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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 22. Income Taxes Income taxes are recognized for the amount of taxes payable by our subsidiaries and for the impact of deferred income tax assets and liabilities related to such subsidiaries. Our income tax expense is as follows:
| Successor |  |  | Predecessor
| Year Ended December 31, |  | Period From May 25 to December 31, |  |  | Period From January 1 to May 24,
| 2024 |  | 2023 |  | 2022 |  |  | 2022
| (Dollars in millions)
Current tax expense (recovery) | $ | 93 |  |  | $ | (9) |  |  | $ | 21 |  |  |  | $ | 57 |
Deferred tax expense (recovery) | (263) |  |  | 56 |  |  | 53 |  |  |  | (24) |
Total income tax expense (recovery) | $ | (170) |  |  | $ | 47 |  |  | $ | 74 |  |  |  | $ | 33 |
Income tax expense (recovery) differed from the amount computed at the statutory federal income tax rate of 21% is as follows:
| Successor |  |  | Predecessor
| Year Ended December 31, |  | Period From May 25 to December 31, |  |  | Period From January 1 to May 24,
| 2024 |  | 2023 |  | 2022 |  |  | 2022
| (Dollars in millions)
Net income (loss) before income taxes | $ | 510 |  |  | $ | 444 |  |  | $ | 400 |  |  |  | $ | 166 |
Income tax at statutory rate | $ | 107 |  |  | $ | 93 |  |  | $ | 84 |  |  |  | $ | 35 |
Tax effect of: |  |  |  |  |  |  |  |
Change in tax rates and imposition of new tax legislation | (292) |  |  | (35) |  |  | — |  |  |  | — |
Tax credits | (3) |  |  | (12) |  |  | (11) |  |  |  | (1) |
Valuation allowance | 18 |  |  | — |  |  | — |  |  |  | — |
Other | — |  |  | 1 |  |  | 1 |  |  |  | (1) |
Total income tax expense (recovery) | $ | (170) |  |  | $ | 47 |  |  | $ | 74 |  |  |  | $ | 33 |
The following table presents a reconciliation of the statutory income tax rate to the effective income tax rate:
| Successor |  |  | Predecessor
| Year Ended December 31, |  | Period From May 25 to December 31, |  |  | Period From January 1 to May 24,
| 2024 |  | 2023 |  | 2022 |  |  | 2022
Statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | % |  |  | 21.0 | %
Increase (reduction) in rate resulting from: |  |  |  |  |  |  |  |
Change in tax rates and imposition of new tax legislation | (57.4) | % |  | (8.0) | % |  | — | % |  |  | — | %
Tax credits | (0.6) | % |  | (2.7) | % |  | (2.8) | % |  |  | (0.5) | %
Valuation allowance | 3.5 | % |  | — | % |  | — | % |  |  | — | %
Other | 0.2 | % |  | 0.4 | % |  | 0.4 | % |  |  | (0.7) | %
Effective income tax rate | (33.3) | % |  | 10.7 | % |  | 18.6 | % |  |  | 19.8 | %
The tax effects of temporary differences that gave rise to the deferred tax assets and liabilities are shown below:
| December 31,
| 2024 |  | 2023
| (Dollars in millions)
Deferred tax assets |  |  |
Investments | $ | 1,445 |  |  | $ | 291 |
Value of business acquired and other intangible assets | — |  |  | 109 |
Policyholders' account balances | 60 |  |  | 58 |
Bermuda DTA | 377 |  |  | 35 |
Reinsurance recoverables | 3,920 |  |  | — |
Loss carryforwards | 624 |  |  | 28 |
Tax credit carryforwards | 88 |  |  | 3 |
Other | 45 |  |  | — |
Gross deferred tax assets | 6,559 |  |  | 524 |
Valuation allowance | (21) |  |  | (5) |
Deferred tax assets after valuation allowance | 6,538 |  |  | 519 |
Deferred tax liabilities |  |  |
Deferred acquisition costs | 198 |  |  | 4 |
Pension assets | 64 |  |  | 49 |
Value of business acquired and other intangible assets | 2,060 |  |  | — |
Future policy benefits | 4,153 |  |  | 138 |
Other | — |  |  | 37 |
Gross deferred tax liabilities | 6,475 |  |  | 228 |
Total net deferred tax asset | $ | 63 |  |  | $ | 291 |
Below is a reconciliation of deferred tax assets (liabilities) as reported on the financial statements:
| December 31,
| 2024 |  | 2023
| (Dollars in millions)
Deferred tax assets | $ | 529 |  |  | $ | 291 |
Deferred tax liabilities | 466 |  |  | — |
Total net deferred tax asset | $ | 63 |  |  | $ | 291 |
