Income Taxes

6 Months Ended

Jun. 30, 2022

Income Taxes

(10) Income Taxes

The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Statutory U.S. federal income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
Increase in rate resulting from:
Tax on income from terminated swaps		2.9			2.1			2.9			2.9
Other, net		1.0			0.3			0.7			0.3
Effective rate		24.9	%		23.4	%		24.6	%		24.2	%

The effective tax rate for the three and six months ended June 30, 2022 and 2021 was above the statutory U.S. federal income tax rate of 21% largely due to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income.

The increase in the effective tax rate for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 was primarily attributable to higher tax expense on forward starting swap gains in relation to pre-tax income in the current year.

Our ability to realize our deferred tax assets is largely dependent upon generating sufficient taxable income and capital gains in future years. As of June 30, 2022 and December 31, 2021, our tax valuation allowance was $434 million and $382 million, respectively. Given the change in our unrealized gains (losses) on our fixed maturity securities in the current year due to rising interest rates and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets, we recorded an additional valuation allowance of $50 million in the second quarter of 2022 through OCI related to capital deferred tax assets.