Humana 2013 Annual Report Download - page 124

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, 2013 and 2012 were as follows:
Assets (Liabilities)
2013 2012
(in millions)
Future policy benefits payable .................................................. $303 $246
Compensation and other accrued expenses ........................................ 185 174
Benefits payable ............................................................ 111 91
Net operating loss carryforward ................................................ 49 203
Deferred acquisition costs ..................................................... 46 37
Unearned premiums .......................................................... 10 11
Capital loss carryforward ...................................................... 0 13
Other ..................................................................... 12 9
Total deferred income tax assets ........................................ 716 784
Valuation allowance ................................................. (28) (28)
Total deferred income tax assets, net of valuation allowance .................. 688 756
Depreciable property and intangible assets ........................................ (453) (465)
Investment securities ......................................................... (78) (265)
Prepaid expenses ............................................................ (83) (59)
Total deferred income tax liabilities ..................................... (614) (789)
Total net deferred income tax assets (liabilities) ........................ $ 74 $ (33)
Amounts recognized in the consolidated balance sheets:
Other current assets ...................................................... $ 60 $ 0
Other long-term assets .................................................... 14 12
Trade accounts payable and accrued expenses ................................. 0 (45)
Total net deferred income tax assets (liabilities) ........................ $ 74 $ (33)
At December 31, 2013, we had approximately $134 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 2014 through 2031. A significant portion of these losses are in a subsidiary that was not included in
the Humana Inc. consolidated tax return until 2013, and, therefore, were not used until 2013 which resulted in a
decrease to the deferred tax asset associated with net operating loss carryforwards. 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 provide for income taxes on the undistributed earnings of our Puerto Rico operations using that
jurisdiction’s tax rate, which has been lower historically than the U.S. statutory tax rate. Permanent investment of
these earnings has resulted in cumulative unrecognized deferred tax liabilities of approximately $40 million as of
December 31, 2013.
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