The Company, excluding certain of its subsidiaries which file separate tax returns, are a party to a tax sharing agreement with a US parent entity, BAMR US Holdings, LLC. In accordance with its agreement, if the Company has taxable income, it pays its share of the consolidated federal income tax liability to its parent. However, if the Company incurs a tax loss, the tax benefit is recovered by decreasing subsequent year’s federal income tax payments to its parent. The Company evaluates its deferred tax asset based on, among other factors, historical operating results, expectation of future profitability, and the duration of the applicable statutory carryforward periods for tax attributes. As of December 31, 2024, the Company reported a valuation allowance of $21 million primarily related to net operating loss carryforwards and alternative minimum tax carryforwards generated by certain of our subsidiaries that file separate tax returns. Based on our evaluation, as of December 31, 2024, the Company determined that the deferred tax assets would be realized within the applicable statutory carryforward period and that no additional valuation allowance was required. Refer to Note 24 - Accumulated Other Comprehensive Income for deferred income tax recovery (expense) recognized in other comprehensive income. As of December 31, 2024, the Company had net operating loss carryforwards of $2.9 billion and foreign tax credit carryovers of $15 million. If not utilized, net operating loss carryforwards of $232 million will begin to expire in 2028 and $2.6 billion can be carried forward indefinitely. Foreign tax credit carryovers, if not utilized, will expire in 2034. Additionally, as of December 31, 2024, the Company had $106 million of capital loss carryforwards for federal income tax purposes that can carried forward for five years. As of December 31, 2024, there were no material income tax contingencies requiring recognition in our consolidated financial statements. 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. Federal income tax returns for tax years 2021 to 2023 are open to examination by the IRS. Under the Inflation Reduction Act of 2022, a 15% corporate alternative minimum tax (“CAMT”) is imposed on the adjusted financial statement income of certain large corporations, effective for taxable years beginning after December 31, 2022. The impact of the CAMT, if any, will vary from year to year, based on the relationship between our adjusted financial statement income and our taxable income and if incurred, is creditable against future CAMT liabilities. As of December 31, 2024, the Company’s current tax expense included an accrual for the CAMT liability of $73 million offset by a deferred tax benefit resulting in no impact to our consolidated statement of operations. Bermuda Corporate Income Tax Regime In December 2023, the government of Bermuda enacted the Corporate Income Tax Act 2023 (“Bermuda CIT”). The Bermuda CIT imposes a corporate income tax on certain multinational groups earning income in Bermuda beginning January 1, 2025. The new Bermuda CIT also 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. As a result, as of December 31, 2023, the Company recognized a deferred tax asset of $35 million. 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”. The release of this additional guidance by the Government of Bermuda as well as changes in forecasted taxable income in Bermuda resulted in our recognition of deferred tax assets of $292 million (through deferred tax expense) and $50 million (via acquisition accounting for AEL) in 2024 which increased our deferred tax assets related to the Bermuda CIT to $377 million. We expect that our Bermuda based subsidiaries and affiliates generally will be subject to tax under the Bermuda CIT. The headline rate will be 15% but may be reduced by any available applicable tax credits. We are continuing to assess and monitor the impact of the Bermuda CIT on our operations, including any transitional provisions and elections available to mitigate such impact.

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