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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11: Income Taxes Income (loss) from continuing operations before provision (benefit) for income taxes consisted of:
|  | Years Ended December 31, |
In millions |  | 2022 |  |  |  | 202 1 |  |  |  |  | 202 0 |
Domestic |  | $ | (148) |  |  |  | $ | (445) |  |  |  |  |  | $ | (578) |
Foreign |  |  | — |  |  |  |  | — |  |  |  |  |  |  | — |
Income (loss) from continuing operations before income taxes |  | $ | (148) |  |  |  | $ | (445) |  |  |  |  |  | $ | (578) |
The Company files a consolidated tax return that includes all of its U.S. subsidiaries and foreign branches. The Company also files tax returns in Spain, Mexico, and various state and local jurisdictions. Income tax expense (benefit) on income (loss) and shareholders’ equity, net of changes in the Company’s valuation allowance, consisted of:
|  | Years Ended December 31, |
In millions |  | 2022 |  |  | 2021 |  |  | 2020 |
Current taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | — |  |  |  | — |  |  |  | — |
Foreign |  |  | 1 |  |  |  | — |  |  |  | — |
Deferred taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
Provision (benefit) for income taxes |  |  | 1 |  |  |  | — |  |  |  | — |
Income taxes charged (credited) to shareholders’ equity related to: |  |  |  |  |  |  |  |  |  |  |  |
Change in unrealized gains (losses) on AFS securities |  |  | — |  |  |  | — |  |  |  | — |
Change in AFS securities with OTTI |  |  | — |  |  |  | — |  |  |  | — |
Change in foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |
Total income taxes charged (credited) to shareholders’ equity |  |  | — |  |  |  | — |  |  |  | — |
Total effect of income taxes |  | $ | 1 |  |  | $ | — |  |  | $ | — |
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate for the years ended December 31, 2022, 2021 and 2020 is presented in the following table:
|  | Years Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Federal income tax computed at the statutory rate |  |  | 21.0% |  |  |  | 21.0% |  |  |  | 21.0% |
Increase (reduction) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Change in valuation allowance |  |  | (9.4)% |  |  |  | (20.6)% |  |  |  | (20.3)% |
Deferred inventory adjustments |  |  | (9.3)% |  |  |  | 0.0% |  |  |  | 0.0% |
Excessive Remuneration Sec. 162(m) |  |  | (1.7)% |  |  |  | (0.4)% |  |  |  | (0.3)% |
Other |  |  | (1.1)% |  |  |  | 0.0% |  |  |  | (0.4)% |
Effective tax rate |  |  | (0.5 )% |  |  |  | 0.0% |  |  |  | 0.0% |
Deferred Tax Asset, Net of Valuation Allowance The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized. The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2022 and 2021 are presented in the following table:
|  | As of |
In millions |  | December 31, 2022 |  |  | December 31, 2021 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Unearned premium revenue |  | $ | 36 |  |  | $ | 40 |
Deferred acquisition costs |  |  | 4 |  |  |  | 5 |
Net gains on financial instruments at fair value and foreign exchange |  |  | 121 |  |  |  | — |
Net unrealized gains and losses in accumulated other comprehensive income |  |  | — |  |  |  | 21 |
Net deferred taxes on VIEs |  |  | 27 |  |  |  | 34 |
Total gross deferred tax liabilities |  |  | 188 |  |  |  | 100 |
Deferred tax assets: |  |  |  |  |  |  |  |
Compensation and employee benefits |  |  | 8 |  |  |  | 8 |
Accrued interest |  |  | 259 |  |  |  | 233 |
Loss and loss adjustment expense reserves |  |  | 148 |  |  |  | 45 |
Net operating loss |  |  | 814 |  |  |  | 777 |
Foreign tax credits |  |  | 57 |  |  |  | 58 |
Other-than-temporary impairments and capital loss carryforward |  |  | 16 |  |  |  | 9 |
Net gains and losses on financial instruments at fair value and foreign exchange |  |  | — |  |  |  | 28 |
Net unrealized gains and losses in accumulated other comprehensive income |  |  | 72 |  |  |  | — |
Other |  |  | 13 |  |  |  | 4 |
Total gross deferred tax assets |  |  | 1,387 |  |  |  | 1,162 |
Valuation allowance |  |  | 1,199 |  |  |  | 1,062 |
Net deferred tax asset |  | $ | — |  |  | $ | — |
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. A significant piece of objective negative evidence evaluated was the Company having a three-year cumulative loss. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections of pre-tax income. On the basis of this evaluation, the Company has recorded a full valuation allowance against its net deferred tax asset of $1.2 billion and $1.1 billion as of December 31, 2022 and December 31, 2021, respectively. The Company will continue to analyze the valuation allowance on a quarterly basis. Net operating losses (“NOLs”) of property and casualty insurance companies are permitted to be carried back two years and carried forward 20 years. NOLs of property and casualty insurance companies are not subject to the 80 percent taxable income limitation and indefinite lived carryforward period required by the Tax Cuts and Jobs Act applicable to general corporate NOLs. Treatment of Undistributed Earnings of Certain Foreign Subsidiaries—“Accounting for Income Taxes—Special Areas” The Company’s amount of undistributed earnings of certain foreign subsidiaries was not material as of December 31, 2022. Accounting for Uncertainty in Income Taxes The Company’s policy is to record and disclose any change in unrecognized tax benefit (“UTB”) and related interest and/or penalties to income tax in the consolidated statements of operations. The Company includes interest as a component of income tax expense. As of December 31, 2022 and December 31, 2021, the Company had no UTB. Federal income tax returns through 2011 have been examined or surveyed. As of December 31, 2022, the Company’s NOL is approximately $3.9 billion. NOLs generated prior to tax reform and property and casualty NOLs generated after tax reform will expire between tax years 2026 through 2042. As of December 31, 2022, the Company has a foreign tax credit carryforward of $57 million, which will expire between tax years 2023 through 2032. Section 382 of the Internal Revenue Code Included in the Company’s Amended By-Laws are restrictions on certain acquisitions of Company stock that otherwise may have increased the likelihood of an ownership change within the meaning of Section 382 of the Internal Revenue Code. With certain exceptions, the By-Laws generally prohibit a person from becoming a “Section 382 five-percent shareholder” by acquiring, directly or by attribution, 5% or more of the outstanding shares of the Company’s common stock. Inflation Reduction Act On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law and includes several tax changes, notably a new 15% minimum tax on the book income of large corporations and a 1% excise tax on most stock buybacks. The IRA will not have a material impact on the Company’s financial results.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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