SCHEDULE I - PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

SCHEDULE I - PARENT COMPANY FINANCIAL INFORMATION

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS

	December 31,
	2019			2018
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,006		$	265
Investment securities	355			313
Receivable from operating subsidiaries	1,248			1,306
Other current assets	778			628
Total current assets	3,387			2,512
Property and equipment, net	1,403			1,209
Investments in subsidiaries	14,763			16,951
Equity method investment in Kindred at Home	1,063			1,047
Other long-term assets	778			359
Total assets	$	21,394		$	22,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Payable to operating subsidiaries	$	1,975		$	4,487
Current portion of notes payable to operating subsidiaries	36			28
Book overdraft	40			38
Short-term debt	699			1,694
Other current liabilities	1,128			791
Total current liabilities	3,878			7,038
Long-term debt	4,967			4,375
Other long-term liabilities	512			504
Total liabilities	9,357			11,917
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; 198,629,992 shares issued at December 31, 2019 and 198,594,841 shares issued at December 31, 2018	33			33
Capital in excess of par value	2,820			2,535
Retained earnings	17,483			15,072
Accumulated other comprehensive income (loss)	156			(159		)
Treasury stock, at cost, 66,524,771 shares at December 31, 2019 and 63,028,169 shares at December 31, 2018	(8,455		)	(7,320		)
Total stockholders’ equity	12,037			10,161
Total liabilities and stockholders’ equity	$	21,394		$	22,078

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,
	2019			2018			2017
	(in millions)
Revenues:
Management fees charged to operating subsidiaries	$	1,789		$	1,666		$	1,864
Investment and other income, net	28			30			57
	1,817			1,696			1,921
Expenses:
Operating costs	1,578			1,468			1,801
Merger termination fee and related costs, net	—			—			(936		)
Depreciation	387			342			332
Interest	242			218			243
	2,207			2,028			1,440
Other (income) expense, net	(507		)	33			—
Loss on sale of business	—			782			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	117			(1,147		)	481
Provision (benefit) for income taxes	27			(542		)	61
Income (loss) before equity in net earnings of subsidiaries	90			(605		)	420
Equity in net earnings of subsidiaries	2,603			2,277			2,028
Equity in net earnings of Kindred at Home	14			11			—
Net income	$	2,707		$	1,683		$	2,448

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,
	2019			2018			2017
	(in millions)
Net income	$	2,707		$	1,683		$	2,448
Other comprehensive income (loss):
Change in gross unrealized investment losses/gains	450			(189		)	149
Effect of income taxes	(105		)	51			(55		)
Total change in unrealized investment gains/losses, net of tax	345			(138		)	94
Reclassification adjustment for net realized gains included in investment income	(34		)	(53		)	(14		)
Effect of income taxes	8			17			5
Total reclassification adjustment, net of tax	(26		)	(36		)	(9		)
Other comprehensive income (loss), net of tax	319			(174		)	85
Comprehensive income attributable to our equity method investment in Kindred at Home	(4		)	(4		)	—
Comprehensive income	$	3,022		$	1,505		$	2,533

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,
	2019			2018			2017
	(in millions)
Net cash provided by operating activities	$	3,529		$	2,719		$	2,423
Cash flows from investing activities:
Acquisitions, net of cash acquired	—			(354		)	—
Acquisitions, equity method investment in Kindred at Home	—			(1,095		)	—
Capital contributions to operating subsidiaries	(423		)	(697		)	(695		)
Purchases of investment securities	(204		)	(145		)	(53		)
Proceeds from sale of investment securities	15			35			—
Maturities of investment securities	134			59			51
Purchases of property and equipment, net	(585		)	(465		)	(359		)
Net cash used in investing activities	(1,063		)	(2,662		)	(1,056		)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net	987			—			1,779
(Repayments) proceeds from issuance of commercial paper, net	(360		)	485			(153		)
Proceeds from term loan	—			1,000			—
Repayment of term loan	(650		)	(350		)	—
Repayment of long-term debt	(400		)	—			(800		)
Change in book overdraft	2			(3		)	3
Common stock repurchases	(1,070		)	(1,090		)	(3,365		)
Dividends paid	(291		)	(265		)	(220		)
Proceeds from stock option exercises and other	57			48			62
Net cash used in financing activities	(1,725		)	(175		)	(2,694		)
Increase (decrease) in cash and cash equivalents	741			(118		)	(1,327		)
Cash and cash equivalents at beginning of year	265			383			1,710
Cash and cash equivalents at end of year	$	1,006		$	265		$	383

See accompanying notes to the parent company financial statements.

SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION

NOTES TO CONDENSED 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.

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 $1.8 billion in 2019, $2.3 billion in 2018, and $1.4 billion in 2017.

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 and funding to maintain required statutory capital levels of certain other regulated subsidiaries.

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. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, it is generally considered an extraordinary dividend requiring prior regulatory approval. 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 $7.6 billion as of December 31, 2019 and 2018, respectively, which exceeded aggregate minimum regulatory requirements of $5.9 billion and $5.2 billion, respectively. The amount of ordinary dividends that may be paid to our parent company in 2020 is approximately $1 billion in the aggregate. The amount, timing and mix of ordinary and extraordinary dividend payments will vary due to state regulatory requirements, the level of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix. Actual dividends that were paid to our parent company were approximately $1.8 billion in 2019, $2.3 billion in 2018, and $1.4 billion in 2017.

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 DIVESTITURESRefer to Notes 3 and 4 of the notes to consolidated financial statements in this Annual Report on Form 10-K for a description of certain acquisitions and divestitures. During 2019, 2018 and 2017, 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 12 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 13 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 16 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.