Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) consists of:

(In thousands)	Current Expense		Deferred Expense (Benefit)		Total
December 31, 2021
Domestic	$	239,090	$	2,752	$	241,842
Foreign	—		10,048		10,048
Total expense	$	239,090	$	12,800	$	251,890
December 31, 2020
Domestic	$	162,305	$	17	$	162,322
Foreign	23,375		(13,880)		9,495
Total expense (benefit)	$	185,680	$	(13,863)	$	171,817
December 31, 2019
Domestic	$	124,231	$	27,616	$	151,847
Foreign	9,030		8,058		17,088
Total expense	$	133,261	$	35,674	$	168,935

        

Income before income taxes from domestic operations was $1,224 million, $831 million and $739 million for the years ended December 31, 2021, 2020 and 2019, respectively. Income (loss) before income taxes from foreign operations was $59 million, ($126) million and $114 million for the years ended December 31, 2021, 2020 and 2019, respectively.

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of 21% for 2021, 2020 and 2019 to pre-tax income are as follows:

(In thousands)	2021		2020		2019
Computed “expected” tax expense	$	269,410	$	148,008	$	179,113
Tax-exempt investment income	(11,380)		(12,770)		(14,666)
Change in valuation allowance	2,974		46,238		(1,945)
Impact of foreign tax rates	(2,368)		6,753		7,700
State and local taxes	4,230		2,561		4,842
Other, net	(10,976)		(18,973)		(6,109)
Total expense	$	251,890	$	171,817	$	168,935

At December 31, 2021 and 2020, the tax effects of differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

(In thousands)	2021		2020
Deferred tax asset:
Loss reserve discounting	$	162,636	$	141,877
Unearned premiums	163,143		134,971
Net operating losses & foreign tax credits	88,502		90,601
Other-than-temporary impairments	5,176		5,973
Employee compensation plans	61,301		60,551
Other	54,269		59,230
Gross deferred tax asset	535,027		493,203
Less valuation allowance	(75,230)		(79,488)
Deferred tax asset	459,797		413,715
Deferred tax liability:
Amortization of intangibles	12,787		12,761
Loss reserve discounting - transition rule	19,796		24,747
Deferred policy acquisition costs	137,893		113,084
Unrealized investment gains	36,850		100,241
Property, furniture and equipment	43,186		48,235
Investment funds	101,999		77,783
Other	67,331		49,970
Deferred tax liability	419,842		426,821
Net deferred tax asset (liability)	$	39,955	$	(13,106)

The Company had a current tax net receivable of $2.5 million and net payable of $35.4 million at December 31, 2021 and 2020, respectively. At December 31, 2021, the Company had foreign net operating loss carryforwards of $6.8 million that expire beginning in 2027, and an additional $238.2 million that have no expiration date. At December 31, 2021, the Company had a valuation allowance of $75.2 million, as compared to $79.5 million at December 31, 2020. The Company has provided a valuation allowance against the utilization of foreign tax credits and the future net operating loss carryforward benefits of certain foreign operations. The statute of limitations for the Company’s U.S. Federal income tax returns has closed for all years through December 31, 2017.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

The Tax Cuts and Jobs Act of 2017 (the "Tax Act") provided for a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The U.S. tax law requires insurance reserves to be discounted for tax purposes. The Tax Act modified this computation. The IRS issued revised discount factors to be applied to the 2017 reserves, which increased the beginning of year 2018 deferred tax asset for loss reserve discounting. Under the related transition rule, a deferred tax liability was established which will be included in taxable income over the eight year period that began in 2018.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $126.7 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed the Company projects that the incremental tax, if any, will be immaterial.