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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income tax expense (benefit) on continuing operations consists of the following:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (In millions)
Current | $ | 241 |  |  | $ | 331 |  |  | $ | 656 |
Deferred | (49) |  |  | 108 |  |  | 157 |
| $ | 192 |  |  | $ | 439 |  |  | $ | 813 |
Total income tax expense was allocated as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (In millions)
Net earnings from continuing operations | $ | 192 |  |  | $ | 439 |  |  | $ | 813 |
Other comprehensive earnings (loss): |  |  |  |  |
Unrealized gain (loss) on investments and other financial instruments | 275 |  |  | (1,198) |  |  | (160) |
Unrealized gain (loss) on foreign currency translation and cash flow hedging | 2 |  |  | (4) |  |  | — |
Changes in current discount rate - future policy benefits | (50) |  |  | 203 |  |  | 33 |
Changes in instrument - specific credit risk - market risk benefits | (9) |  |  | 18 |  |  | 3 |
F&G 15% Distribution | (35) |  |  | 9 |  |  | — |
Minimum pension liability adjustment | — |  |  | 2 |  |  | (2) |
Total income tax expense (benefit) allocated to other comprehensive earnings | 183 |  |  | (970) |  |  | (126) |
Total income tax expense (benefit) | $ | 375 |  |  | $ | (531) |  |  | $ | 687 |
A reconciliation of the federal statutory rate to our effective tax rate is as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 2.4 |  |  | 2.0 |  |  | 1.4 |
Stock compensation | (0.2) |  |  | (0.1) |  |  | (0.2) |
Tax credits | (1.8) |  |  | (0.7) |  |  | (0.2) |
Valuation allowance for deferred tax assets | 5.0 |  |  | 5.4 |  |  | (0.4) |
Benefit on Capital Loss Carryback | — |  |  | (1.3) |  |  | — |
Officers Compensation | 1.2 |  |  | 0.4 |  |  | 0.2 |
Non-deductible expenses and other, net | 0.1 |  |  | (1.3) |  |  | 1.0 |
Effective tax rate | 27.7 | % |  | 25.4 | % |  | 22.8 | %
The significant components of deferred tax assets and liabilities consist of the following:
| December 31,
| 2023 |  | 2022
| (In millions)
Deferred Tax Assets: |  |  |
Employee benefit accruals | $ | 116 |  |  | $ | 104 |
Net operating loss carryforwards | 84 |  |  | 38 |
Derivatives | — |  |  | 67 |
Tax credits | 119 |  |  | 74 |
Investment securities | 686 |  |  | 952 |
Capital loss carryover | 38 |  |  | 8 |
Life insurance and claim related adjustments | 547 |  |  | 433 |
Funds held under reinsurance agreements | 500 |  |  | 37 |
Market Risk Benefits | 61 |  |  | 32 |
Bermuda corporate income tax net operating loss carryforward | 24 |  |  | — |
Other | 26 |  |  | 36 |
Total gross deferred tax asset | 2,201 |  |  | 1,781 |
Less: valuation allowance | 197 |  |  | 151 |
Total deferred tax asset | $ | 2,004 |  |  | $ | 1,630 |
Deferred Tax Liabilities: |  |  |
Title plant | $ | (53) |  |  | $ | (53) |
Amortization of goodwill and intangible assets | (98) |  |  | (117) |
Other | (8) |  |  | (2) |
Depreciation | (29) |  |  | (32) |
Partnerships | (152) |  |  | (122) |
Value of business acquired | (304) |  |  | (339) |
Deferred acquisition costs | (361) |  |  | (209) |
Transition reserve on new reserve method | (17) |  |  | (25) |
Funds held under reinsurance agreements | (621) |  |  | (187) |
Title Insurance reserve discounting | (18) |  |  | (31) |
Total deferred tax liability | $ | (1,661) |  |  | $ | (1,117) |
Net deferred tax asset | $ | 343 |  |  | $ | 513 |
Our net deferred tax asset (liability) was $343 million and $513 million as of December 31, 2023 and 2022, respectively. The significant changes in the deferred taxes are as follows: the deferred tax asset for investment securities decreased by $266 million primarily due to unrealized losses recorded for investment securities, of which $11 million was related to a reduction in unrealized losses in our Title segment and $255 million was primarily due to unrealized capital gains on fixed maturities in our F&G segment's life insurance business. The deferred tax liability related to deferred acquisition costs increased by $152 million, which is consistent with the growth in sales in our F&G segment. The reinsurance receivable deferred tax asset increased by $463 million, and the reinsurance receivable deferred tax liability increased by $434 million both due to Modco reinsurance treatment of GAAP and tax reserves. The deferred tax asset relating to life insurance receivables increased by $114 million primarily due to GAAP reserves for the year increasing by more than the tax reserves for F&G. As of December 31, 2023, we have net operating losses ("NOLs") on a pretax basis of $401 million, of which $46 million relates to our Title segment and $355 million relates to our F&G segment's life insurance business, which are available to carryforward and offset future federal taxable income. The Title segment NOLs are U.S. federal NOLs arising from acquisitions made since 2012, including Buyers Protection