On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted, implementing numerous changes to tax law including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits.

During the year ended December 31, 2020, the Company filed a refund claim for $198.4 million and recorded a $79.3 million tax benefit related to the ability to carryback net operating losses to prior periods under the CARES Act, resulting in a decrease of the net deferred tax asset of $107.1 million and an increase to the current receivable of $186.4 million. The Company accrued a $5.1 million after-tax interest benefit related to the refund from the carryback for the year ended December 31, 2020, included in the provision for income taxes in the consolidated statements of operations. The Company received the full amount of the refund plus interest in July 2020. The Company also recorded refundable employee retention tax credits of $5.2 million for the year ended December 31, 2020, respectively, included in underwriting, general and administrative expenses in the consolidated statements of operations, and has deferred the timing of payroll taxes as permitted by the CARES Act. The Company continues to assess the impact of this legislation and any changes that could have a potential impact on its financial position and results of operations.


	Years Ended December 31,
	2020		2019		2018
Current expense (benefit):
Federal and state	$	(164.3)	$	19.7	$	5.7
Foreign	45.3		58.5		53.8
Total current expense (benefit)	(119.0)		78.2		59.5
Deferred expense (benefit):
Federal and state	184.7		92.2		31.0
Foreign	6.9		(2.7)		(9.6)
Total deferred expense (benefit)	191.6		89.5		21.4
Total income tax expense (benefit)	$	72.6	$	167.7	$	80.9

The provision for foreign taxes includes amounts attributable to income from U.S. possessions that are considered foreign under U.S. tax laws. International operations of the Company are subject to income taxes imposed by the jurisdiction in which they operate.


	Years Ended December 31,
	2020		2019		2018
Federal income tax rate:	21.0	%	21.0	%	21.0	%
Reconciling items:
Non-taxable investment income	(0.5)		(0.6)		(1.2)
Foreign earnings (1)	1.6		0.8		3.5
Non-deductible compensation	0.8		0.7		0.9

Tax reform deferred revaluation (2)	—		—		0.5
Goodwill impairment (3)	5.6		—		—
Change in valuation allowance (4)	1.3		8.7		(0.5)
Net operating loss carryback - CARES Act (5)	(15.7)		—		—
Other	—		(0.4)		0.1
Effective income tax rate:	14.1	%	30.2	%	24.3	%

(2)The U.S. Tax Cuts and Jobs Act (the “TCJA”) reduced the corporate tax rate to 21%, effective January 1, 2018. The Company recorded an adjustment to its original estimate of $1.5 million in 2018, which had a 0.5% impact to the effective tax rate.

(4)The change in valuation allowance in 2019 is primarily related to the valuation allowance of $49.7 million established on the deferred taxes that arose related to losses incurred on our investment in Iké. The change in valuation allowance in 2020 is primarily related to an additional valuation allowance of $6.7 million related to Iké. The change in valuation allowance in 2018 was due to movements in valuation allowances in other foreign subsidiaries.

(5)The CARES Act includes a five year net operating loss (“NOL”) carryback provision, which enabled the Company to benefit from certain losses and remeasure certain deferred tax assets and liabilities at the former federal tax rate of 35%. In 2020, the Company recorded a tax benefit related to the NOL carryback provision.


	Years Ended December 31,
	2020		2019		2018
Balance at beginning of year	$	(12.5)	$	(11.8)	$	(6.7)
Additions based on tax positions related to the current year	(0.5)		(0.5)		(2.5)
Reductions based on tax positions related to the current year	—		—		—
Additions for tax positions of prior years	(2.7)		(0.4)		(4.1)
Reductions for tax positions of prior years	0.1		0.2		0.6
Lapses	—		—		0.9
Balance at end of year	$	(15.6)	$	(12.5)	$	(11.8)

Total unrecognized tax benefits of $17.9 million, $14.0 million and $13.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, which includes interest and penalties, would impact the Company’s consolidated effective tax rate if recognized. The liability for unrecognized tax benefits is included in accounts payable and other liabilities on the consolidated balance sheets.

The Company’s continuing practice is to recognize interest expense related to income tax matters in income tax expense. During the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $1.5 million, $0.7 million and $0.4 million, respectively, of interest expense related to income tax matters. The Company had $1.8 million, $0.8 million and $0.5 million of interest accrued as of December 31, 2020, 2019 and 2018, respectively. The Company had $0.8 million of penalties accrued as of December 31, 2020, 2019 and 2018.

The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2015. Substantially all non-U.S.


	December 31,
	2020		2019
Deferred Tax Assets
Policyholder and separate account reserves	$	808.1	$	1,063.5
Net operating loss carryforwards	53.8		147.0
Investments, net	91.1		57.3
Credit carryforwards	33.0		38.0
Employee and post-retirement benefits	25.5		32.8
Compensation related	29.9		31.6
Capital loss carryforwards	9.8		3.1
Other	54.1		123.3
Total deferred tax assets	1,105.3		1,496.6
Less valuation allowance	(27.6)		(76.6)
Deferred tax assets, net of valuation allowance	1,077.7		1,420.0
Deferred Tax Liabilities
Deferred acquisition costs	(1,211.2)		(1,472.0)
Net unrealized appreciation on securities	(413.3)		(274.0)
Intangible assets	(105.8)		(67.5)
Total deferred tax liabilities	(1,730.3)		(1,813.5)
Net deferred income tax liabilities	$	(652.6)	$	(393.5)

A cumulative valuation allowance of $27.6 million existed as of December 31, 2020 based on management’s assessment that it is more likely than not that certain deferred tax assets attributable to international subsidiaries will not be realized.

The Company’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income of the same character within the carryback or carryforward periods. In assessing future taxable income, the Company considered all sources of taxable income available to realize its deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies. If changes occur in the assumptions underlying the Company’s tax planning strategies or in the scheduling of the reversal of the Company’s deferred tax liabilities, the valuation allowance may need to be adjusted in the future.

Other than for certain wholly owned Canadian and Latin American subsidiaries, the Company plans to indefinitely reinvest the earnings in other jurisdictions. Under current U.S. tax law, no material income taxes are anticipated on future repatriation of earnings. Therefore, deferred taxes have not been provided.

Global intangible low taxed income (“GILTI”): The TCJA creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the U.S. shareholder’s “net CFC tested income” over 10% of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder. Under GAAP, the Company is allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or (2) factoring such amounts into the company’s measurement of its deferred taxes. The Company has elected to recognize the current tax on GILTI as a period expense in the period the tax is incurred. Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period. The GILTI current period expense is immaterial.

(1)All NOLs as of December 31, 2019 were used during the year and carried back under the CARES Act. New NOLs were recorded during the year ended December 31, 2020 due to the acquisition of HYLA. $58.7 million of net operating losses as of December 31, 2020 expire between 2030 and 2036 and $8.1 million has an unlimited carryforward.