Health Net 2010 Annual Report Download - page 83

must maintain the greater of the Company Action Level RBC, calculated as 200% of the ACL, or the minimum
statutory net worth requirement calculated pursuant to pre-RBC guidelines. Because our regulated subsidiaries
are also subject to their state regulators’ overall oversight authority, some of our subsidiaries are required to
maintain minimum capital and surplus in excess of the RBC requirement, even though RBC has been adopted in
their states of domicile. Historically, we generally managed our aggregate regulated subsidiary capital above
300% of ACL, although RBC standards are not yet applicable to all of our regulated subsidiaries. At
December 31, 2010, we had sufficient capital to exceed 400% of ACL.
As necessary, we make contributions to and issue standby letters of credit on behalf of our subsidiaries to
meet RBC or other statutory capital requirements under state laws and regulations. During the year ended
December 31, 2010, we made no such capital contributions. In addition, we made no capital contributions to any
of our subsidiaries to meet RBC or other statutory capital requirements under state laws and regulations
thereafter through the filing date of this report.
Legislation has been or may be enacted in certain states in which our subsidiaries operate imposing
substantially increased minimum capital and/or statutory deposit requirements for HMOs in such states. Such
statutory deposits may only be drawn upon under limited circumstances relating to the protection of
policyholders.
As a result of the above requirements and other regulatory requirements, certain subsidiaries are subject to
restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies.
Such restrictions, unless amended or waived or unless regulatory approval is granted, limit the use of any cash
generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by
our insurance company subsidiaries without prior approval of the applicable state insurance departments is
subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.
Contractual Obligations
Our significant contractual obligations as of December 31, 2010 are summarized below for the years ending
December 31:
Total 2011 2012 2013 2014 2015 Thereafter
(Dollars in Millions)
Fixed-rate borrowing principal (c) ............ $400.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $400.0
Fixed-rate borrowing interest ................ 162.7 25.5 25.5 25.5 25.5 25.5 35.2
Operating leases .......................... 232.1 61.5 44.5 37.2 35.4 28.3 25.2
Long-term purchase obligations .............. 367.2 155.5 107.0 84.4 17.0 3.3 0.0
Uncertain tax positions liability, including
interest and penalties (b) .................. 3.1 3.1 0.0 0.0 0.0 0.0 0.0
Deferred compensation ..................... 47.6 4.9 3.9 3.0 2.5 2.3 31.0(a)
Estimated future payments for pension and other
benefits ............................... 32.9 1.8 2.1 2.4 3.9 3.9 18.8(a)
(a) Represents estimated future payments from 2016 through 2020.
(b) The obligations shown above represent uncertain tax positions expected to be paid within the reporting
periods presented. In addition to the obligations shown above, approximately $21.6 million of unrecognized
tax benefits have been recorded as a liability, and we are uncertain as to if or when such amounts may be
settled or paid.
(c) These amounts are based on stated terms and expected payments. As such, they differ from the amounts
reported on our consolidated balance sheet and notes, which are reported consistently with the financial
reporting and classification requirements.
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