Income Taxes

12 Months Ended

Dec. 31, 2015

Income Taxes [Abstract]

Income Taxes

Note 19– Income Taxes

• Income Tax Expense

The components of income taxes for the years ended December 31 were as follows:

(In millions)	2015		2014		2013
Current taxes
U.S. income taxes	$	1,076	$	1,068	$	382
Foreign income taxes		93		115		77
State income taxes		60		49		42
		1,229		1,232		501
Deferred taxes (benefits)
U.S. income taxes		22		10		152
Foreign income taxes (benefits)		(6)		(22)		46
State income taxes (benefits)		5		(10)		(1)
		21		(22)		197
Total income taxes	$	1,250	$	1,210	$	698

Total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate of 35% for the following reasons:

(In millions)	2015		2014		2013
Tax expense at nominal rate	$	1,164	$	1,156	$	761
Effect of undistributed foreign earnings		(67)		(74)		(42)
Health insurance industry tax		109		83		-
State income tax (net of federal income tax benefit)		42		25		27
Other		2		20		(48)
Total income taxes	$	1,250	$	1,210	$	698

Consolidated pre-tax income from the Company's foreign operations was approximately 11% of the Company's pre-tax income in 2015, 10% in 2014 and12% in 2013.

Effective Tax Rates

The consolidated effective tax rates of 37.6% in 2015 and 36.6% in 2014 have increased from historical levels due to the health insurance industry tax that took effect in 2014 and that is not deductible for federal income tax purposes. Other matters having a significant impact on the effective tax rate included:

• Undistributedforeign earnings. As part of its global capital management strategy, the Company's foreign operations retaina significant portion of theirearnings overseas. These undistributed earnings are deployed outside of the U.S. in support of the liquidity and capital needs of our foreign operations. The Company does not intend to repatriate these earnings to the U.S. and as a result, income taxes are provided using the respective foreign jurisdictions' tax rate. The Company has accumulated undistributed foreign earnings of $2.2billion as of December 31, 2015. If the Company intended to repatriate these foreign earnings to the U.S., the Company's consolidated balance sheet would have included an additional $290million of deferred tax liabilities as ofDecember 31, 2015.

• Completion of IRS examinations/other 2013 impacts. In 2013, the Internal Revenue Service (“IRS”) completed its examination of the Company's 2009 and 2010 tax years, resulting in an increase to shareholders' net income of $18 million. In addition, income tax expense was reduced in 2013 due to certain other tax benefits related to the Company's foreign operations.

B.Deferred Income Taxes

Deferred income tax assets and liabilities as of December 31 were as follows:

(In millions)	2015		2014
Deferred tax assets
Employee and retiree benefit plans	$	535	$	597
Other insurance and contractholder liabilities		465		440
Net operating losses		101		72
Other accrued liabilities		177		203
Other		99		105
Deferred tax assets before valuation allowance		1,377		1,417
Valuation allowance for deferred tax assets		(71)		(49)
Deferred tax assets, net of valuation allowance		1,306		1,368
Deferred tax liabilities
Depreciation and amortization		765		755
Unrealized appreciation on investments and foreign currency translation		152		298
Other		10		22
Total deferred tax liabilities		927		1,075
Net deferred income tax assets	$	379	$	293

Included in the consolidated net deferred tax asset of $379 million is approximately $150 million of deferred tax liabilities attributable to foreign jurisdictions, most notably Korea and Taiwan.

Management believes that future results will be sufficient to realize the Company's deferred tax assets. With the exception of certain net operating loss related tax benefits, the Company's deferred tax benefits may be carried forward indefinitely. Net operating loss benefits are primarily attributable to foreign jurisdictions. The Company establishes a valuation allowance when it determines that realization of a deferred tax asset does not meet the more likely than not standard. Valuation allowances have been established against certain federal, foreign and state deferred tax assets, generally when there is a requirement to assess them on a separate entity basis. The increased valuation allowance for 2015 is primarily attributable to tax benefits of certain overseas start-up operations.

C.Uncertain Tax Positions

A reconciliation of unrecognized tax benefits for the years ended December 31 was as follows:

(In millions)	2015		2014		2013
Balance at January 1,	$	26	$	17	$	51
Decrease due to prior year positions		-		-		(35)
Increase due to current year positions		7		12		6
Reduction related to lapse of applicable statute of limitations		(2)		(3)		(5)
Balance at December 31,	$	31	$	26	$	17

D.Other Tax Matters

The Internal Revenue Serviceis expected to complete their examination of the Company's 2011 and 2012 consolidated federal income tax returnsduring the second half of 2016.

The Company conducts business in a number of state and foreign jurisdictions, and may be engaged in multiple audit proceedings at any given time. Generally, no further state audit activity is expected for tax years prior to 2011, and prior to 2009 for foreign audit activity.