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Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
22. Income Taxes
For the three and nine months ended September 30, 2024, the effective tax rates on pre-tax income were 18.8% and 109.4% respectively. For the three-month period, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to adjustments for noncontrolling interest. For the nine-month period, the Company’s effective tax rate differed from the statutory tax rate of 21% primarily due to the recognition of a deferred tax benefit related to the Bermuda corporate income tax.
For the three and nine months ended September 30, 2023, the effective tax rates on pre-tax income were 14.1% and 14.4% respectively. The Company’s effective tax rate differed from the statutory tax rate of 21% for the same respective periods primarily due to benefits from tax-exempt investments, dividends-received deduction and tax credits.
Pillar Two and Bermuda Corporate Income Tax Regime
The Organization for Economic Cooperation and Development (“OECD”) and its member countries with support from the G20, have proposed the enactment of a global minimum tax of 15% for Multinational Enterprise (“MNE”) groups with global annual revenue of €750 million or more (“Pillar Two”). The Company may become subject to additional income taxes as a result of these proposals, as enacted locally across jurisdictions.
The Company’s wholly-owned subsidiary, Freestone, is incorporated under the laws of Bermuda and is not required to pay any taxes in Bermuda based upon income or capital gains. However, in December 2023, the Government of Bermuda enacted a corporate income tax (“CIT”) regime, designed to align with the OECD’s global minimum tax rules. Effective January 1, 2025, the regime applies a 15% CIT to Bermuda businesses that are part of MNE groups with annual revenue of €750 million or more. As a result of this new regime, the Company recognized a deferred tax benefit of $35 million as of December 31, 2023.
The new Bermuda CIT introduced an economic transition adjustment (“ETA”) which allows for an elective increase or decrease in the tax basis of assets and liabilities (excluding goodwill) held as of September 30, 2023 to fair value. It also allows for the recognition of a DTA related to the value of “identifiable intangible assets” that may be amortized over 10 years, beginning January 1, 2025. Examples of identifiable intangible assets include brand and trade names, software, customer relationships and the value of in-force insurance business. On January 16, 2024, the Government of Bermuda clarified that the ETA can be applied to “customer or supplier relationships between separate legal entities, whether intragroup or with third parties”. With the release of this additional guidance by the Government of Bermuda as well as the increase of forecasted taxable income in Bermuda, we recognized additional deferred tax assets of $292 million (through deferred tax expense) and $50 million (via acquisition accounting for AEL) which increased our Bermuda CIT related deferred tax asset to $377 million. The Company will continue to monitor developments prior to the commencement of this regime.