Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for combined current and deferred income taxes (credits) reflected in the consolidated statements of income may not bear the usual relationship to income before income taxes (credits) as the result of permanent and other differences between pretax income or loss and taxable income or loss determined under existing tax regulations. The more significant differences, their effect on the statutory income tax rate (credit), and the resulting effective income tax rates (credits) are summarized below:

Years Ended December 31:	2023		2022		2021
Statutory tax rate	21.0	%	21.0	%	21.0	%
Tax rate increases (decreases):
Tax-exempt interest	(0.4)		(0.3)		(0.2)
Dividends received exclusion	(1.0)		(1.3)		(0.7)
Meals and entertainment	0.3		0.2		0.1
Other items - net	—		0.3		—
Effective tax rate	19.9	%	19.9	%	20.2	%

The tax effects of temporary differences that give rise to significant portions of the Company's net deferred tax assets (liabilities) are as follows at the dates shown:

December 31:	2023		2022		2021
Deferred Tax Assets:
Loss and loss adjustment expense reserves	$	214.9	$	218.6	$	214.2
Pension and deferred compensation plans	23.8		22.6		42.4
Realized loss from pending sale of mortgage insurance business	9.5		—		—
Net operating loss carryforward	5.5		7.6		9.6
AMT credit carryforward	9.0		9.0		9.0
Operating leases	46.4		46.7		49.7
Other temporary differences	16.3		17.1		12.3
Total deferred tax assets	325.4		321.6		337.5
Deferred Tax Liabilities:
Unearned premium reserves	46.3		63.3		61.0
Deferred policy acquisition costs	82.8		76.0		68.5
Amortization of fixed income securities	14.6		6.8		5.2
Net unrealized investment gains	214.4		141.3		372.6
Title plants and records	2.8		2.8		2.8
Tax reform transition adjustment on loss and loss adjustment
expense reserves	6.7		10.3		13.8
Operating leases	40.9		41.9		45.8
Other temporary differences	22.5		20.1		17.2
Total deferred tax liabilities	431.0		362.5		586.9
Net deferred tax liabilities (a)	$	(105.6)	$	(40.9)	$	(249.5)

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(a)    RFIG Run-off deferred tax assets of $0.3 and deferred tax liabilities of $0.1 have been reclassified as held-for-sale as of December 31, 2023. See Note 2 for further discussion.

At December 31, 2023, the Company had an available net operating loss (NOL) carryforward of $26.4 which will expire in years 2024 through 2029, and a $9.0 alternative minimum tax (AMT) credit carryforward. The NOL carryforward is subject to the limitations set by Section 382 of the Internal Revenue Code and is available to reduce future years' taxable income by a maximum of $9.8 each year until expiration.

In valuing the deferred tax assets, the Company considered certain factors including primarily the scheduled reversals of certain deferred tax liabilities, estimates of future taxable income, the impact of available carryback and carryforward periods, as well as the availability of certain tax planning strategies. The Company estimates that all gross deferred tax assets at year-end 2023 will more likely than not be fully realized.

Tax positions taken or expected to be taken in a tax return by the Company are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. To the best of management's knowledge there are no tax uncertainties that are expected to result in significant increases or decreases to unrecognized tax benefits within the next twelve month period. The Company views its income tax exposures as primarily consisting of timing differences whereby the ultimate deductibility of a taxable amount is highly certain but the timing of its deductibility is uncertain. Such differences relate principally to the timing of deductions for loss and premium reserves. As in prior examinations, the Internal Revenue Service (IRS) could assert that loss reserve deductions were overstated thereby reducing the Company's statutory taxable income in any particular year. The Company believes that it establishes its reserves fairly and consistently at each balance sheet date, and that it would succeed in defending its tax position in these regards. Because of the impact of deferred tax accounting, the possible accelerated payment of tax to the IRS would not necessarily affect the annual effective tax rate. The Company classifies interest and penalties as income tax expense in the consolidated statements of income. The Company is not currently under audit by the IRS and 2020 and subsequent tax years remain open.

The Inflation Reduction Act (IRA) was enacted into law on August 16, 2022, which, among its many elements, imposes a Corporate Alternative Minimum Tax (CAMT) on the adjusted financial statement income at the rate of 15% for tax periods beginning on or after January 1, 2023. The Company, as a member of a controlled group, has determined it will be subject to the CAMT calculations for the year ended December 31, 2023. However, the Company expects to be a regular taxpayer and not a CAMT taxpayer.

In addition, a Federal Excise Tax (FET) was enacted at the rate of 1% on all corporate stock buybacks effective January 1, 2023. The Company is subject to the FET, and an immaterial amount of excise tax incurred on stock repurchases has been recognized as part of the cost basis of the treasury stock acquired.