SCHEDULE I-PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

SCHEDULE I-PARENT COMPANY FINANCIAL INFORMATION

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS

	December 31,
	2017			2016
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	383		$	1,710
Investment securities	305			300
Receivable from operating subsidiaries	1,042			1,136
Other current assets	245			122
Total current assets	1,975			3,268
Property and equipment, net	1,091			1,086
Investments in subsidiaries	16,810			15,276
Other long-term assets	426			374
Total assets	$	20,302		$	20,004
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Payable to operating subsidiaries	$	4,311		$	4,107
Current portion of notes payable to operating subsidiaries	28			28
Book overdraft	41			38
Short-term borrowings	150			300
Other current liabilities	896			708
Total current liabilities	5,426			5,181
Long-term debt	4,770			3,792
Notes payable to operating subsidiaries	9			9
Other long-term liabilities	255			337
Total liabilities	10,460			9,319
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	—			—
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,572,458 shares issued at December 31, 2017 and 198,495,007 shares issued at December 31, 2016	33			33
Capital in excess of par value	2,445			2,562
Retained earnings	13,670			11,454
Accumulated other comprehensive income (loss)	19			(66		)
Treasury stock, at cost, 60,893,762 shares at December 31, 2017 and 49,189,811 shares at December 31, 2016	(6,325		)	(3,298		)
Total stockholders’ equity	9,842			10,685
Total liabilities and stockholders’ equity	$	20,302		$	20,004

See accompanying notes to the parent company financial statements.

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

CONDENSED STATEMENTS OF INCOME

	For the year ended December 31,
	2017			2016			2015
	(in millions)
Revenues:
Management fees charged to operating subsidiaries	$	1,864		$	1,683		$	1,469
Investment and other income, net	57			42			5
	1,921			1,725			1,474
Expenses:
Operating costs	1,801			1,519			1,347
Merger termination fee and related costs, net	(936		)	104			23
Depreciation	332			302			252
Interest	243			189			186
	1,440			2,114			1,808
Income (loss) before gain on sale of business, income taxes and equity in net earnings of subsidiaries	481			(389		)	(334		)
Gain on sale of business	—			—			270
Income (loss) before income taxes and equity in net earnings of subsidiaries	481			(389		)	(64		)
Provision (benefit) for income taxes	61			(107		)	(70		)
Income (loss) before equity in net earnings of subsidiaries	420			(282		)	6
Equity in net earnings of subsidiaries	2,028			896			1,270
Net income	$	2,448		$	614		$	1,276

See accompanying notes to the parent company financial statements.

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

	For the year ended December 31,
	2017			2016			2015
	(in millions)
Net income	$	2,448		$	614		$	1,276
Other comprehensive income (loss):
Change in gross unrealized investment gains/losses	149			(101		)	(114		)
Effect of income taxes	(55		)	38			42
Total change in unrealized investment gains/losses, net of tax	94			(63		)	(72		)
Reclassification adjustment for net realized gains included in investment income	(14		)	(96		)	(146		)
Effect of income taxes	5			35			53
Total reclassification adjustment, net of tax	(9		)	(61		)	(93		)
Other comprehensive income (loss), net of tax	85			(124		)	(165		)
Comprehensive income	$	2,533		$	490		$	1,111

See accompanying notes to the parent company financial statements.

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

CONDENSED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2017			2016			2015
	(in millions)
Net cash provided by operating activities	$	2,423		$	1,848		$	953
Cash flows from investing activities:
Proceeds from sale of business	—			—			1,055
Capital contributions to operating subsidiaries	(695		)	(895		)	(833		)
Purchases of investment securities	(53		)	(151		)	(507		)
Proceeds from sale of investment securities	—			25			18
Maturities of investment securities	51			143			108
Purchases of property and equipment, net	(359		)	(382		)	(378		)
Net cash used in investing activities	(1,056		)	(1,260		)	(537		)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net	1,779			—			—
(Repayments) proceeds from issuance of commercial paper, net	(153		)	(2		)	298
Repayment of long-term debt	(800		)	—			—
Change in book overdraft	3			5			(16		)
Common stock repurchases	(3,365		)	(104		)	(385		)
Dividends paid	(220		)	(177		)	(172		)
Tax benefit from stock-based compensation	—			—			15
Proceeds from stock option exercises and other	62			11			22
Net cash used in financing activities	(2,694		)	(267		)	(238		)
(Decrease) increase in cash and cash equivalents	(1,327		)	321			178
Cash and cash equivalents at beginning of year	1,710			1,389			1,211
Cash and cash equivalents at end of year	$	383		$	1,710		$	1,389

See accompanying notes to the parent company financial statements.

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.

Related Party

Refer to Note 2 of the notes to consolidated financial statements in this Annual Report on Form 10-K for a description of our related party transactions. A related party note receivable is included with other long-term assets in our condensed balance sheet at December 31, 2017 and December 31, 2016 in the amount of $349 million and $314 million, respectively. We have also entered into a revolving note agreement providing a line of credit up to $55 million under which$18 million was outstanding at December 31, 2017, and we had no balance outstanding at December 31, 2016. The related interest income of $35 million and $30 million for 2017 and 2016, respectively, is included in investment and other income in our condensed statements of income.

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 $1.4 billion in 2017, $763 million in 2016, and $493 million in 2015.

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 or other state regulatory authorities.

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 2.14% to 6.65% and are payable in 2018 and 2019. We recorded interest expense of $1 million related to these notes for each of the years ended December 31, 2017, 2016 and 2015.

REGULATORY REQUIREMENTS

Certain of our 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 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.

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 insurances subsidiaries had aggregate statutory capital and surplus of approximately$8.0 billion and $7.7 billion as of December 31, 2017 and 2016, respectively, which exceeded aggregate minimum regulatory requirements of$4.8 billion in both years. Subsidiary dividends are subject to state regulatory approval, the amount and timing of which could be reduced or delayed. Excluding Puerto Rico subsidiaries, the amount of ordinary dividends that may be paid to our parent company in2018is approximately$1.1 billionin the aggregate. This compares to dividends that were paid to our parent company in2017of approximately$1.4 billion. 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.

Our parent company funded a subsidiary capital contribution of approximately $535 million in the first quarter of 2017 for reserve strengthening associated with our closed block of long-term care insurance policies discussed further in Note 18 of the notes to consolidated financial statements in this Annual Report on Form 10-K.

Our use of operating cash flows derived from our non-insurance subsidiaries, such as in our Healthcare Services segment, is generally not restricted by state departments of insurance (or comparable state regulators).

ACQUISITIONS AND DIVESTITURES

Refer to Note 3 of the notes to consolidated financial statements in this Annual Report on Form 10-K for a description of certain acquisitions and divestitures. On June 1, 2015, we completed the sale of our wholly owned subsidiary, Concentra Inc. During 2017, 2016 and 2015, we funded certain non-regulated subsidiary acquisitions with contributions from Humana Inc., our parent company, included in capital contributions in the condensed statement of cash flows.

INCOME TAXES

Refer to Note 11 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of income taxes.

DEBT

Refer to Note 12 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of debt.

STOCKHOLDER’S EQUITY

Refer to Note 15 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of stockholders’ equity, including stock repurchases and stockholder dividends.