Federal Income Taxes

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements [Abstract]

Federal Income Taxes

7. Federal Income Taxes

A reconciliation of the effective tax rate differences (in millions) was as follows:

			For the Three						For the Nine
			Months Ended						Months Ended
			September 30,						September 30,
			2012			2011			2012			2011
Tax rate times pre-tax income			$	146		$	54		$	409		$	347
Effect of:
	Tax-preferred investment income			(32)			(47)			(101)			(107)
	Tax credits			(17)			(14)			(38)			(35)
	Change in uncertain tax positions			(83)			-			(83)			-
	Other items			31			1			37			9
		Federal income tax expense (benefit)	$	45		$	(6)		$	224		$	214
Effective tax rate				11	%		-4	%		19	%		22	%

The effective tax rate is the ratio of tax expense over pre-tax income (loss). The tax-preferred investment income relates primarily to separate account dividends-received deductions. The change in uncertain tax positions relates primarily to the lapse of statute of limitations for prior year tax returns and excludes amounts included in other items.Additional amounts related to uncertain tax positions are included in discontinued operations. See Note 3 for information on amounts reflected in discontinued operations. Other items include corrections of immaterial errors in prior period financial statements.  

As of September 30, 2012 and 2011, $94 million and $231 million, respectively, of our unrecognized tax benefits presented below, if recognized, would have affected our income tax expense and effective tax rate.A reconciliation of the unrecognized tax benefits (in millions) was as follows:

			For the Nine
			Months Ended
			September 30,
			2012		2011
Balance as of beginning-of-year			$	316	$	318
	Decreases for prior year tax positions			(200)		(12)
	Increases for current year tax positions			27		2
	Decreases for lapse of statute of limitations			(74)		-
		Balance as of end-of-period	$	69	$	308