Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Components of Deferred Tax Assets and Liabilities

The significant components of deferred tax assets and liabilities included in the consolidated balance sheets at December 31 were as follows:

	At December 31,
(In millions)	2011		2010
Deferred tax assets:
Loss and loss expense reserves	$	201	$	182
Unearned premiums		113		107
Investments		36		31
Other		46		34
Total		396		354
Deferred tax liabilities:
Unrealized investment gains and losses		481		411
Deferred acquisition costs		167		157
Life policy reserves		42		26
Other		20		20
Total		710		614
Net deferred tax liability	$	314	$	260

Differences Between the 35 Percent Statutory Income Tax Rate and Effective Income Tax Rate

The differences between the 35 percent statutory income tax rate and our effective income tax rate were as follows:

	Years ended December 31,
(Dollars in millions)	2011					2010					2009
Tax at statutory rate	$	62		35.0	%	$	175		35.0	%	$	204		35.0	%
Increase (decrease) resulting from:
Tax-exempt income from municipal bonds		(35	)	(19.6	)		(36	)	(7.2	)		(38	)	(6.5	)
Dividend received exclusion		(20	)	(11.5	)		(19	)	(3.8	)		(19	)	(3.4	)
Other		3		1.8			4		0.8			3		0.6
Effective tax	$	10		5.7	%	$	124		24.8	%	$	150		25.7	%

Unrecognized Tax Benefit

Below is the unrecognized tax benefit for the years ended December 31:

	Years ended December 31,
(In millions)	2011		2010		2009
Gross unrecognized tax benefits at January 1	$	0	$	0	$	2
Gross increase in prior year positions		0		0		0
Gross decrease in prior year positions		0		0		(2	)
Gross increase in current year positions		0		0		0
Gross decrease in current year positions		0		0		0
Settlements with tax authorities		0		0		0
Decrease for lapse in applicable statute of limitations		0		0		0
Gross unrecognized tax benefits at December 31	$	0	$	0	$	0