Statutory Surplus And Subsidiary Dividend Restrictions

12 Months Ended

Dec. 31, 2011

Statutory Surplus And Subsidiary Dividend Restrictions [Abstract]

Statutory Surplus And Subsidiary Dividend Restrictions

NOTE 8 - Statutory Surplus and Subsidiary Dividend Restrictions

The insurance departments of various states in which the insurance subsidiaries of HMEC are domiciled recognize as net income and surplus those amounts determined in conformity with statutory accounting principles prescribed or permitted by the insurance departments, which differ in certain respects from GAAP.

Reconciliations of statutory capital and surplus and net income, as determined using statutory accounting principles, to the amounts included in the accompanying consolidated financial statements are as follows:

	(Unaudited)
	December 31,
	2011			2010
Statutory capital and surplus of insurance subsidiaries	$	711,983		$	684,909
Increase (decrease) due to:
Deferred policy acquisition costs		265,041			272,825
Difference in policyholder reserves		58,522			50,927
Goodwill		47,396			47,396
Liability for postretirement benefits other than pensions		(3,326	)		(3,489	)
Investment fair value adjustments on fixed maturities		439,944			183,549
Difference in investment reserves		84,519			65,773
Federal income tax liability		(264,019	)		(165,108	)
Net funded status of pension and other postretirement benefit obligations		(25,137	)		(20,336	)
Non-admitted assets and other, net		10,814			7,297
Shareholders' equity (deficit) of parent company and non-insurance subsidiaries		(1,067	)		(6,057	)
Parent company short-term and long-term debt		(237,744	)		(237,679	)
Shareholders' equity as reported herein	$	1,086,926		$	880,007
	(Unaudited)
	Year Ended December 31,
	2011			2010			2009
Statutory net income of insurance subsidiaries	$	63,986		$	77,235		$	69,295
Net loss of non-insurance companies		(10,164	)		(4,211	)		(4,678	)
Interest expense		(14,007	)		(13,953	)		(13,971	)
Tax benefit of interest expense and other parent company current tax adjustments		4,603			5,411			6,779
Combined net income		44,418			64,482			57,425
Increase (decrease) due to:
Deferred policy acquisition costs		8,958			12,686			12,895
Policyholder benefits		14,419			13,018			7,550
Federal income tax expense		(6,625	)		(17,987	)		(19,385	)
Amortization of intangible assets		-			-			(223	)
Investment reserves		9,903			16,167			21,188
Other adjustments, net		(593	)		(7,504	)		(5,964	)
Net income as reported herein	$	70,480		$	80,862		$	73,486

The Company has principal insurance subsidiaries domiciled in Illinois and Texas. The statutory financial statements of these subsidiaries are prepared in accordance with accounting principles prescribed or permitted by the Illinois Department of Insurance and the Texas Department of Insurance, as applicable. Prescribed statutory accounting principles include a variety of publications of the National Association of Insurance Commissioners ("NAIC"), as well as state laws, regulations and general administrative rules.

The Company's insurance subsidiaries are subject to various regulatory restrictions which limit the amount of annual dividends or other distributions, including loans or cash advances, available to HMEC without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in 2012 from all of HMEC's insurance subsidiaries without prior regulatory approval is approximately $71,000.

The NAIC has adopted risk-based capital guidelines to evaluate the adequacy of statutory capital and surplus in relation to risks assumed in investments, reserving policies, and volume and types of insurance business written. Based on current guidelines, the risk-based capital statutory requirements are not expected to have a negative regulatory impact on the Company's insurance subsidiaries. At December 31, 2011 and 2010, statutory capital and surplus of each of the Company's insurance subsidiaries was above required levels.

At the time of this Annual Report on Form 10-K and during each of the years in the three year period ended December 31, 2011, the Company had no financial reinsurance agreements in effect.