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Income Tax | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Tax | INCOME TAX The effective tax rate for 2020 was higher than the U.S. Statutory rate of 21% primarily as a result of income earned in jurisdictions with tax rates higher than the U.S., GILTI tax primarily due to RGA Canada's income, and a change in the corporate tax rate in the UK. These increases were partially offset by foreign tax credit utilization and bases differences in Australia. The effective tax rate for 2019 was higher than the U.S. Statutory rate of 21% primarily as a result of valuation allowance increases in various jurisdictions which were partially offset by foreign bases differences in Australia. The effective tax rate for 2018 was lower than the U.S. Statutory rate of 21% primarily as a result of U.S. Tax Reform release of a valuation allowance on foreign tax credits and foreign bases differences, which was partially offset by tax expense related to GILTI tax and valuation allowance increases. See the table below for additional information. Pre-tax income for the years ended December 31, 2020, 2019 and 2018 consists of the following (dollars in millions):
|  | 2020 |  | 2019 |  | 2018
Pre-tax income - U.S. |  | $ | 79 |  |  | $ | 871 |  |  | $ | 626 |
Pre-tax income - foreign |  | 474 |  |  | 261 |  |  | 220 |
Total pre-tax income |  | $ | 553 |  |  | $ | 1,132 |  |  | $ | 846 |
The provision for income tax expense for the years ended December 31, 2020, 2019 and 2018 consists of the following (dollars in millions):
|  | 2020 |  | 2019 |  | 2018
Current income tax expense (benefit): |  |  |  |  |  |
U.S. |  | $ | 75 |  |  | $ | (9) |  |  | $ | 78 |
U.S. Tax Reform |  | — |  |  | — |  |  | (68) |
Foreign |  | 79 |  |  | 60 |  |  | 43 |
Total current |  | 154 |  |  | 51 |  |  | 53 |
Deferred income tax expense (benefit): |  |  |  |  |  |
U.S. |  | (60) |  |  | 182 |  |  | 63 |
U.S. Tax Reform |  | — |  |  | — |  |  | 6 |
Foreign |  | 44 |  |  | 29 |  |  | 8 |
Total deferred |  | (16) |  |  | 211 |  |  | 77 |
Total provision for income taxes |  | $ | 138 |  |  | $ | 262 |  |  | $ | 130 |
The Company’s effective tax rate differed from the U.S. federal income tax statutory rate of 21% as a result of the following for the years ended December 31, 2020, 2019 and 2018 (dollars in millions):
|  | 2020 |  | 2019 |  | 2018
Tax provision at U.S. statutory rate |  | $ | 116 |  |  | $ | 238 |  |  | $ | 178 |
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |
U.S. Tax Reform |  | — |  |  | — |  |  | (62) |
Tax rate differences on income in other jurisdictions |  | 21 |  |  | 2 |  |  | 4 |
Differences in tax basis in foreign jurisdictions |  | (32) |  |  | (23) |  |  | (23) |
Deferred tax valuation allowance |  | 10 |  |  | 56 |  |  | 23 |
Amounts related to uncertain tax positions |  | 10 |  |  | 8 |  |  | 1 |
Equity based compensation |  | (1) |  |  | (8) |  |  | (6) |
Corporate rate changes |  | 13 |  |  | (1) |  |  | 1 |
GILTI, net of credits |  | 13 |  |  | — |  |  | 10 |
Subpart F for non-full inclusion companies |  | — |  |  | 1 |  |  | 1 |
Foreign tax credits |  | (7) |  |  | (6) |  |  | (3) |
Return to provision adjustments |  | (4) |  |  | (6) |  |  | (1) |
Other, net |  | (1) |  |  | 1 |  |  | 7 |
Total provision for income taxes |  | $ | 138 |  |  | $ | 262 |  |  | $ | 130 |
Effective tax rate |  | 24.9 | % |  | 23.1 | % |  | 15.4 | %
Total income taxes for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in millions):
|  | 2020 |  | 2019 |  | 2018
Provision for income taxes |  | $ | 138 |  |  | $ | 262 |  |  | $ | 130 |
Income tax from OCI and additional paid-in-capital: |  |  |  |  |  |
Net unrealized holding gain (loss) on debt and equity securities recognized for financial reporting purposes |  | 611 |  |  | 681 |  |  | (368) |
Foreign currency translation |  | (9) |  |  | 3 |  |  | 19 |
Unrealized pension and post retirement |  | (1) |  |  | (5) |  |  | — |
Total income taxes provided |  | $ | 739 |  |  | $ | 941 |  |  | $ | (219) |
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at December 31, 2020 and 2019, are presented in the following tables (dollars in millions):
|  | 2020 |  | 2019
Deferred income tax assets: |  |  |  |
Nondeductible accruals |  | $ | 92 |  |  | $ | 95 |
Net operating loss carryforward |  | 254 |  |  | 330 |
Capital loss and tax credit carryforwards |  | — |  |  | 38 |
Subtotal |  | 346 |  |  | 463 |
Valuation allowance |  | (251) |  |  | (236) |
Total deferred income tax assets |  | 95 |  |  | 227 |
Deferred income tax liabilities: |  |  |  |
Deferred acquisition costs |  | 775 |  |  | 675 |
Policy reserves and other reinsurance liabilities |  | 1,105 |  |  | 1,208 |
Invested assets |  | 1,043 |  |  | 645 |
Outside basis difference foreign subsidiaries |  | 354 |  |  | 308 |
Foreign currency translation |  | 40 |  |  | 52 |
Anticipated future tax credit reduction |  | 20 |  |  | 26 |
Other |  | 2 |  |  | 1 |
Total deferred income tax liabilities |  | 3,339 |  |  | 2,915 |
Net deferred income tax liabilities |  | $ | 3,244 |  |  | $ | 2,688 |
Balance sheet presentation of net deferred income tax liabilities: |  |  |  |
Included in other assets |  | $ | 19 |  |  | $ | 24 |
Included in deferred income taxes |  | 3,263 |  |  | 2,712 |
Net deferred income tax liabilities |  | $ | 3,244 |  |  | $ | 2,688 |
