Humana 2013 Annual Report Download - page 131

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Regulatory Requirements
Certain of our insurance subsidiaries operate in states that regulate the payment of dividends, loans, or other
cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit
investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these insurance
subsidiaries, without prior approval by state regulatory authorities, or ordinary dividends, is limited based on the
entity’s level of statutory income and statutory capital and surplus. In most states, prior notification is provided
before paying a dividend even if approval is not required. Actual dividends paid may vary due to consideration of
excess statutory capital and surplus and expected future surplus requirements related to, for example, premium
volume and product mix.
Although minimum required levels of equity are largely based on premium volume, product mix, and the
quality of assets held, minimum requirements vary significantly at the state level. Our state regulated insurance
subsidiaries had aggregate statutory capital and surplus of approximately $5.5 billion and $5.1 billion as of
December 31, 2013 and 2012, respectively, which exceeded aggregate minimum regulatory requirements of
$3.5 billion and $3.4 billion, respectively. Excluding Puerto Rico subsidiaries, the amount of ordinary dividends
that may be paid to our parent company in 2014 is approximately $840 million in the aggregate. This compares
to dividends that were paid to our parent company in 2013 of approximately $967 million. However, actual
dividends paid from the subsidiaries to the parent in 2014 could be reduced as a result of the proposed statutory
accounting for the health insurance industry fee, discussed below, combined with higher surplus requirements
associated with premium growth due to increases in membership.
The NAIC is continuing discussions regarding the statutory accounting for the health insurance industry fee
required by the Health Care Reform Law which in its present form would restrict surplus in the year preceding
payment, beginning in 2014. Accordingly, in addition to recording the full-year 2014 assessment in the first
quarter of 2014, we may be required to restrict surplus for the 2015 assessment ratably in 2014. This proposal
does not affect our financial statements prepared in accordance with generally accepted accounting principles,
under which the fee is expensed ratably throughout the payment year.
15. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Leases
We lease facilities, computer hardware, and other furniture and equipment under long-term operating leases
that are noncancelable and expire on various dates through 2025. We sublease facilities or partial facilities to
third party tenants for space not used in our operations. Rent with scheduled escalation terms are accounted for
on a straight-line basis over the lease term. Rent expense and sublease rental income, which are recorded net as
an operating cost, for all operating leases were as follows for the years ended December 31, 2013, 2012 and
2011:
2013 2012 2011
(in millions)
Rent expense ........................................... $227 $218 $207
Sublease rental income ................................... (11) (11) (10)
Net rent expense .................................... $216 $207 $197
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