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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Components of Income Tax Expense
The following table presents the components of income tax expense included in the amounts reported in the Company’s consolidated financial statements:
(for the year ended December 31, in millions)202120202019
Composition of income tax expense included in the consolidated statement of income
Current expense:
Federal$659 $532 $546 
Foreign67 35 7 
State6 4 6 
Total current tax expense732 571 559 
Deferred expense (benefit):
Federal62 (29)(33)
Foreign2 (2)(10)
Total deferred tax expense (benefit)64 (31)(43)
Total income tax expense included in the consolidated
 statement of income
796 540 516 
Composition of income tax expense (benefit) included
 in shareholders’ equity
Expense (benefit) relating to changes in the unrealized gain (loss) on investments, unrealized loss on foreign exchange and other items in other comprehensive income (loss)
(362)490 641 
Total income tax expense included in the
 consolidated financial statements
$434 $1,030 $1,157 
The following is a reconciliation of income tax expense at the U.S. federal statutory income tax rate to the income tax expense reported in the Company’s consolidated statement of income:
(for the year ended December 31, in millions)202120202019
Income (loss) before income taxes
U.S.$4,107 $3,095 $3,211 
Foreign351 142 (73)
Total income before income taxes4,458 3,237 3,138 
Effective tax rate
Statutory tax rate21 %21 %21 %
Expected federal income tax expense936 680 659 
Tax effect of:
Nontaxable investment income(147)(147)(149)
Other, net7 7 6 
Total income tax expense$796 $540 $516 
Effective tax rate18 %17 %16 %
The Company paid income taxes of $707 million, $578 million and $428 million during the years ended December 31, 2021, 2020 and 2019, respectively.  The current income tax payable was $119 million and $131 million at December 31, 2021 and 2020, respectively, and was included in other liabilities in the consolidated balance sheet.
Deferred Tax Liability

The net deferred tax liability comprises the tax effects of temporary differences related to the following assets and liabilities:
(at December 31, in millions)20212020
Deferred tax assets
Claims and claim adjustment expense reserves$601 $575 
Unearned premium reserves603 560 
Compensation-related liabilities35 110 
Net operating losses101 87 
Other152 180 
Total gross deferred tax assets1,492 1,512 
Less: valuation allowance23 21 
Adjusted gross deferred tax assets1,469 1,491 
Deferred tax liabilities
Deferred acquisition costs479 445 
Investments940 1,225 
Depreciation112 130 
Other227 249 
Total gross deferred tax liabilities1,758 2,049 
Net deferred tax liability$289 $558 
If the Company determines that any of its deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized.  The net change in the valuation allowance for deferred tax assets was an increase of $2 million in 2021, primarily driven by a $3 million increase in the Company's Canadian subsidiary, partially offset by a decrease of $1 million in the Company's Republic of Ireland subsidiary.  Based upon a review
of the Company’s anticipated future taxable income, and also including all other available evidence, both positive and negative, the Company’s management concluded that it is more likely than not that the net deferred tax assets will be realized.
U.S. income taxes have not been recognized on any undistributed earnings that are intended to be permanently reinvested. Any potential U.S. income tax on these amounts is immaterial.

Net Operating Losses
For tax return purposes, as of December 31, 2021, the Company had net operating loss (NOL) carryforwards in the United States, Canada, the Republic of Ireland and the United Kingdom.  The amount and timing of realizing the benefits of NOL carryforwards depend on future taxable income and limitations imposed by tax laws.  Only the benefits of the United Kingdom NOL carryforwards have been recognized in the consolidated financial statements and are included in net deferred tax assets.  The NOL amounts by jurisdiction and year of expiration are as follows:
(in millions)AmountYear of 
expiration
United States$2 2035 - 2036
Canada$25 2035 - 2041
Republic of Ireland$127 None
United Kingdom$328 None
Uncertain Tax Positions
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021 and 2020:
(in millions)20212020
Balance at January 1$49 $37 
Additions for tax positions of prior years2 16 
Reductions for tax positions of prior years(3)— 
Reductions based on tax positions related to current year— — 
Expiration of statute of limitations— (4)
Balance at December 31$48 $49 
Included in the balances at both December 31, 2021 and 2020 were $48 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.  Also included in the balances at those dates were $0 million and $1 million, respectively, of tax positions for which the ultimate deductibility is certain, but for which there is uncertainty about the timing of deductibility.  The timing of such deductibility could affect the annual effective tax rate depending on the year of deduction and tax rate at the time.
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income taxes.  During the years ended December 31, 2021, 2020 and 2019, the Company recognized approximately $3 million, $0 million and $(1) million in interest, respectively.  The Company had approximately $16 million and $13 million accrued for the payment of interest at December 31, 2021 and 2020, respectively.
The IRS is conducting an examination of the Company’s U.S. income tax returns for 2017 and 2018.  The Company believes that it is reasonably possible the liability for unrecognized tax benefits will decrease by approximately $40 million to $50 million within the next twelve months due to the expected completion of the examination of the Company’s U.S. income tax returns for 2017 and 2018. The decrease primarily pertains to temporary differences that originated in periods prior to the Tax Cuts and Jobs Act of 2017.