Humana 2013 Annual Report Download - page 162

Humana Inc.
SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Parent company financial information has been derived from our consolidated financial statements and
excludes the accounts of all operating subsidiaries. This information should be read in conjunction with our
consolidated financial statements.
2. TRANSACTIONS WITH SUBSIDIARIES
Management Fee
Through intercompany service agreements approved, if required, by state regulatory authorities, Humana
Inc., our parent company, charges a management fee for reimbursement of certain centralized services provided
to its subsidiaries including information systems, disbursement, investment and cash administration, marketing,
legal, finance, and medical and executive management oversight.
Dividends
Cash dividends received from subsidiaries and included as a component of net cash provided by operating
activities were $967 million in 2013, $1.2 billion in 2012, and $1.1 billion in 2011.
Guarantee
Through indemnity agreements approved by state regulatory authorities, certain of our regulated
subsidiaries generally are guaranteed by our parent company in the event of insolvency for; (1) member coverage
for which premium payment has been made prior to insolvency; (2) benefits for members then hospitalized until
discharged; and (3) payment to providers for services rendered prior to insolvency. Our parent has also
guaranteed the obligations of our military services subsidiaries.
Notes Receivables from Operating Subsidiaries
We funded certain subsidiaries with surplus note agreements. These notes are generally non-interest bearing
and may not be entered into or repaid without the prior approval of the applicable Departments of Insurance.
Notes Payable to Operating Subsidiaries
We borrowed funds from certain subsidiaries with notes generally collateralized by real estate. These notes,
which have various payment and maturity terms, bear interest ranging from 1.13% to 6.65% and are payable in
2014 and 2019. We recorded interest expense of $1 million related to these notes for each of the years ended
December 31, 2013, 2012 and 2011.
3. 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.
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