Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax assets and liabilities included in Other assets and Other liabilities, respectively, in the Consolidated Balance Sheets were as follows (2022 recast for the adoption of LDTI):

($ in millions)	December 31,
	2023		2022
Income tax (asset) liability
Current	$	(25.9)	$	(18.8)
Deferred	33.4		8.8

Deferred tax assets and liabilities are recognized for all future tax consequences attributable to "temporary differences" between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. There are no deferred tax liabilities that have not been recognized. The "temporary differences" that gave rise to the deferred tax balances were as follows (2022 recast for the adoption of LDTI):

($ in millions)	December 31,
	2023		2022
Deferred tax assets
Other comprehensive income - net unrealized losses on securities	$	82.1	$	105.8
Unearned premium reserve reduction	13.3		10.1
Compensation accruals	9.3		8.4
Impaired securities	2.0		2.0
Other comprehensive income - net funded status of benefit plans	2.0		2.3
Discounting of unpaid claims and claim expense tax reserves	2.7		2.8
Capital loss carryforward	0.8		—
Net operating loss carryforward	9.3		3.6
Intangibles	1.4		—
Postretirement benefits other than pensions	0.2		0.2
Total gross deferred tax assets	123.1		135.2
Deferred tax liabilities
Deferred policy acquisition costs	45.9		48.5
Life insurance future policy benefit reserve	46.4		42.4
Life insurance future policy benefit reserve (transitional rule)	4.3		6.4
Discounting of unpaid claims and claim expense tax reserves (transitional rule)	0.3		0.5
Investment related adjustments	44.8		29.9
Other comprehensive income - net reserve remeasurements	5.8		15.7
Other, net	9.0		0.6
Total gross deferred tax liabilities	156.5		144.0
Net deferred tax liability	$	33.4	$	8.8

The Company evaluated sources and character of income, including historical earnings, loss carryback potential, taxable income from future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income from prudent and feasible tax planning strategies. Although realization of deferred tax assets is not assured, the Company believes it is more likely than not that gross deferred tax assets will be fully realized and that a valuation allowance with respect to the realization of the total gross deferred tax assets was not necessary as of December 31, 2023 and 2022.

The components of the provision for income tax expense (benefit) were as follows (2022 and 2021 recast for the adoption of LDTI):

($ in millions)	Years Ended December 31,
	2023		2022		2021
Current	$	6.5	$	(0.7)	$	27.7
Deferred	1.8		(2.6)		12.0
Total income tax expense (benefit)	$	8.3	$	(3.3)	$	39.7

Income tax expense for the following periods differed from the expected tax computed by applying the federal corporate tax rate of 21% for 2023, 2022 and 2021 to income before income taxes as follows (2022 and 2021 recast for the adoption of LDTI):

($ in millions)	Years Ended December 31,
	2023		2022		2021
Expected federal tax on income	$	11.2	$	3.5	$	44.1
Add (deduct) tax effects of:
Tax-exempt interest	(2.7)		(3.3)		(3.9)
Dividend received deduction	(1.3)		(3.2)		(2.2)
Employee share-based compensation	0.1		(0.5)		(1.3)
Contingent consideration	—		(0.3)		—
Compensation deduction limitation	0.8		0.7		1.5
Research and development reserve	(0.2)		(0.4)		(0.2)
Prior year adjustments	0.3		0.1		0.1
Other, net	0.1		0.1		1.6
Income tax expense (benefit) provided on income	$	8.3	$	(3.3)	$	39.7

The Company's federal income tax returns for years prior to 2020 are no longer subject to examination by the Internal Revenue Service (IRS).

The Company recognizes tax benefits from tax return positions only if it is more likely than not the position will be sustainable, upon examination, on its technical merits and any relevant administrative practices or precedents. As a result, the Company applies a more likely than not recognition threshold for all tax uncertainties.

The Company records liabilities for uncertain tax filing positions where it is more likely than not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based upon changes in facts or law. The Company has no unrecorded liabilities from uncertain tax filing positions.

HMEC and its subsidiaries file a consolidated federal income tax return. The federal income tax sharing agreements between HMEC and its subsidiaries, as approved by the Board, provide that tax on income is charged to each subsidiary as if it were filing a separate tax return with the limitation that each subsidiary will receive the benefit of any losses or tax credits to the extent utilized in the consolidated tax return. Intercompany balances are settled quarterly with a final settlement after filing the consolidated federal income tax return with the IRS. National Teachers Associates Life Insurance Company and NTA Life Insurance Company of New York are not included in HMEC's consolidated federal income tax return and will file separate federal income tax returns until they are eligible to participate in HMEC's consolidated federal income tax return. This is expected to occur in 2025.

Unrecognized tax benefits were immaterial in each of the years ended December 31, 2023, 2022 and 2021.

The Company classifies all tax related interest and penalties as income tax expense.

Interest and penalties were both immaterial in each of the years ended December 31, 2023, 2022 and 2021.