Income Taxes

6 Months Ended

Jun. 30, 2019

The Company's effective tax rate for the three and six months ended June 30, 2019 was 13.1% and 11.2%, respectively. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the dividends received deduction ("DRD").

The Company's effective tax rate for the three months ended June 30, 2018 was 5.6%. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the DRD and change in the valuation allowance.

The Company's effective tax rate for the six months ended June 30, 2018 was 14.1%. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the DRD, partially offset by the change in the valuation allowance.

Tax Sharing Agreement

The results of the Company's operations are included in the consolidated tax return of Voya Financial, Inc. Generally, the Company's consolidated financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods pursuant to the provisions of Income Taxes (ASC Topic 740) as if the Company were a separate taxpayer rather than a member of Voya Financial, Inc.'s consolidated income tax return group with the exception of any net operating loss carryforwards and capital loss carryforwards, which are recorded pursuant to the tax sharing agreement. If the Company instead were to follow a separate taxpayer approach without any exceptions, there would be no impact to income tax expense (benefit) for the periods indicated above. Also, any current tax benefit related to the Company's tax attributes realized by virtue of its inclusion in the consolidated tax return of Voya Financial, Inc. would have been recorded directly to equity rather than income. Under the tax sharing agreement, Voya Financial, Inc. will pay the Company for the tax benefits of ordinary and capital losses only in the event that the consolidated tax group actually uses the tax benefit of losses generated.

Tax Regulatory Matters

For the tax years 2017 through 2019, Voya Financial, Inc. (including the Company) participates in the Internal Revenue Service ("IRS") Compliance Assurance Process ("CAP"), which is a continuous audit program provided by the IRS. During 2019, the IRS finalized the audit of Voya Financial, Inc. (including the Company) for the period ended December 31, 2017. Voya Financial, Inc. (including the Company) is under examination for the period ended December 31, 2018. Voya Financial, Inc. (including the Company) expects the examination to be finalized within the next twelve months.