14.INCOME TAXES

The Company used its respective estimates of its annual 2015 and 2014 incomes in computing its effective income tax rates for the three months ended September 30, 2015 (Successor Company), the period of February 1, 2015 to September 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three and nine months ended September 30, 2014 (Predecessor Company). The effective tax rates for the three months ended September 30, 2015 (Successor Company), the period of February 1, 2015 to September 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three and nine months ended September 30, 2014 (Predecessor Company) were 27.3%, 28.0%, 32.8%, 33.8%, and 33.0%, respectively.

In conjunction with the Merger and as a result of the adjustments to the Company’s assets and liabilities which were discussed in Note 2, Summary of Significant Accounting Policies, the Company’s deferred tax assets and liabilities were re-measured as of the date of the Merger.

The components of the Company’s net deferred income tax liability are as follows:

	Successor			Predecessor
	Company			Company

	As of			As of
	September 30, 2015			December 31, 2014

	(Dollars In Thousands)			(Dollars In Thousands)
Deferred income tax assets:
Loss and credit carryforwards	$	75,781		$	35,642
Premium receivables and policy liabilities	—			154,720
Deferred compensation	103,788			104,117
Invested assets (other than unrealized gains)	—			2,960
Deferred policy acquisition costs	346,439			—
Net unrealized loss on investments	503,859			—
Valuation allowance	(796		)	(791		)

	1,029,071			296,648

Deferred income tax liabilities:
VOBA and other intangibles	666,660			—
Premium receivables and policy liabilities	103,036			—
DAC and VOBA	—			1,073,499
Invested assets (other than unrealized gains)	1,619,114			—
Net unrealized gains on investments	—			798,529
Other	2,589			36,484

	2,391,399			1,908,512

Net deferred income tax liability	$	(1,362,328	)	$	(1,611,864	)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Successor			Predecessor
	Company			Company

	February 1, 2015			January 1, 2015
	to			to			As of
	September 30, 2015			January 31, 2015			December 31, 2014

	(Dollars In Thousands)			(Dollars In Thousands)
Balance, beginning of period	$	105,850		$	168,076		$	85,846
Additions for tax positions of the current year	8,217			(5,010		)	57,392
Additions for tax positions of prior years	1,602			1,149			34,371
Reductions of tax positions of prior years:
Changes in judgment	(899		)	(58,365		)	(9,533		)
Settlements during the period	(90,872		)	—			—
Lapses of applicable statute of limitations	—			—			—

Balance, end of period	$	23,898		$	105,850		$	168,076

The revisions to the Company’s unrecognized tax benefits for the period of February 1, 2015 to September 30, 2015 (Successor Company) are shown in the chart above. These revisions included increasing prior determinations of amounts accrued for earlier years as well as reducing some previously accrued amounts. These revisions were primarily related to timing issues. However, revisions were made to certain issues that constituted permanent differences between GAAP income and taxable income. The tax on these permanent differences, excluding interest, caused income tax expense to increase by approximately $4.1 million, $0.2 million, and $3.3 million for the period of February 1, 2015 to September 30, 2015 (Successor Company), the one month ended January 31, 2015 (Predecessor Company), and the year ended December 31, 2014 (Predecessor Company), respectively.

In the IRS audit that concluded in 2012, the IRS proposed favorable and unfavorable adjustments to the Company’s 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and was seeking resolution at the IRS’ Appeals Division. Subsequent to September 30, 2015, Appeals accepted the Company’s proposed settlement offer that related to its earlier protest. In the IRS audit that concluded during the three months ended September 30, 2015, the IRS proposed favorable and unfavorable adjustments to the Company’s 2008 through 2011 reported taxable income. The Company agreed to these adjustments. The resulting net adjustment to the Company’s income taxes for the year 2003 through 2011 will not materially affect the Company nor its effective tax rate.

The Company is currently under audit by the IRS for the years 2012 and 2013. As of September 30, 2015, no materially adverse adjustments to reported taxable income have been proposed.

The Company believes that in the next 12 months approximately $14.3 million of these unrecognized tax benefits will be reduced. Based upon technical guidance and ongoing discussions with the IRS, the Company anticipates that within the next 12 months it will reach final settlement with the IRS regarding its material uncertain tax positions for the years 2003 through 2013.

In general, the Company is no longer subject to U.S. federal, state, and local income tax examinations by taxing authorities for tax years that began before 2003.

Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of September 30, 2015.