Cigna 2012 Annual Report Download - page 137

PART II
ITEM 8 Financial Statements and Supplementary Data
continues to evaluate the permanent investment of foreign earnings liability includes an increase of $10 million associated with
for additional jurisdictions. unrecorded deferred tax liabilities reported through other
comprehensive income.
Shareholders’ net income for the year ended December 31, 2012
increased by $37 million related to this method of providing for
income taxes including $13 million attributable to the first quarter
Change in Valuation Allowance
implementation of this method for the Company’s China and The significant decline in the 2010 valuation allowance primarily
Indonesia operations. Permanent investment of foreign operation reflects the resolution of a disputed federal income tax matter specific
earnings has resulted in cumulative unrecognized deferred tax to the run-off reinsurance operations.
liabilities of $116 million through December 31, 2012. The
year-to-date change in the cumulative unrecognized deferred tax
B. Deferred Income Taxes
Deferred income tax assets and liabilities as of December 31 are shown below.
(In millions) 2012 2011
Deferred tax assets
Employee and retiree benefit plans $ 765 $ 829
Investments, net 95 108
Other insurance and contractholder liabilities 486 443
Deferred gain on sale of businesses 28 46
Policy acquisition expenses 147 151
Loss carryforwards 98
Other accrued liabilities 164 109
Bad debt expense 21 17
Other 33 37
Deferred tax assets before valuation allowance 1,748 1,748
Valuation allowance for deferred tax assets (42) (45)
Deferred tax assets, net of valuation allowance 1,706 1,703
Deferred tax liabilities
Depreciation and amortization 704 377
Foreign operations, net 147 128
Unrealized appreciation on investments and foreign currency translation 481 395
Total deferred tax liabilities 1,332 900
NET DEFERRED INCOME TAX ASSETS $ 374 $ 803
Management believes consolidated taxable income expected to be The Company’s deferred tax asset is net of federal, state, and foreign
generated in the future will be sufficient to support realization of the valuation allowances. The foreign valuation allowance was initially
Company’s net deferred tax assets. This determination is based upon recorded in connection with the Company’s 2011 acquisition of
the Company’s consistent overall earnings history and future earnings FirstAssist, for which there was a year over year decline of $7 million.
expectations. Other than deferred tax benefits attributable to This reduction did not impact shareholder’s net income. The
operating loss carryforwards, there are no time constraints within valuation allowance reflects management’s assessment that certain
which the Company’s deferred tax assets must be realized. deferred tax assets may not be realizable.
C. Uncertain Tax Positions
A reconciliation of unrecognized tax benefits for the years ended December 31 is as follows:
(In millions) 2012 2011 2010
Balance at January 1, $ 52 $ 177 $ 214
Decrease due to prior year positions (5) (113) (55)
Increase due to current year positions 7734
Reduction related to settlements with taxing authorities – (17) (13)
Reduction related to lapse of applicable statute of limitations (3) (2) (3)
BALANCE AT DECEMBER 31, $ 51 $ 52 $ 177
CIGNA CORPORATION - 2012 Form 10-K 115