Health Net 2010 Annual Report Download - page 135

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant components of our deferred tax assets and liabilities as of December 31 are as follows:
2010 2009
(Dollars in millions)
DEFERRED TAX ASSETS:
Accrued liabilities ............................................................. $ 81.5 $118.4
Insurance loss reserves and unearned premiums ..................................... 18.1 16.4
Tax credit carryforwards ........................................................ 0.4 0.2
Accrued compensation and benefits ............................................... 75.7 68.8
Deferred gain and revenues ...................................................... 32.6 81.0
Net operating and capital loss carryforwards ........................................ 41.9 50.9
Other ....................................................................... 3.3 1.1
Deferred tax assets before valuation allowance ...................................... 253.5 336.8
Valuation allowance ........................................................... (42.4) (60.1)
Net deferred tax assets .......................................................... $211.1 $276.7
DEFERRED TAX LIABILITIES:
Depreciable and amortizable property ............................................. $ 41.4 $ 37.8
Deferred revenue .............................................................. 61.1 86.2
Discount on notes ............................................................. 0 3.9
Other ....................................................................... 12.2 12.8
Deferred tax liabilities .......................................................... $114.7 $140.7
On December 11, 2009, we completed the Northeast Sale (see Note 3). The Northeast Sale resulted in a total
federal and state income tax benefit of $60.6 million for 2009 plus an additional tax benefit of $4.4 million for
2010. The 2010 adjustment in tax benefit arose due to a change in our estimate of contingent sale price
components. The Northeast Sale also resulted in deferred tax assets for capital loss carryovers having a potential
future federal and state tax benefit of $28.3 million and $35.6 million as of December 31, 2010 and 2009,
respectively. A valuation allowance was established for the full amount of these deferred tax assets, as we
determined that the future realizability of these benefits could not be assumed.
During 2010, our total valuation allowance decreased by $17.7 million principally due to reassessment of
contingent sale price components of the Northeast Sale. These sale price components give rise to deferred tax
assets for which future realization is uncertain.
For 2010, 2009 and 2008 the income tax benefit realized from share-based award exercises was $7.5
million, $2.2 million and $1.7 million, respectively. Of the tax (detriment) benefit realized, $(5.7) million, $(4.9)
million and $0.1 million were allocated to stockholders’ equity in 2010, 2009 and 2008, respectively.
As of December 31, 2010, we had federal and state net operating loss carryforwards of approximately $6.0
million and $158.2 million, respectively. The net operating loss carryforwards expire at various dates through
2030.
Limitations on utilization may apply to approximately $6.0 million and $153.1 million of the federal and
state net operating loss carryforwards, respectively. Accordingly, valuation allowances have been provided to
account for the potential limitations on utilization of these tax benefits. No portion of the 2010 valuation
allowance was allocated to reduce goodwill.
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