Anthem Blue Cross 2001 Annual Report Download - page 36

Other
Our Other segment includes various ancillary business units such as AdminaStar Federal, a subsidiary that
administers Medicare Parts A and B programs in Indiana, Illinois, Kentucky and Ohio, and Anthem
Alliance, a subsidiary that provided the health care benefits and administration in nine states for active and
retired military employees and their dependents under the Department of Defense’s TRICARE program for
military families. We sold the TRICARE business on May 31, 2001. Our Other segment also includes
intersegment revenue and expense eliminations and corporate expenses not allocated to operating segments.
The following table presents the summarized results of operations for our Other segment for the years
ended December 31, 2000 and 1999:
($ in Millions) 2000 1999 % Change
Operating Revenue $ 206.4 $ 184.4 12%0
Operating Loss $ (34.9) $ (19.7) NM0
Operating revenue increased $22.0 million, or 12%, from 1999. Excluding intersegment operating revenue
eliminations of $151.7 million in 2000 and $111.2 million in 1999, operating revenue increased $62.5
million, or 21%, primarily due to higher premiums at Anthem Alliance. These amounts were received in
connection with our global settlement related to a series of bid price adjustments, requests for equitable
adjustments and change orders filed during the past two years with the Department of Defense under our
TRICARE program.
Certain corporate expenses are not allocated to our business segments. These unallocated expenses
accounted for $39.9 million in 2000 and $26.7 million in 1999, and primarily included such items as
unallocated incentive compensation and other corporate expenses. Excluding unallocated corporate
expenses, operating gain was $5.0 million in 2000, $2.0 million, or 29%, less than in 1999. Most of the
decrease was due to higher non-reimbursable administrative expense at AdminaStar Federal.
Income Taxes
Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” requires, among
other things, the separate recognition, measured at currently enacted tax rates, of deferred tax assets and
deferred tax liabilities for the tax effect of temporary differences between financial reporting and tax
reporting. A valuation allowance must be established for deferred tax assets if it is “more likely than not”
that all or a portion may be unrealized. See Note 13 to our audited consolidated financial statements for
additional information.
We believe a net deferred tax liability of $63.6 million properly reflects our net future tax obligation as of
December 31, 2001. This net deferred tax liability is comprised of a gross tax asset of $467.1 million, less a
valuation allowance of $250.4 million and a deferred tax liability of $280.3 million. We believe that our
valuation allowance is sufficient and at each quarterly financial reporting date, we evaluate each of our gross
deferred tax assets based on each of the five key elements that follow:
• the types of temporary differences making up our gross deferred tax asset;
• the anticipated reversal periods of those temporary differences;
• the amount of taxes paid in prior periods and available for a carry-back claim;
• the forecasted near term future taxable income; and
• any significant other issues impacting the likely realization of the benefit of the temporary differences.
As an entity taxed under Internal Revenue Code Section 833, at December 31, 2001, we have tax temporary
differences of approximately $199.7 million for net operating loss carry-forwards and alternative minimum
tax and other credits. Due to uncertainty of the realization of these deferred tax assets, we have provided a
valuation allowance included above of $188.3 million for these amounts. This amount is part of the total
valuation allowance of $250.4 million at December 31, 2001.
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