PART II ITEM 8 Financial Statements and Supplementary Data subsidiaries are regulated by such statutory requirements. The statutory net income for the years ended, and statutory surplus as of, December 31 of the Company’s life insurance and HMO subsidiaries were as follows: (In millions) 2012 2011 2010 Net income $ 1,520 $ 953 $ 1,697 Surplus $ 6,109 $ 5,286 $ 5,107 annual dividends or other distributions (such as loans or cash advances) insurance companies may extend to the parent company without prior approval of regulatory authorities. The maximum dividend distribution that the Company’s life insurance and HMO subsidiaries may make during 2013 without prior approval is approximately $1.1 billion. Restricted net assets of the Company as of December 31, 2012, were approximately $8.7 billion. Certain life insurance subsidiaries of the Company are permitted to loan up to $750 million to the parent company without prior approval. The minimum statutory surplus required by regulators for the Company’s life insurance and HMO company subsidiaries was approximately $1.7 billion as of December 31, 2012. As of December 31, 2012, statutory surplus for each of the Company’s life insurance and HMO subsidiaries is sufficient to meet the minimum required by regulators. As of December 31, 2012, the Company’s life insurance and HMO subsidiaries had investments on deposit with state departments of insurance with statutory carrying values of $337 million. The Company’s life insurance and HMO subsidiaries are also subject to regulatory restrictions that limit the amount of Income Taxes NOTE 20 A. Income Tax Expense The components of income taxes for the years ended December 31 were as follows: (In millions) 2012 2011 2010 Current taxes U.S. income $ 604 $ 320 $ 267 Foreign income 72 58 45 State income 43 20 19 719 398 331 Deferred taxes (benefits) U.S. income 131 193 187 Foreign income 4 23 8 State income (1) 1 (7) 134 217 188 TOTAL INCOME TAXES $ 853 $ 615 $ 519 (In millions) 2012 2011 2010 Tax expense at nominal rate $ 867 $ 657 $ 631 Tax-exempt interest income (28) (29) (31) Effect of permanently invested foreign earnings (37) (17) (11) Dividends received deduction (3) (4) (3) Resolution of federal tax matters – (30) – State income tax (net of federal income tax benefit) 28 14 9 Change in valuation allowance 6 5 (93) Other 20 19 17 TOTAL INCOME TAXES $ 853 $ 615 $ 519 Effect of Permanently Invested Foreign Earnings 114 CIGNA CORPORATION -  2012 Form  10-K Commencing in the first quarter of 2012, the Company began using this approach to compute income taxes attributable to its China and Indonesia operations, based upon a determination that the related earnings would be permanently invested overseas. The Company The Company provides for income taxes on the undistributed earnings of certain foreign operations using the foreign jurisdictions’ tax rate, as compared to the higher U.S. statutory tax rate. Total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate of 35% for the following reasons: