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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We file consolidated federal income tax returns that include all of our wholly-owned subsidiaries. Our income tax expense as presented in the consolidated financial statements is summarized as follows:
Year Ended December 31,
202120202019
(Dollars in thousands)
Consolidated statements of operations:
Current income taxes$332 $3,430 $12,528 
Deferred income taxes128,423 141,071 56,947 
Total income tax expense included in consolidated statements of operations128,755 144,501 69,475 
Stockholders' equity:
Expense (benefit) relating to:
Adoption of expected credit loss model— (2,543)— 
Change in net unrealized investment losses(90,284)225,746 372,472 
Total income tax expense included in consolidated financial statements$38,471 $367,704 $441,947 
Income tax expense in the consolidated statements of operations differed from the amount computed at the applicable statutory federal income tax rates of 21% for the years ended December 31, 2021, 2020, and 2019 as follows:
Year Ended December 31,
202120202019
(Dollars in thousands)
Income before income taxes$602,747 $815,961 $315,565 
Income tax expense on income before income taxes$126,577 $171,352 $66,269 
Tax effect of:
State income taxes5,239 5,749 5,111 
Tax exempt net investment income(4,715)(4,602)(4,385)
Tax rate differential on net operating loss carryback— (30,041)— 
Other1,654 2,043 2,480 
Income tax expense$128,755 $144,501 $69,475 
Effective tax rate21.4 %17.7 %22.0 %
The effective tax rate for the year ended December 31, 2020 was positively impacted by $30.0 million related to the provision of the CARES ACT which allowed net operating losses for 2018 through 2020 to be carried back to previous tax years in which a 35% statutory tax rate was in effect.
Deferred income tax assets or liabilities are established for temporary differences between the financial reporting amounts and tax bases of assets and liabilities that will result in deductible or taxable amounts, respectively, in future years. The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, 2021 and 2020, are as follows:
December 31,
20212020
(Dollars in thousands)
Deferred income tax assets:
Policy benefit reserves$1,373,485 $1,586,000 
Credit losses/Impairments15,275 28,519 
Other policyholder funds3,332 3,789 
Deferred compensation3,434 2,161 
Share-based compensation5,171 2,189 
Net operating loss carryforwards87,314 — 
Other1,140 3,569 
Gross deferred tax assets1,489,151 1,626,227 
Deferred income tax liabilities:
Deferred policy acquisition costs and deferred sales inducements(1,170,859)(1,268,790)
Net unrealized gains on available for sale fixed maturity securities(489,290)(579,766)
Derivative instruments(107,717)(119,444)
Policy benefit reserves(98,616)(123,270)
Investment income items(56,285)(28,719)
Amounts due reinsurer(103,234)(5,636)
Other(5,122)(4,602)
Gross deferred tax liabilities(2,031,123)(2,130,227)
Net deferred income tax liability$(541,972)$(504,000)
Included in deferred income taxes is the expected income tax benefit attributable to unrealized losses on available for sale fixed maturity securities. There is no valuation allowance provided for the deferred income tax asset attributable to unrealized losses on available for sale fixed maturity securities. Management expects that the passage of time will result in the reversal of these unrealized losses due to the fair value increasing as these securities near maturity. We have the intent and ability to hold these securities to maturity and do not believe it would be necessary to liquidate these securities at a loss. In addition, we have the ability to sell fixed maturity securities in unrealized gain positions to offset realized deferred income tax assets attributable to unrealized losses on available for sale fixed maturity securities.
Realization of our deferred income tax assets is more likely than not based on expectations as to our future taxable income and considering all other available evidence, both positive and negative. Therefore, no valuation allowance against deferred income tax assets has been established as of December 31, 2021 and 2020.
There were no material income tax contingencies requiring recognition in our consolidated financial statements as of December 31, 2021. Our tax returns are subject to audit by various federal, state and local tax authorities. The Company's income tax returns are subject to examination by the IRS and state tax authorities, generally for three years after they are due or filed, whichever is later. Tax years ended before December 31, 2018 are no longer open to examination by the IRS.
At December 31, 2021, we have $87.3 million of net operating loss carryforwards for federal income tax purposes.