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Recent Accounting Pronouncements
 6 Months Ended
Jun. 30, 2012
Recent Accounting Pronouncements  
Recent Accounting Pronouncements [Text Block]

Note 2 — Recent Accounting Pronouncements

 

Fees Paid to the Federal Government by Health Insurers (Accounting Standards Update (“ASU”) 2011-06) In 2011, the Financial Accounting Standards Board (“FASB”) issued accounting guidance for the health insurance industry assessment (the “fee”) mandated by the Patient Protection and Affordable Care Act of 2010 (“Health Care Reform”). The fee will be levied on health insurers beginning in 2014 based on a ratio of an insurer's net health insurance premiums written for the previous calendar year compared to the U.S. health insurance industry total. In addition, because these fees will generally not be tax deductible, the Company's effective tax rate is expected to be adversely impacted in future periods. Under the guidance, the liability for the fee will be estimated and recorded in full each year beginning in 2014 when health insurance is first provided. A corresponding deferred cost will be recorded and amortized over the calendar year. The amount of the fees is expected to be material, although the Company is unable to estimate the impact of these fees on shareholders' net income and the effective tax rate because guidance for these calculations has not been finalized.

       

       Deferred policy acquisition costs. Effective January 1, 2012, the Company adopted the FASB's amended guidance (ASU 2010-26) on accounting for costs to acquire or renew insurance contracts. This guidance requires certain sales compensation and telemarketing costs related to unsuccessful efforts and any indirect costs to be expensed as incurred. The Company's deferred acquisition costs arise from sales and renewal activities primarily in its International segment. This amended guidance was implemented through retrospective adjustment of comparative prior periods. As reported in the Consolidated Statement of Equity, the cumulative effect of adopting the amended accounting guidance as of January 1, 2011 was a reduction in Total Shareholders' Equity of $289 million. Full-year 2011 shareholders' net income on a retrospectively adjusted basis was reduced by $67 million, partially offset by increased foreign currency translation of $6 million, resulting in a cumulative impact on Total Shareholders' Equity as of December 31, 2011 of $350 million. Summarized below are the effects of the amended guidance on previously reported amounts for the three months and six months ended June 30, 2011. This implementation had no impact on the underlying economic value or cash flows of the Company's businesses, nor did it impact the Company's liquidity or the statutory surplus of its insurance subsidiaries.

 

 

Condensed Consolidated Statement of Income      
Three Months Ended June 30, 2011      
    Effect of   
    amended  As
  As previously accounting retrospectively
(in millions) reported guidance adjusted
Revenues, excluding other revenues$ 5,436$ $ 5,436
Other revenues  73  (2)  71
Total Revenues  5,509  (2)  5,507
Benefits and expenses, excluding other operating expenses  3,418    3,418
Other operating expenses  1,475  22  1,497
Total benefits and expenses  4,893  22  4,915
Income before Income Taxes  616  (24)  592
Current income taxes  138    138
Deferred income taxes  70  (7)  63
Total taxes  208  (7)  201
Net income  408  (17)  391
Less: Net income attributable to Noncontrolling Interest  -    -
Shareholders' Net Income$ 408$ (17)$ 391
       
Earnings per share:      
Basic$ 1.52$ (0.06)$ 1.46
Diluted$ 1.50$ (0.07)$ 1.43

Condensed Consolidated Statement of Income      
Six Months Ended June 30, 2011      
    Effect of   
    amended  As
  As previously accounting retrospectively
(in millions) reported guidance adjusted
Revenues, excluding other revenues$ 10,813$ $ 10,813
Other revenues  109  (4)  105
Total Revenues  10,922  (4)  10,918
Benefits and expenses, excluding other operating expenses  6,749    6,749
Other operating expenses  2,957  41  2,998
Total benefits and expenses  9,706  41  9,747
Income before Income Taxes  1,216  (45)  1,171
Current income taxes  160    160
Deferred income taxes  218  (12)  206
Total taxes  378  (12)  366
Net income  838  (33)  805
Less: Net income attributable to Noncontrolling Interest  1    1
Shareholders' Net Income$ 837$ (33)$ 804
       
Earnings per share:      
Basic$ 3.11$ (0.13)$ 2.98
Diluted$ 3.06$ (0.12)$ 2.94

Condensed Consolidated Balance sheet      
As of December 31, 2011      
    Effect of   
    amended  As
  As previously accounting retrospectively
(in millions) reported guidance adjusted
Deferred policy acquisition costs$ 1,312$ (495)$ 817
Deferred income taxes, net  632  171  803
Other assets, including other intangibles  1,776  (26)  1,750
All other assets  47,327    47,327
Total assets$ 51,047$ (350)$ 50,697
       
Net translation of foreign currencies$ (3)$ 6$ 3
Retained earnings  11,143  (356)  10,787
Other shareholders' equity  (2,796)    (2,796)
Total shareholders' equity$ 8,344$ (350)$ 7,994

Condensed Consolidated Statement of Cash Flows         
Six Months Ended June 30, 2011          
            Effect of  
            amended  As
          As previously accounting retrospectively
(in millions)         reported guidance adjusted
               
Net income        $ 838$ (33)$ 805
Deferred income taxes          218  (12)  206
Deferred policy acquisition expenses         (116)  41  (75)
Other assets          (44)  4  (40)
               
               
Note 16              
Segment information: International         
   Three Months Ended June 30, 2011  Six Months Ended June 30, 2011
     Effect of      Effect of  
     amended  As    amended  As
   As previously accounting retrospectively  As previously accounting retrospectively
(in millions)  reported guidance adjusted  reported guidance adjusted
               
Premiums and fees and other revenues$ 742$ (2)$ 740 $ 1,448$ (4)$ 1,444
Segment earnings   74  (17)  57   151  (33)  118

Presentation of Comprehensive Income. Effective January 1, 2012, the Company adopted the FASB's amended guidance (ASU 2011-05) that requires presenting net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive statements. Neither measurement of comprehensive income nor disclosure requirements for reclassification adjustments between other comprehensive income and net income were affected by this amended guidance. The Company has elected to present a separate statement of comprehensive income following the statement of income and has retrospectively adjusted prior periods to conform to the new presentation, as required.

 

 

 

 

 

 

 

Amendments to Fair Value Measurement and Disclosure. Effective January 1, 2012, the Company adopted the FASB's amended guidance on fair value measurement and disclosure (ASU 2011-04) on a prospective basis. A key objective was to achieve common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. The amended guidance changes certain fair value measurement principles and expands required disclosures to include quantitative and qualitative information about unobservable inputs in Level 3 measurements and leveling for financial instruments not carried at fair value in the financial statements. Upon adoption, there were no effects on the Company's fair value measurements. See Note 7 for expanded fair value disclosures.