As of December 31, 2020, the valuation allowance against deferred tax assets was $251 million. During 2020, there was a $20 million increase to the valuation allowance related to the tax losses of RGA Reinsurance Company of Australia Limited ("RGA Australia"). RGA Australia's tax loss primarily relates to income on internal retrocession that is not taxable in RGA Australia. The RGA Australia deferred tax asset has been reduced to the amount more likely than not to be realized considering the projected future earnings. The valuation allowance increased further due to losses in jurisdictions that do not have a history of income and changes in foreign currency translation during the year. These increases were partially offset by a valuation allowance release related to U.S. Foreign Tax Credit utilization and income in jurisdictions with valuation allowances. As of December 31, 2019, the valuation allowance against deferred tax assets was $236 million. During 2019, there was a $44 million increase to the valuation allowance related to the tax losses of RGA Australia. RGA Australia's tax loss primarily relates to income on internal retrocession that is not taxable in RGA Australia. The RGA Australia deferred tax asset has been reduced to the amount more likely than not to be realized considering the projected future earnings. The valuation allowance also increased due to losses in jurisdictions where the company does not have a recent history of earnings, including China and Spain. These increases were partially offset by a release of a valuation allowance in New Zealand due to taxable income in recent years. The earnings of substantially all of the Company's foreign subsidiaries have been permanently reinvested in foreign operations. The Company has provided for future tax on the full inclusion companies where the Company cannot assert permanent reinvestment. At December 31, 2020 and 2019, the financial reporting basis in excess of the tax basis for which no deferred taxes have been recognized was approximately $2.7 billion and $1.6 billion, respectively. As U.S. Tax Reform generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, the Company does not expect to incur material income taxes if these funds were repatriated. During 2020, 2019, and 2018, the Company received federal and foreign income tax refunds of approximately $59 million, $22 million, and $2 million, respectively. The Company made cash income tax payments of approximately $167 million, $66 million, and $144 million, in 2020, 2019, and 2018, respectively. The following table presents consolidated net operating losses (“NOL”) as of December 31, 2020 (dollars in millions):
| 2020
NOL with no expiration and with no valuation allowance | $ | 103 |
NOL with a full valuation allowance | 131 |
NOL with no expiration and a partial valuation allowance | 646 |
NOL with expiration dates between 2033 & 2040 with no valuation allowance | 20 |
Total net operating loss carryforwards | $ | 900 |
These net operating losses, other than the net operating losses for which there is a valuation allowance, are expected to be utilized in the normal course of business during the period allowed for carryforwards and in any event, are not expected to be lost, due to the application of tax planning strategies that management would utilize. As of December 31, 2020, the Company had foreign tax credit carryforwards of $32 million in Ireland for which there is a full valuation allowance. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is under continuous examination by the Internal Revenue Service and is subject to audit by taxing authorities in other foreign jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2017, Canadian tax authorities for years prior to 2016 and with a few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years prior to 2015. As of December 31, 2020, the Company’s total amount of unrecognized tax benefits is $342 million and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, is $155 million. Management believes it is reasonably possible that the unrecognized tax benefit could decrease by up to $312 million over the next 12 months if statutes expire. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018, is as follows (dollars in millions):
|  | Total Unrecognized Tax Benefits
|  | 2020 |  | 2019 |  | 2018
Beginning balance, January 1 |  | $ | 333 |  |  | $ | 325 |  |  | $ | 321 |
Acquisition accounting |  | — |  |  | — |  |  | 1 |
Additions for tax positions of prior years |  | 281 |  |  | 264 |  |  | 256 |
Reductions for tax positions of prior years |  | (278) |  |  | (262) |  |  | (257) |
Additions for tax positions of current year |  | 6 |  |  | 6 |  |  | 4 |
Settlements with tax authorities |  | — |  |  | — |  |  | — |
Ending balance, December 31 |  | $ | 342 |  |  | $ | 333 |  |  | $ | 325 |
The Company recognized interest expense (benefit) associated with uncertain tax positions in 2020, 2019 and 2018 of $11 million, $12 million, and $(3) million, respectively. As of December 31, 2020 and 2019, the Company had $34 million and $23 million, respectively, of accrued interest related to unrecognized tax benefits. There are no penalties accrued as of December 31, 2020 or December 31, 2019.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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