Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 9.  Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.  At June 30, 2011, we recorded a net deferred tax liability of $251 million on our Consolidated Statements of Financial Position.  Of this amount, $250 million is attributable to the Exchange and $1 million is attributable to Indemnity.  There was no deferred tax valuation allowance recorded at June 30, 2011.  Our effective tax rate is calculated after consideration of permanent differences related to our investment revenues.  Given that these amounts represent 99% of the total permanent differences, the effective tax rate is approximately 35% for both Indemnity and Exchange when the investment related permanent differences are considered.