ASSURANT INC
For the period ended Dec 31, 2023. Filed Feb 15, 2024.
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FY2023 · Filed Feb 15, 2024
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Income Taxes
- Income Taxes
The components of income tax expense (benefit) were as follows for the periods indicated:
| Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Pre-tax income: | |||
| Domestic | $700.9 | $250.4 | $618.0 |
| Foreign | 105.9 | 99.5 | 153.3 |
| Total pre-tax income | $806.8 | $349.9 | $771.3 |
| Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Current expense (benefit): | |||
| Federal and state | $220.9 | $(23.5) | $0.6 |
| Foreign | 51.9 | 33.0 | 36.1 |
| Total current expense (benefit) | 272.8 | 9.5 | 36.7 |
| Deferred expense (benefit): | |||
| Federal and state | (80.4) | 65.7 | 123.4 |
| Foreign | (28.1) | (1.9) | 8.3 |
| Total deferred expense (benefit) | (108.5) | 63.8 | 131.7 |
| Total income tax expense (benefit) | $164.3 | $73.3 | $168.4 |
The provision for foreign taxes includes amounts attributable to income from U.S. possessions that are considered foreign under U.S. tax laws. International operations of the Company are subject to income taxes imposed by the jurisdiction in which they operate.
A reconciliation of the federal income tax rate to the Company’s effective income tax rate follows for the periods indicated:
| Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Federal income tax rate: | 21.0% | 21.0% | 21.0% |
| Reconciling items: | |||
| Non-taxable investment income | (0.2) | (0.4) | (0.3) |
| Foreign earnings (1) | 0.2 | 2.2 | 1.0 |
| Non-deductible compensation | 0.6 | 0.8 | 0.7 |
| Change in liability for prior year tax (2) | (0.8) | (2.8) | (0.4) |
| Change in valuation allowance | (0.6) | (0.4) | (0.2) |
| Other | 0.2 | 0.5 | — |
| Effective income tax rate: | 20.4% | 20.9% | 21.8% |
(1)Results for 2023, 2022, and 2021 primarily include the impact of foreign earnings taxed at different rates.
(2)The change in liability for prior year tax in 2022 was primarily related to a foreign derived intangible income benefit of $9.2 million taken on an amended 2019 income tax return.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 is as follows:
| Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Balance at beginning of year | $(18.5) | $(18.5) | $(15.6) |
| Additions based on tax positions related to the current year | (0.9) | (0.6) | (0.6) |
| Reductions based on tax positions related to the current year | — | — | — |
| Additions for tax positions of prior years | (0.5) | (0.2) | (5.9) |
| Reductions for tax positions of prior years | 2.9 | 0.8 | 3.6 |
| Lapses | — | — | — |
| Balance at end of year | $(17.0) | $(18.5) | $(18.5) |
Total unrecognized tax benefits of $19.2 million, $20.4 million and $19.9 million for the years ended December 31, 2023, 2022, and 2021, respectively, which includes interest and penalties, would impact the Company’s consolidated effective tax rate if recognized. The liability for unrecognized tax benefits is included in accounts payable and other liabilities on the consolidated balance sheets.
The Company’s continuing practice is to recognize interest expense related to income tax matters in income tax expense. During the years ended December 31, 2023, 2022, and 2021, the Company recognized approximately $0.4 million, $0.7 million and $(0.1) million, respectively, of interest expense (benefit) related to income tax matters. The Company had $2.8 million, $2.4 million and $1.7 million of interest accrued as of December 31, 2023, 2022 and 2021, respectively. The Company hadno penalties accrued as of December 31, 2023, 2022, and 2021.
The Company does not anticipate any significant increase or decrease of unrecognized tax benefit within the next 12 months.
The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2015. Substantially all non-U.S. income tax matters have been concluded for years through 2010, and all state and local income tax matters have been concluded for years through 2008.
The tax effects of temporary differences that result in significant deferred tax assets and deferred tax liabilities are as follows as of the dates indicated:
| December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Deferred Tax Assets | ||
| Policyholder and separate account reserves | $538.3 | $610.6 |
| Net operating loss carryforwards | 43.4 | 42.3 |
| Net unrealized appreciation on securities | 87.7 | 141.1 |
| Credit carryforwards | 9.9 | 9.5 |
| Employee and post-retirement benefits | 8.6 | 7.0 |
| Compensation related | 43.9 | 38.3 |
| Capital loss carryforwards | 12.1 | 5.2 |
| Other | 65.3 | 44.6 |
| Total deferred tax assets | 809.2 | 898.6 |
| Less valuation allowance | (16.1) | (23.6) |
| Deferred tax assets, net of valuation allowance | 793.1 | 875.0 |
| Deferred Tax Liabilities | ||
| Deferred acquisition costs | (1,161.0) | (1,300.0) |
| Investments, net | (0.6) | (9.6) |
| Intangible assets | (101.5) | (110.9) |
| Total deferred tax liabilities | (1,263.1) | (1,420.5) |
| Net deferred income tax liabilities | $(470.0) | $(545.5) |
A cumulative valuation allowance of $16.1 million existed as of December 31, 2023 based on management’s assessment that it is more likely than not that certain deferred tax assets attributable to international subsidiaries will not be realized.
The Company’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income of the same character within the carryback or carryforward periods. In assessing future taxable income, the Company considered all sources of taxable income available to realize its deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies. If changes occur in the assumptions underlying the Company’s tax planning strategies or in the scheduling of the reversal of the Company’s deferred tax liabilities, the valuation allowance may need to be adjusted in the future.
Other than for certain wholly owned Canadian and Latin American subsidiaries, the Company plans to indefinitely reinvest the earnings in other jurisdictions. Under current U.S. tax law, no material income taxes are anticipated on future repatriation of earnings. Therefore, deferred taxes have not been provided.
The net operating loss carryforwards by jurisdiction are as follows as of the dates indicated:
| December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Federal net operating loss carryforwards | $— | $18.4 |
| Foreign net operating loss carryforwards (1) | $164.9 | $154.6 |
(1)Of the $164.9 million as of December 31, 2023, $46.9 million expires between 2023 and 2038, and $118.0 million has an unlimited carryforward.
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