Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The tax effects of temporary differences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS	2021		2020
Deferred Income Tax Assets:
Insurance Reserves	$	31.9	$	18.4
Unearned Premium Reserves	78.3		66.7
Tax Capitalization of Policy Acquisition Costs	46.6		46.6
Payroll and Employee Benefit Accruals	36.4		35.6
Net Operating Loss Carryforwards	3.6		1.1
Other	11.6		13.4
Total Deferred Income Tax Assets	208.4		181.8
Deferred Income Tax Liabilities:
Investments	209.1		258.8
Deferred Policy Acquisition Costs	142.4		123.7
Life VIF and P&C Customer Relationships	4.6		5.0
Goodwill and Other Intangible Assets Acquired	38.0		35.5
Depreciable Assets	38.7		42.1
Other	2.6		2.4
Total Deferred Income Tax Liabilities	435.4		467.5
Net Deferred Income Tax Liabilities	$	227.0	$	285.7

The expiration of federal net operating loss (“NOL”) carryforwards and their related deferred income tax assets at December 31, 2021 is presented below by year of expiration.

DOLLARS IN MILLIONS	NOL Carry-forwards		Deferred Tax Asset
Expiring in:
2027	$	0.8	$	0.2
2028	4.4		0.9
No Expiration	12.3		2.5
Total All Years	$	17.5	$	3.6

The NOL carryforwards were acquired in connection with business acquisitions made in prior years and are subject to annual usage limitations under the Internal Revenue Code. The Company expects to fully utilize these federal NOL carryforwards.

A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS	2021		2020		2019
Liabilities for Unrecognized Tax Benefits at Beginning of Year	$	—	$	—	$	4.4
Additions for Tax Positions of Current Year	—		—		—
Reductions for Tax Positions of Prior Years	—		—		(4.4)
Liabilities for Unrecognized Tax Benefits at End of Year	$	—	$	—	$	—

There were no Unrecognized Tax Benefits at December 31, 2021 and 2020. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. There were no liabilities for accrued interest and penalties as of December 31, 2021 and 2020.

NOTE 23. INCOME TAXES (Continued)

The statute of limitations related to Kemper and its eligible subsidiaries’ consolidated Federal income tax returns is closed for all tax years up to and including 2011. As a result of the Company filing amended federal income tax returns, tax years 2012 and 2013 are under limited examination with respect to carryback adjustments associated with the amended returns. The statute of limitations related to tax years 2014, 2015, 2016 and 2017 has been extended to September 30, 2022. Tax years 2018, 2019 and 2020 are subject to a statute of three years from the extended due dates of October 15, 2019, 2020 and 2021, respectively.

The expiration of the statute of limitations related to the various state income tax returns that Kemper and its subsidiaries file varies by state.

The components of Income Tax Expense from Operations for the years ended December 31, 2021, 2020 and 2019 were:

DOLLARS IN MILLIONS	2021		2020		2019
Current Income Tax Benefit (Expense)	$	122.7	$	(86.6)	$	(66.4)
Deferred Income Tax Benefit (Expense)	2.1		(13.6)		(68.5)
(Increase) Decrease Unrecognized Tax Benefits	—		—		4.4
Income Tax Benefit (Expense)	$	124.8	$	(100.2)	$	(130.5)

Income taxes paid, net of income tax refunds received, were $38.0 million, $55.8 million, and $68.1 million in 2021, 2020, and 2019, respectively.

A reconciliation of the Statutory Federal Income Tax Benefit (Expense) and Rate to the Company’s Effective Income Tax Benefit (Expense) and Rate from Operations for the years ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS	2021				2020				2019
	Amount		Rate		Amount		Rate		Amount		Rate
Statutory Federal Income Tax Benefit (Expense)	$	51.5	21.0	%	$	(107.1)	21.0	%	$	(138.9)	21.0	%
Tax-exempt Income and Dividends Received Deduction	4.6		1.9		4.0		(0.8)		4.3		(0.7)
Untaxed Earnings on Company-Owned Life Insurance	5.4		2.2		2.7		(0.5)		1.6		(0.2)
Investment tax credits	66.1		27.0		3.2		(0.6)		—		—
Stock-Based Compensation	0.3		0.1		2.2		(0.5)		4.4		(0.7)
Nondeductible Executive Compensation	(2.7)		(1.1)		(2.7)		0.5		(2.5)		0.4
Other, Net	(0.4)		(0.2)		(2.5)		0.5		0.6		(0.1)
Effective Income Tax Benefit (Expense)	$	124.8	50.9	%	$	(100.2)	19.6	%	$	(130.5)	19.7	%

Comprehensive Income Tax (Expense) Benefit included in the Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019 was:

DOLLARS IN MILLIONS	2021		2020		2019
Income Tax Benefit (Expense):
Operations	$	124.8	$	(100.2)	$	(130.5)
Unrealized Depreciation (Appreciation) on Securities	(60.1)		(78.3)		(85.2)
Tax Effects from Postretirement Benefit Plans	(2.4)		(15.3)		1.7
Tax Effects from Cash Flow Hedge	0.1		—		(0.1)
Comprehensive Income Tax (Expense) Benefit	$	62.4	$	(193.8)	$	(214.1)