Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate for the three and six months ended June 30, 2023 was 20% and (63)%. The effective tax rate for the three and six months ended June 30, 2022 was 20% and 25%. The effective tax rate on pre-tax income for the six months ended June 30, 2023 differs from the U.S Federal statutory rate of 21% primarily due to the valuation allowance recorded on capital deferred tax assets for US Life companies, partially offset by favorable permanent adjustments, including low income housing tax credits (“LIHTC”), the dividends received deduction (“DRD”), and company owned life insurance (“ICOLI”). The effective tax rate on pre-tax income for the three months ended June 30, 2023 differs from the U.S Federal Statutory rate of 21% primarily due to favorable permanent adjustments, including LIHTC, DRD, and ICOLI, partially offset by the valuation allowance recorded on capital deferred tax assets for US Life companies. The effective tax rate on pre-tax income for the six months ended June 30, 2022 differed from the U.S. Federal statutory rate of 21% primarily due to the valuation allowance recorded on the capital loss carryforwards for the US Non-life companies, partially offset by favorable permanent adjustments, including LIHTC, DRD, and ICOLI. The effective tax rate on pre-tax income for the three months ended June 30, 2022 differed from the U.S Federal Statutory rate of 21% primarily due to favorable permanent adjustments, including LIHTC, DRD, and ICOLI.

As of December 31, 2022, the Company had a partial valuation allowance of $30 million against its net deferred tax assets of $630 million. As of June 30, 2023, the Company had a partial valuation allowance of $69 million against its net deferred tax assets of $615 million. There was a $39 million increase in the valuation allowance for the six months ended June 30, 2023. The valuation allowance consisted of a full valuation allowance on the unrealized capital loss deferred tax assets for F&G Life Re, F&G Cayman Re, and the US non-life companies, a full valuation allowance on the US non-life companies’ remaining capital loss carryforwards, and a partial valuation allowance on the capital loss deferred tax assets on the U.S. life insurance companies.

The valuation allowance is reviewed quarterly and will be maintained until there is sufficient positive evidence, if any, to support a release. At each reporting date, management considers new evidence, both positive and negative, that could impact the future realization of deferred tax assets. Management will consider a release of

the valuation allowance once there is sufficient positive evidence that it is more likely than not that the deferred tax assets will be realized.

All other deferred tax assets are more likely than not to be realized based on expectations as to our future taxable income and considering all other available evidence, both positive and negative.

The Inflation Reduction Act of 2022 (the “IRA”) was signed into law on August 16, 2022. Among other changes, the IRA introduced a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement income and a 1% excise tax on treasury stock repurchases. The effective date of these provisions is January 1, 2023. Though the Company will likely be subject to the minimum tax, the Company does not expect to be in a perpetual CAMT position. The life companies will join the consolidated tax return group with FNF and file a life/non-life consolidated return once the five-year waiting period has completed in 2026, which should strengthen that position as FNF is not anticipating owing CAMT on its future returns. As a result, the Company has assessed that there is no material impact of the CAMT to tax for the six months ended June 30, 2023.

As a result of the adoption of ASU 2018-12, the changes required resulted in changes to deferred tax for the prior periods. The decrease in the deferred tax asset as of December 31, 2022 due to ASU 2018-12 was $163 million. See Note A - Basis of Financial Statements for details on the changes required for the new accounting standard.