Group, Inc., Digital Insurance Holdings, Inc. and THL Corporations (ServiceLink). Most of the NOLs are subject to an annual Internal Revenue Code Section 382 limitation. These losses will begin to expire in year 2034 and we fully anticipate utilizing the Title segment losses prior to expiration with the exception of $25 million of gross net operating losses that are offset by a $25 million valuation allowance in the Title segment. The F&G NOLs are primarily indefinite life U.S. federal NOLs arising from the life insurance business of which $68 million are subject to an annual Internal Revenue Code Section 382 limitation. As of December 31, 2023 and 2022, we had $119 million and $74 million of tax credits, respectively, some of which have expiration dates and will begin to expire between 2029 and 2043. The credits primarily consist of general business credits and corporate alternative minimum tax credits, including $79 million associated with our F&G segment's life insurance business. The F&G segment's corporate alternative minimum tax credit has an indefinite life. We anticipate the remainder of the credits will be utilized prior to expiration with the exception of $28 million relating to general business credits in our Title segment which have a corresponding $28 million valuation allowance recorded. As of December 31, 2023, a full valuation allowance on the net deferred tax asset related to the Bermuda corporate income tax net operating loss carryforward of $24 million was recorded. This net change in the valuation allowance of $24 million was due to the 2023 enactment of the Bermuda Corporate Income Tax. As of December 31, 2023, a valuation allowance of $139 million on the net deferred tax asset for capital losses was recorded, of which $78 million related to our Title segment and $61 million related to our F&G segment. The net change in the capital loss valuation allowance was a $20 million increase for the year ended December 31, 2023. The increase to the valuation allowance was primarily due to a $31 million increase in the valuation allowance on unrealized capital losses in the F&G segment's life insurance business, offset by a decrease of $11 million in the valuation allowance on unrealized capital losses in the Title segment's bond portfolio. As of December 31, 2023 and 2022, the balance of unrecognized tax benefits that would, if recognized, favorably affect our effective tax rate was $0 million and $0 million, respectively. Interest and penalties accrued on income tax uncertainties are recorded as a component of income tax expense and were $0 million and $0 million, respectively, as of December 31, 2023, and 2022. A reconciliation of the beginning and ending unrecognized tax benefits is as follows (in millions):
|  | Year ended December 31,
|  | 2023 |  | 2022
Beginning balance |  | $ | — |  |  | $ | 60 |
Additions based on positions taken in current year |  | — |  |  | 1 |
Reductions related to IRS accepting refund, statute of limitation lapses and audit payments |  | — |  |  | (61) |
Ending balance |  | $ | — |  |  | $ | — |
F&G's life insurance subsidiaries, as well as certain F&G non-life subsidiaries file separate tax returns from the FNF consolidated group. Prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of December 31, 2023, includes: $26 million of tax receivables related to the FNF consolidated group as well as $28 million of tax receivables and $372 million of deferred tax assets related to F&G subsidiaries who file separate tax returns. As of December 31, 2022, prepaid expenses and other assets included $26 million of tax receivables related to the FNF consolidated group as well as $28 million of tax receivables and $584 million of deferred tax assets related to the F&G subsidiaries. We continue to be a participant in the Internal Revenue Service (“IRS”) Compliance Assurance Process that is a real-time audit. Our 2022 U.S. federal income tax return is currently under audit by the IRS. The 2023 U.S. federal income tax return remains open to examination by the IRS. We file income tax returns in various foreign and US state jurisdictions. Our state income tax returns for the 2019 through 2023 tax years remain subject to examination by state jurisdictions. The F&G life insurance group files a separate consolidated return with the IRS. The F&G federal income tax returns for 2018 through the current period remain open to examination by the IRS. The Company considers its non-U.S. earnings to be indefinitely reinvested outside of the U.S. to the extent these earnings are not subject to the U.S. income tax under an anti-deferral tax regime. Given our intent to reinvest these earnings for an indefinite period of time, the Company has not accrued a deferred tax liability on these earnings. A determination of an unrecognized deferred tax liability related to these earnings is not practicable.

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