United Healthcare 2012 Annual Report Download - page 81

Income Taxes
Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax
reporting bases of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or
benefit generally reflects the net change in deferred income tax assets and liabilities during the year, excluding
any deferred income tax assets and liabilities of acquired businesses. The current income tax provision reflects
the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for
the year reported.
Future Policy Benefits and Reinsurance Receivable
Future policy benefits represent account balances that accrue to the benefit of the policyholders, excluding surrender
charges, for universal life and investment annuity products and for long-duration health policies sold to individuals
for which some of the premium received in the earlier years is intended to pay benefits to be incurred in future
years. As a result of the 2005 sale of the life and annuity business within the Company’s Golden Rule Financial
Corporation subsidiary under an indemnity reinsurance arrangement, the Company has maintained a liability
associated with the reinsured contracts, as it remains primarily liable to the policyholders, and has recorded a
corresponding reinsurance receivable due from the purchaser. As of December 31, 2012, the Company had an
aggregate $1.9 billion reinsurance receivable, of which $135 million was recorded in Other Current Receivables and
$1.8 billion was recorded in Other Assets in the Consolidated Balance Sheets. As of December 31, 2011, the
Company had an aggregate $1.9 billion reinsurance receivable, of which $125 million was recorded in Other
Current Receivables and $1.8 billion was recorded in Other Assets in the Consolidated Balance Sheets. The
Company evaluates the financial condition of the reinsurer and only records the reinsurance receivable to the extent
of probable recovery. As of December 31, 2012, the reinsurer was rated by A.M. Best as “A+.”
Foreign currency translation
Assets and liabilities of the Company’s foreign operations denominated in non-U.S. dollar functional currencies
are translated into U.S. dollars at current exchange rates as of the end of each accounting period. Related revenue
and expenses are translated at average exchange rates during the accounting period. The gains or losses resulting
from translating foreign currency financial statements into U.S. dollars are included in shareholders’ equity and
comprehensive income.
Noncontrolling interests
Noncontrolling interests in the Company’s subsidiaries whose redemption is outside the control of the Company
are classified as temporary equity. The redeemable noncontrolling interests are primarily related to holders of
Amil Participações S.A. (Amil) shares. Amil was acquired in 2012, see Note 6 for more information. During
2012, the Company purchased noncontrolling interest shares for $319 million, of which $11 million was recorded
as a reduction of Additional Paid-In Capital. For the year ended December 31, 2012, the Company’s net earnings
attributable to redeemable noncontrolling interests was nil and other noncontrolling interest activity was not
material.
Policy Acquisition Costs
The Company’s short duration health insurance contracts typically have a one-year term and may be canceled by
the customer with at least 30 days notice. Costs related to the acquisition and renewal of short duration customer
contracts are charged to expense as incurred.
Share-Based Compensation
The Company recognizes compensation expense for share-based awards, including stock options, stock-settled
stock appreciation rights (SARs) and restricted stock and restricted stock units (collectively, restricted shares), on
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