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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Components of Income Tax Expense
The following table presents the components of income tax expense (benefit) included in the amounts reported in the Company’s consolidated financial statements:
(for the year ended December 31, in millions)202220212020
Composition of income tax expense included in the consolidated statement of income
Current expense:
Federal$636 $659 $532 
Foreign97 67 35 
State8 6 4 
Total current tax expense741 732 571 
Deferred expense (benefit):
Federal(186)62 (29)
Foreign(43)2 (2)
Total deferred tax expense (benefit)(229)64 (31)
Total income tax expense included in the consolidated
 statement of income
512 796 540 
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)
(2,002)(362)490 
Total income tax expense (benefit) included in the
 consolidated financial statements
$(1,490)$434 $1,030 
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)202220212020
Income before income taxes
U.S.$3,101 $4,107 $3,095 
Foreign253 351 142 
Total income before income taxes3,354 4,458 3,237 
Effective tax rate
Statutory tax rate21 %21 %21 %
Expected federal income tax expense704 936 680 
Tax effect of:
Nontaxable investment income(149)(147)(147)
Audit reserve(40)1 15 
Other, net(3)6 (8)
Total income tax expense$512 $796 $540 
Effective tax rate15 %18 %17 %
The Company paid income taxes of $817 million, $707 million and $578 million during the years ended December 31, 2022, 2021 and 2020, respectively.  The current income tax receivable of $32 million at December 31, 2022 was included in other assets in the consolidated balance sheet. The current income tax payable of $119 million at December 31, 2021 was included in other liabilities in the consolidated balance sheet.
Deferred Tax Asset (Liability)

The net deferred tax asset (liability) comprises the tax effects of temporary differences related to the following assets and liabilities:
(at December 31, in millions)20222021
Deferred tax assets
Investments$999 $— 
Claims and claim adjustment expense reserves660 601 
Unearned premium reserves673 603 
Net operating losses96 101 
Other262 187 
Total gross deferred tax assets2,690 1,492 
Less: valuation allowance27 23 
Adjusted gross deferred tax assets2,663 1,469 
Deferred tax liabilities
Claims and claim adjustment expense reserve discounting (transition rule)58 77 
Deferred acquisition costs539 479 
Investments— 940 
Intangibles65 59 
Depreciation105 112 
Other19 91 
Total gross deferred tax liabilities786 1,758 
Net deferred tax asset (liability)$1,877 $(289)
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 $4 million in 2022, primarily driven by a $5 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, 2022, 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$46 2035 - 2042
Republic of Ireland$120 None
United Kingdom$257 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, 2022 and 2021:
(in millions)20222021
Balance at January 1$48 $49 
Additions for tax positions of prior years3 2 
Reductions for tax positions of prior years(44)(3)
Additions based on tax positions related to current year2 — 
Expiration of statute of limitations— — 
Balance at December 31$9 $48 
Included in the balances at December 31, 2022 and 2021 were $8 million and $48 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.  Also included in the balances at those dates were $1 million and $0 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, 2022, 2021 and 2020, the Company recognized approximately $(13) million, $3 million and $0 million in interest, respectively.  The Company had approximately $3 million and $16 million accrued for the payment of interest at December 31, 2022 and 2021, respectively.
The IRS has completed examination of the Company’s U.S. income tax returns for all years through 2018. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months.
Enactment of the Inflation Reduction Act of 2022
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (IRA) which, among other changes, created a new corporate alternative minimum tax (AMT) based on adjusted financial statement income and imposes a 1% excise tax on corporate stock repurchases. The effective date of these provisions is January 1, 2023. The enactment of the IRA did not have any impact on the Company’s financial statements in 2022. While the Company will be an applicable corporation subject to the AMT tax beginning in 2023 based on its reported GAAP earnings for the past three years, the Company expects any AMT tax incurred to be treated as a taxable temporary difference and have no direct impact on total income tax expense, subject to any additional guidance or regulations that may be issued. Any excise tax incurred on corporate stock repurchases will generally be recognized as part of the cost basis of the treasury stock acquired and not reported as part of income tax expense.