SCHEDULE I-PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2016

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,
	2016			2015
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,710		$	1,389
Investment securities	300			256
Receivable from operating subsidiaries	1,136			1,124
Other current assets	122			224
Total current assets	3,268			2,993
Property and equipment, net	1,086			1,011
Investments in subsidiaries	15,276			14,276
Other long-term assets	374			410
Total assets	$	20,004		$	18,690
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Payable to operating subsidiaries	$	4,107		$	3,322
Current portion of notes payable to operating subsidiaries	28			28
Book overdraft	38			38
Short-term borrowings	300			299
Other current liabilities	708			572
Total current liabilities	5,181			4,259
Long-term debt	3,792			3,794
Notes payable to operating subsidiaries	9			9
Other long-term liabilities	337			282
Total liabilities	9,319			8,344
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; 198,495,007 shares issued at December 31, 2016 and 198,372,059 shares issued at December 31, 2015	33			33
Capital in excess of par value	2,562			2,530
Retained earnings	11,454			11,017
Accumulated other comprehensive income	(66		)	58
Treasury stock, at cost, 49,189,811 shares at December 31, 2016 and 50,084,043 shares at December 31, 2015	(3,298		)	(3,292		)
Total stockholders’ equity	10,685			10,346
Total liabilities and stockholders’ equity	$	20,004		$	18,690

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,
	2016			2015			2014
	(in millions)
Revenues:
Management fees charged to operating subsidiaries	$	1,683		$	1,469		$	1,509
Investment and other income, net	42			5			4
	1,725			1,474			1,513
Expenses:
Operating costs	1,623			1,370			1,434
Depreciation	302			252			212
Interest	189			186			192
	2,114			1,808			1,838
Loss before gain on sale of business, income taxes and equity in net earnings of subsidiaries	(389		)	(334		)	(325		)
Gain on sale of business	—			270			—
Loss before income taxes and equity in net earnings of subsidiaries	(389		)	(64		)	(325		)
Benefit for income taxes	(107		)	(70		)	(81		)
Income (loss) before equity in net earnings of subsidiaries	(282		)	6			(244		)
Equity in net earnings of subsidiaries	896			1,270			1,391
Net income	$	614		$	1,276		$	1,147

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,
	2016			2015			2014
	(in millions)
Net income	$	614		$	1,276		$	1,147
Other comprehensive (loss) income:
Change in gross unrealized investment gains/losses	(101		)	(114		)	122
Effect of income taxes	38			42			(44		)
Total change in unrealized investment gains/losses, net of tax	(63		)	(72		)	78
Reclassification adjustment for net realized gains included in investment income	(96		)	(146		)	(20		)
Effect of income taxes	35			53			7
Total reclassification adjustment, net of tax	(61		)	(93		)	(13		)
Other comprehensive (loss) income, net of tax	(124		)	(165		)	65
Comprehensive income	$	490		$	1,111		$	1,212

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,
	2016			2015			2014
	(in millions)
Net cash provided by operating activities	$	1,848		$	953		$	1,499
Cash flows from investing activities:
Proceeds from sale of business	—			1,055			—
Capital contributions to operating subsidiaries	(895		)	(833		)	(442		)
Purchases of investment securities	(151		)	(507		)	(629		)
Proceeds from sale of investment securities	25			18			606
Maturities of investment securities	143			108			149
Purchases of property and equipment, net	(382		)	(378		)	(380		)
Net cash used in investing activities	(1,260		)	(537		)	(696		)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net	—			—			1,733
Proceeds from issuance of commercial paper, net	(2		)	298			—
Repayment of long-term debt	—			—			(500		)
Change in book overdraft	5			(16		)	(5		)
Common stock repurchases	(104		)	(385		)	(872		)
Dividends paid	(177		)	(172		)	(172		)
Tax benefit from stock-based compensation	—			15			12
Proceeds from stock option exercises and other	11			22			51
Net cash (used in) provided by financing activities	(267		)	(238		)	247
Increase in cash and cash equivalents	321			178			1,050
Cash and cash equivalents at beginning of year	1,389			1,211			161
Cash and cash equivalents at end of year	$	1,710		$	1,389		$	1,211

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, 2016 and December 31, 2015 in the amount of $314 million and $284 million, respectively. The related interest income of $30 million for 2016 is included in investment and other income in our condensed statement 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 $763 million in 2016, $493 million in 2015, and $927 million in 2014.

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 1.93% to 6.65% and are payable in 2017 and 2019. We recorded interest expense of $1 million related to these notes for each of the years ended December 31, 2016, 2015 and 2014.

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$7.7 billion and $6.6 billion as of December 31, 2016 and 2015, respectively, which exceeded aggregate minimum regulatory requirements of$4.8 billion and $4.6 billion, respectively. 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 in2017is approximately$850 millionin the aggregate. This compares to dividends that were paid to our parent company in2016of approximately$763 million. 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 2016, 2015 and 2014, 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.