Cigna 2009 Annual Report Download - page 176

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B. Deferred Income Taxes
Deferred income tax assets and liabilities as of December 31 are shown below.
(In millions) 2009 2008
Deferred tax assets
Employee and retiree benefit plans $ 774 $ 921
Investments, net 111 130
Other insurance and contractholder liabilities 430 454
Deferred gain on sale of business 67 78
Policy acquisition expenses 144 147
Loss carryforwards 104 111
Other accrued liabilities 111 110
Bad debt expense 16 22
Other 34 39
Deferred tax assets before valuation allowance 1,791 2,012
Valuation allowance for deferred tax assets (116) (126)
Deferred tax assets, net of valuation allowance 1,675 1,886
Deferred tax liabilities
Depreciation and amortization 291 238
Unrepatriated foreign income, net 151 135
Unrealized appreciation (depreciation) on investments and foreign currency translation 204 (104)
Total deferred tax liabilities 646 269
Net deferred income tax assets $ 1,029 $ 1,617
Management believes consolidated taxable income to be generated in the future will be sufficient in amount and character to support
realization of the Company’s net deferred tax assets of $1.0 billion as of December 31, 2009 and $1.6 billion as of December 31,
2008. This determination is based upon the Company’s consistent overall earnings history and future earnings expectations. Other
than deferred tax benefits attributable to operating loss and foreign tax credit carryforwards, there are no constraints on the period of
time within which the Company’s deferred tax assets must be realized. Federal operating loss carryforwards of $283 million were
available to offset future taxable income of the generating companies, and begin to expire in 2022. Foreign tax credit carryforwards of
$11 million were generated in 2009 and may be carried forward 10 years.
The Company’s deferred tax asset is net of a federal and state valuation allowance (see table above). The valuation allowance reflects
management’s assessment that certain deferred tax assets may not be realizable. As was the case at December 31, 2008, the valuation
allowance at December 31, 2009 relates primarily to operating losses, and other deferred tax benefits, of the run-off reinsurance
operations. It is reasonably possible there could be a significant decline in the level of valuation allowance recorded against deferred
tax benefits of the reinsurance operations within the next 12 months.
C. Uncertain Tax Positions
A reconciliation of unrecognized tax benefits for the years ended December 31 is as follows:
(In millions) 2009 2008 2007
Balance at January 1, $ 164 $ 260 $ 245
Increase (decrease) due to prior year positions 5 (119) (31)
Increase due to current year positions 76 34 51
Reduction related to settlements with taxing authorities (28) (5) -
Reduction related to lapse of applicable statute
of limitations (3) (6) (5)
Balance at December 31, $ 214 $ 164 $ 260