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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The significant components of deferred tax assets and liabilities included in the consolidated balance sheets at December 31 were as follows:
(Dollars in millions) |  | At December 31,
|  | 2023 |  | 2022
Deferred tax assets: |  |  |  |
Unearned premiums |  | $ | 165 |  |  | $ | 148 |
Loss and loss expense reserves |  | 120 |  |  | 106 |
Net operating loss on international earnings |  | 26 |  |  | 28 |
Deferred international earnings |  | — |  |  | 16 |
Other |  | 70 |  |  | 55 |
Deferred tax assets before valuation allowance |  | 381 |  |  | 353 |
Valuation allowance for international operations |  | — |  |  | 31 |
Deferred tax assets net of valuation allowance |  | 381 |  |  | 322 |
Deferred tax liabilities: |  |  |  |
Investment gains and other, net |  | 1,290 |  |  | 992 |
Deferred acquisition costs |  | 184 |  |  | 171 |
Life policy reserves |  | 104 |  |  | 121 |
Deferred international earnings |  | 21 |  |  | — |
Investments |  | 35 |  |  | 31 |
Other |  | 71 |  |  | 61 |
Total gross deferred tax liabilities |  | 1,705 |  |  | 1,376 |
Net deferred income tax liability |  | $ | 1,324 |  |  | $ | 1,054 |
Deferred tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount recognized for tax purposes. Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, we believe it is more likely than not that all of the deferred tax assets on our U.S. domestic operations will be realized. As a result, we have no valuation allowance at December 31, 2023 and 2022, for our U.S. domestic operations. For financial reporting purposes, income (loss) before income taxes includes the following components:
(Dollars in millions) |  | For the years ended December 31,
|  | 2023 |  | 2022 |  | 2021
United States |  | $ | 2,195 |  |  | $ | (719) |  |  | $ | 3,672 |
International |  | 81 |  |  | 25 |  |  | 26 |
Total income (loss) before income taxes |  | $ | 2,276 |  |  | $ | (694) |  |  | $ | 3,698 |
The provision (benefit) for income taxes consists of:
(Dollars in millions) |  | For the years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Provision (benefit) for income taxes: |  |  |  |  |  |
Current – United States federal |  | $ | 209 |  |  | $ | 148 |  |  | $ | 248 |
International |  | 1 |  |  | — |  |  | (1) |
Total current |  | 210 |  |  | 148 |  |  | 247 |
Deferred – United States federal |  | 216 |  |  | (355) |  |  | 483 |
International |  | 7 |  |  | — |  |  | — |
Total deferred |  | 223 |  |  | (355) |  |  | 483 |
Total provision (benefit) for income taxes |  | $ | 433 |  |  | $ | (207) |  |  | $ | 730 |
The differences between the 21% statutory federal income tax rate and our effective income tax rate were as follows:
(Dollars in millions) |  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Tax at statutory rate: |  | $ | 478 |  |  | 21.0 | % |  | $ | (146) |  |  | 21.0 | % |  | $ | 777 |  |  | 21.0 | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt income from municipal bonds |  | (21) |  |  | (0.9) |  |  | (20) |  |  | 2.9 |  |  | (20) |  |  | (0.5) |
Dividend received exclusion |  | (22) |  |  | (1.0) |  |  | (21) |  |  | 3.0 |  |  | (20) |  |  | (0.5) |
Release of unrecognized tax benefit |  | — |  |  | — |  |  | (34) |  |  | 4.9 |  |  | — |  |  | — |
Other |  | (2) |  |  | (0.1) |  |  | 14 |  |  | (2.0) |  |  | (7) |  |  | (0.3) |
Provision (benefit) for income taxes |  | $ | 433 |  |  | 19.0 | % |  | $ | (207) |  |  | 29.8 | % |  | $ | 730 |  |  | 19.7 | %
The provision (benefit) for federal income taxes is based upon the filing of a consolidated income tax return for the company and its domestic subsidiaries within the United States. We had no operating or capital loss carryforwards in the United States at December 31, 2023 and 2022. As more fully discussed below, Cincinnati Global, has operating loss carryforwards in the United Kingdom. Enactment of the Inflation Reduction Act of 2022 The Inflation Reduction Act of 2022 (Tax Act) was enacted on August 16, 2022. Along with other changes, the Tax Act created a new corporate alternative minimum tax (CAMT) for certain corporations based on 15% of adjusted financial statement income for the taxable year. The effective date of this enacted legislation was January 1, 2023. Even though we are an applicable corporation for the purposes of the CAMT, we do not expect the enactment of the Tax Act to have a material impact on our financial statements. Unrecognized Tax Benefits During 2022, we received favorable guidance from the Internal Revenue Service (IRS) supporting our tax position related to our unrecognized tax benefit set up in 2018. As a result of this guidance, we released our $34 million gross unrecognized tax benefit liability at December 31, 2022. The $34 million release was recognized as an additional income tax benefit and is shown separately in our effective income tax rate reconciliation. We had no unrecognized tax benefit at December 31, 2023. We are currently under audit for tax years 2021 and 2020. The statute of limitations for federal tax purposes has closed for tax years ended December 31, 2019 and earlier. In addition to our IRS filings, we file income tax returns with immaterial amounts in various state jurisdictions and record these amounts in our provision for income taxes for both current and deferred taxes. The statute of limitations for state income tax purposes has closed for tax years ended December 31, 2020 and earlier. Cincinnati Global operates in the United Kingdom and as such, is subject to tax in that jurisdiction. The statute of limitations for tax return review by His Majesty’s Revenue and Customs (HMRC) has closed for tax returns with a submission deadline ended December 31, 2021, and earlier. There are currently no tax returns under review by HMRC. Income taxes paid in our consolidated statements of cash flows are shown net of refunds received. We received a $2 million refund in 2023, and no refunds in 2022 or 2021. Cincinnati Global Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, we believe it is more likely than not that all of the deferred tax assets of Cincinnati Global will be realized. As a result, we had no valuation allowance at December 31, 2023. We had a valuation allowance of $31 million and $53 million at December 31, 2022, and 2021, respectively. The following is a tabular reconciliation of the total amounts of our Cincinnati Global valuation allowance:
(Dollars in millions) | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021 |  |
Valuation allowance, January 1 |  | $ | 31 |  |  | $ | 53 |  |  | $ | 56 |  |  |
Current year operations |  | (31) |  |  | (22) |  |  | (3) |  |  |
Valuation allowance, December 31 |  | $ | — |  |  | $ | 31 |  |  | $ | 53 |  |  |
Cincinnati Global had no operating loss carryforwards in the United States and $100 million in the United Kingdom at December 31, 2023, and $5 million in the United States and $109 million in the United Kingdom at December 31, 2022. These Cincinnati Global losses can only be utilized within the Cincinnati Global group in both the United States and in the United Kingdom and cannot offset the income of our domestic operations in the United States.

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