payable ............................................................ 91 111
Deferred acquisition costs ..................................................... 37 35
Capital loss carryforward ...................................................... 13 13
Unearned premiums .......................................................... 11 11
Other ..................................................................... 9 20
Total deferred income tax assets ........................................ 784 645
Valuation allowance ................................................. (28) (28)
Total deferred income tax assets, net of valuation allowance .................. 756 617
Depreciable property and intangible assets ........................................ (465) (347)
Investment securities ......................................................... (265) (191)
Prepaid expenses ............................................................ (59) (49)
Total deferred income tax liabilities ..................................... (789) (587)
Total net deferred income tax (liabilities) assets ........................ $ (33) $ 30
Amounts recognized in the consolidated balance sheets:
Other long-term assets .................................................... $ 12 $ 46
Trade accounts payable and accrued expenses ................................. (45) (16)
Total net deferred income tax (liabilities) assets ........................ $ (33) $ 30
At December 31, 2012, we had approximately $555 million of net operating losses to carry forward related
to prior acquisitions. These net operating loss carryforwards, if not used to offset future taxable income, will
expire from 2013 through 2031. A significant portion of these losses are in a subsidiary that will not be included
in the Humana Inc. consolidated tax return until 2013, and, therefore, may not be used until that point. Due to
limitations and uncertainty regarding our ability to use some of the carryforwards, a valuation allowance was
established on $77 million of net operating loss carryforwards related to prior acquisitions. For the remainder of
the net operating loss carryforwards, based on our historical record of producing taxable income and profitability,
we have concluded that future operating income will be sufficient to give rise to tax expense to recover all
deferred tax assets.
We file income tax returns in the United States and certain foreign jurisdictions. The U.S. Internal Revenue
Service, or IRS, has completed its examinations of our consolidated income tax returns for 2011 and prior years.
Our 2012 tax return is under advance review by the IRS under its Compliance Assurance Process. With few
exceptions, which are immaterial in the aggregate, we no longer are subject to state, local and foreign tax
examinations for years before 2009. As of December 31, 2012, we are not aware of any material adjustments that
may be proposed.
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