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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
12. Income Taxes

Income tax expense (benefit) consists of the following:
SuccessorPredecessor
(In millions)Year Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Current$381 $410 $107 
Deferred(1,357)(24)178 
Income tax expense (benefit)$(976)$386 $285 
Income tax expense (benefit) was calculated based on the following income (loss) before income taxes by jurisdiction:
SuccessorPredecessor
(In millions)Year Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Bermuda$(3,425)$2,780 $903 
US(3,627)1,559 1,083 
United Kingdom(178)(153)220 
Income (loss) before income taxes$(7,230)$4,186 $2,206 

We, along with certain of our non-US subsidiaries, are Bermuda exempted companies that have historically not been subject to US corporate income taxes on earnings. As a result of the merger, our non-US earnings will generally be subject to US corporate income taxes.

As a result, the post-merger expected tax provision computed on pre-tax income is based upon the statutory US tax rate of 21%. Prior to the merger, our expected tax provision computed on pre-tax income was calculated using a weighted average tax rate as the sum of the pre-tax income in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. Statutory tax rates of 0%, 21% and 19% had been used for Bermuda, the US and the United Kingdom (UK), respectively. A reconciliation of the difference between the expected tax provision at the weighted average tax rate and income tax expense (benefit) is as follows:

SuccessorPredecessor
(In millions, except for percentages)Year Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Expected tax provision computed on pre-tax income (loss)$(1,518)$299 $268 
(Decrease) increase in income taxes resulting from:
Deferred tax valuation allowance39 (2)8 
Non-deductible expenses1 19 5 
Prior year true-up48 4 (4)
Corporate owned life insurance— 52 (6)
Stock compensation expense9 2 — 
Noncontrolling interests443 — — 
Other2 12 14 
Income tax expense (benefit)$(976)$386 $285 
Effective tax rate13 %9 %13 %

During the third quarter of 2021, we recorded an out-of-period adjustment that affected the consolidated statements of income (loss). The adjustment related to the correction of errors in jurisdictional income, which resulted in the misstatement of income tax expense. The adjustment understated income tax expense for the year ended December 31, 2021 by $63 million. We evaluated the out-of-period adjustment and determined it was not material to the consolidated financial statements for the year ended December 31, 2021, or any other previously reported period.

Total income taxes were as follows:
SuccessorPredecessor
(In millions)Year Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Income tax expense (benefit)$(976)$386 $285 
Income tax expense (benefit) from OCI(3,083)(371)413 
Total income tax expense (benefit)$(4,059)$15 $698 
Current income tax recoverable and deferred tax assets are included in other assets on the consolidated balance sheets, and current income tax payable and deferred tax liabilities are included in other liabilities on the consolidated balance sheets. Current and deferred income tax assets and liabilities were as follows:
SuccessorPredecessor
(In millions)December 31, 2022December 31, 2021
Current income tax recoverable$272 $2 
Current income tax payable— 169 
Net current income tax recoverable (payable)$272 $(167)
Deferred tax assets$5,913 $— 
Deferred tax liabilities34 576 
Net deferred tax assets (liabilities)$5,879 $(576)

Deferred income tax assets and liabilities consisted of the following:
SuccessorPredecessor
(In millions)December 31, 2022December 31, 2021
Deferred tax assets
Insurance liabilities$2,668 $2,169 
Net unrealized losses on AFS3,083 — 
Net operating and capital loss carryforwards185 60 
Investments, including derivatives282 — 
Employee benefits8 22 
Investment in foreign subsidiaries1,011 — 
Other74 39 
Total deferred tax assets7,311 2,290 
Valuation allowance(105)(66)
Deferred tax assets, net of valuation allowance7,206 2,224 
Deferred tax liabilities
Investments, including derivatives— 974 
Intangible assets379 — 
Net unrealized gains on AFS— 626 
DAC, DSI and VOBA946 1,026 
Other2 174 
Total deferred tax liabilities1,327 2,800 
Net deferred tax assets (liabilities)$5,879 $(576)

As of December 31, 2022, we have US federal net operating losses of $108 million, which will begin to expire by 2023; US state net operating losses of $302 million, which will begin to expire by 2031; and UK net operating losses of $355 million, which do not expire.

The valuation allowance consists of the following:
SuccessorPredecessor
(In millions)December 31, 2022December 31, 2021
US federal and state net operating losses and other deferred tax assets$16 $30 
UK net operating losses and other deferred tax assets89 36 
Total valuation allowance$105 $66 

The primary jurisdictions in which we operate and incur income taxes are the US and the UK. We have accumulated undistributed earnings generated by certain foreign subsidiaries, which we intend to indefinitely reinvest. As such, we have not recorded deferred taxes related to the accumulated undistributed earnings. We determined that estimating the unrecognized tax liability is not practicable.

On August 16, 2022, the US government enacted the Inflation Reduction Act of 2022 (IRA). The IRA contains a number of tax-related provisions including a 15% minimum corporate income tax on certain large corporations as well as an excise tax on stock repurchases. It is unclear how the IRA will be ultimately implemented by the US Department of the Treasury through regulation although the IRS has issued interim guidance relevant to us describing regulations it intends to issue upon which taxpayers are entitled to rely until the issuance of regulations. We are still evaluating the impact of the IRA on our tax liability, which tax liability could also be affected by how the provisions of the IRA are implemented through such regulation. We will continue to evaluate the IRA's impact as further information becomes available.
AHL and its Bermuda subsidiaries file protective US income tax returns and its US subsidiaries file income tax returns with the US federal government and various US state governments. AADE is not subject to US federal and state examinations by tax authorities for years prior to 2013, while Athene Annuity & Life Assurance Company of New York (AANY) is not subject to examinations for years prior to 2015. The Internal Revenue Service is currently auditing the 2017 consolidated tax return filed by AADE. No material adverse proposed adjustments have been issued with respect to the examination.

Under current Bermuda law, we are not required to pay any taxes in Bermuda on either income or capital gains. We have received an undertaking from the Bermuda Minister of Finance that, in the event of any such taxes being imposed, we will be exempted from taxation until the year 2035.

We expect that earnings from AHL’s US subsidiaries will not be subject to US dividend withholding tax under the benefits provided by the income tax treaty between the US and the UK. Any dividends remitted to AHL from ALRe are not subject to withholding tax.