Income Taxes

12 Months Ended

Dec. 31, 2020


Note 15			Income Taxes

The Company and its domestic subsidiaries file a consolidated federal income tax return. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective entities.

Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws or rates are enacted.

Regulatory tax examinations The Internal Revenue Service (“IRS”) has completed its exam of the

Company’s 2013 through 2016 federal income tax returns. The 2017 and 2018 audit cycle is expected to begin in the first quarter of 2021. Any adjustments that may result from IRS examinations of the Company’s tax returns are not expected to have a material effect on the consolidated financial statements.

Unrecognized tax benefits The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the consolidated financial statements.


Reconciliation of the change in the amount of unrecognized tax benefits
	For the years ended December 31,
($ in millions)	2020		2019		2018
Balance – beginning of year	$	70	$	70	$	55
Increase for tax positions taken in a prior year	—		—		3

Increase for tax positions taken in the current year	—		—		12

Decrease for settlements	(58)		—		—

Balance – end of year	$	12	$	70	$	70

The Company believes that the unrecognized tax benefits balance will not materially change within the next twelve months.


Components of the deferred income tax assets and liabilities
	As of December 31,
($ in millions)	2020		2019
Deferred tax assets
Unearned premium reserves	$	659	$	642
Pension	161		197
Accrued compensation	139		147
Discount on loss reserves	79		78

Other postretirement benefits	36		49
Net operating loss carryover	23		26
Other assets	68		54

Total deferred tax assets	1,165		1,193
Deferred tax liabilities
DAC	(858)		(847)
Unrealized net capital gains	(856)		(507)
Investments	(394)		(567)
Life and annuity reserves	(216)		(222)

Intangible assets	(87)		(98)
Other liabilities	(109)		(106)
Total deferred tax liabilities	(2,520)		(2,347)
Net deferred tax liability	$	(1,355)	$	(1,154)

Although realization is not assured, management believes it is more likely than not that the deferred tax assets will be realized based on the Company’s assessment that the deductions ultimately recognized for tax purposes will be fully utilized. As of December 31, 2020, the Company has U.S. federal and foreign net operating loss carryforwards of $44 million and $68 million, respectively.

The provisions of the Tax Cuts and Jobs Act of 2017 eliminated the 20-year carryforward period and made it indefinite for federal net operating losses generated in tax years after December 31, 2017. For such amounts generated prior to 2018, the 20-year carryforward period continues to apply.


Components of the net operating loss carryforwards as of December 31, 2020
($ in millions)	20-Year Carryforward Expires in 2025-2037		Indefinite Carryforward Period		Total
US Federal	$	36	$	8	$	44
Foreign	—		68		68
Total	$	36	$	76	$	112


Components of income tax expense
	For the years ended December 31,
($ in millions)	2020		2019		2018
Current	$	1,499	$	991	$	704
Deferred	(116)		251		(236)
Total income tax expense	$	1,383	$	1,242	$	468

The Company paid income taxes of $1.48 billion, $648 million and $731 million in 2020, 2019 and 2018, respectively.

The Company had current income tax payable of $84 million and $124 million as of December 31, 2020 and 2019, respectively.


Reconciliation of the statutory federal income tax rate to the effective income tax rate
	For the years ended December 31,
($ in millions)	2020				2019				2018
Income before income taxes	$	6,959			$	6,089			$	2,628

Statutory federal income tax rate on income from operations	1,461		21.0	%	1,279		21.0	%	552		21.0	%
Tax credits	(45)		(0.7)		(33)		(0.5)		(34)		(1.3)
Share-based payments	(30)		(0.4)		(24)		(0.4)		(16)		(0.6)
Tax-exempt income	(24)		(0.3)		(27)		(0.4)		(24)		(0.9)
State income taxes	35		0.5		41		0.7		27		1.0
Tax Legislation benefit	—		—		—		—		(29)		(1.1)


Other	(14)		(0.2)		6		—		(8)		(0.3)
Effective income tax rate on income from operations	$	1,383	19.9	%	$	1,242	20.4	%	$	468	17.8	%

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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