Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) consists of:

(In thousands)	Current Expense		Deferred (Benefit) Expense		Total
December 31, 2022
Domestic	$	295,849	$	(27,544)	$	268,305
Foreign	42,890		23,532		66,422
Total expense (benefit)	$	338,739	$	(4,012)	$	334,727
December 31, 2021
Domestic	$	239,090	$	2,752	$	241,842
Foreign	—		10,048		10,048
Total expense	$	239,090	$	12,800	$	251,890
December 31, 2020
Domestic	$	162,305	$	17	$	162,322
Foreign	23,375		(13,880)		9,495
Total expense (benefit)	$	185,680	$	(13,863)	$	171,817

        

Income before income taxes from domestic operations was $1,240 million, $1,224 million and $831 million for the years ended December 31, 2022, 2021 and 2020, respectively. Income (loss) before income taxes from foreign operations was $480 million, $59 million and ($126) million for the years ended December 31, 2022, 2021 and 2020, respectively.

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of 21% for 2022, 2021 and 2020 to pre-tax income are as follows:

(In thousands)	2022		2021		2020
Computed “expected” tax expense	$	361,133	$	269,410	$	148,008
Tax-exempt investment income	(10,815)		(11,380)		(12,770)
Change in valuation allowance	(28,064)		2,974		46,238
Impact of foreign tax rates	(453)		(2,368)		6,753
State and local taxes	8,976		4,230		2,561
Other, net	3,950		(10,976)		(18,973)
Total expense	$	334,727	$	251,890	$	171,817

At December 31, 2022 and 2021, the tax effects of differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

(In thousands)	2022		2021
Deferred tax asset:
Loss reserve discounting	$	192,181	$	162,636
Unearned premiums	180,326		163,143
Unrealized investment losses	228,456		—
Net operating losses & foreign tax credits	58,182		88,502
Other-than-temporary impairments	5,935		5,176
Employee compensation plans	63,313		61,301
Other	72,536		54,269
Gross deferred tax asset	800,929		535,027
Less valuation allowance	(47,166)		(75,230)
Deferred tax asset	753,763		459,797
Deferred tax liability:
Amortization of intangibles	13,973		12,787
Loss reserve discounting - transition rule	14,843		19,796
Deferred policy acquisition costs	157,055		137,893
Unrealized investment gains	—		36,850
Property, furniture and equipment	45,887		43,186
Investment funds	125,525		101,999
Other	67,479		67,331
Deferred tax liability	424,762		419,842
Net deferred tax asset	$	329,001	$	39,955

The Company had a current tax net receivable of $5 million and $3 million at December 31, 2022 and 2021, respectively. At December 31, 2022, the Company had foreign net operating loss carryforwards of $4 million that begin to expire in 2027 and an additional $225 million that have no expiration date. At December 31, 2022, the Company had a valuation allowance of $47 million as compared to $75 million at December 31, 2021. The Company has provided a valuation allowance against the utilization of foreign tax credits and the future net operating loss carryforward benefits of certain foreign operations. The statute of limitations for the Company’s U.S. Federal income tax returns has closed for all years through December 31, 2018.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

The Tax Cuts and Jobs Act of 2017 (the "Tax Act") provided for a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The U.S. tax law requires insurance reserves to be discounted for tax purposes. The Tax Act modified this computation. The IRS issued revised discount factors to be applied to the 2017 reserves, which increased the beginning of year 2018 deferred tax asset for loss reserve discounting. Under the related transition rule, a deferred tax liability was established which will be included in taxable income over the eight year period that began in 2018.

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $169 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed the Company projects that the incremental tax, if any, will be immaterial.