Postretirement benefits

  
The increase in the Company’s effective tax rate for the year ended December 31, 2021 compared to 2020 is primarily the result of a decrease in the dividends received deduction and low income housing tax credits, partially offset by various other adjustments.Deferred income tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes. Deferred income tax assets and liabilities are measured at the statutory rate of 21% as of both December 31, 2021 and 2020. The significant components of the Company’s deferred income tax assets and liabilities, which are included net within Other assets or Other liabilities, were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, |
| 2021 |  | 2020 |
| (in millions) |
| Deferred income tax assets |
| Liabilities for policyholder account balances, future policy benefits and claims | $ | 1,996  |  |  | $ | 1,618  |  |
| Deferred compensation | 586  |  |  | 493  |  |
| Right of use lease liability | 73  |  |  | 60  |  |
| Postretirement benefits | —  |  |  | 65  |  |
|  |  |  |  |
|  |  |  |  |
| Other | 106  |  |  | 51  |  |
| Gross deferred income tax assets | 2,761  |  |  | 2,287  |  |
| Less: valuation allowance | 32  |  |  | 15  |  |
| Total deferred income tax assets | 2,729  |  |  | 2,272  |  |
|  |  |  |  |
| Deferred income tax liabilities |  |  |  |
| Investment related | 565  |  |  | 253  |  |
| Deferred acquisition costs | 481  |  |  | 435  |  |
| Intangible assets | 209  |  |  | 124  |  |
| Net unrealized gains on Available-for-Sale securities | 113  |  |  | 295  |  |
| Depreciation expense | 89  |  |  | 99  |  |
| Goodwill | 77  |  |  | 70  |  |
| Right of use lease asset | 62  |  |  | 54  |  |
| Deferred sales inducement costs | —  |  |  | 44  |  |
| Other | 45  |  |  | 18  |  |
| Gross deferred income tax liabilities | 1,641  |  |  | 1,392  |  |
| Net deferred income tax assets | $ | 1,088  |  |  | $ | 880  |  |

Included in the Company’s deferred income tax assets are tax benefits primarily related to state net operating losses of $12 million, net of federal benefit, which will expire beginning December 31, 2022 and foreign net operating losses of $42 million. Based on analysis of the Company’s tax position, management believes it is more likely than not that the Company will not realize certain state net operating losses of $11 million, state deferred tax assets of $3 million and foreign deferred tax assets of $18 million; therefore, a valuation allowance of $32 million has been established. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|  | (in millions) |
| Balance at January 1 | $ | 110  |  |  | $ | 100  |  |  | $ | 92  |  |
| Additions based on tax positions related to the current year | 21  |  |  | 11  |  |  | 15  |  |
| Reductions based on tax positions related to the current year | (1) |  |  | (1) |  |  | —  |  |
| Additions for tax positions of prior years | 5  |  |  | 10  |  |  | 39  |  |
| Reductions for tax positions of prior years | (8) |  |  | (4) |  |  | (17) |  |
| Reductions due to lapse of statute of limitations | (1) |  |  | (5) |  |  | —  |  |
| Audit settlements | (1) |  |  | (1) |  |  | (29) |  |
| Balance at December 31 | $ | 125  |  |  | $ | 110  |  |  | $ | 100  |  |

If recognized, approximately $95 million, $80 million and $67 million, net of federal tax benefits, of unrecognized tax benefits as of December 31, 2021, 2020, and 2019, respectively, would affect the effective tax rate.It is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months. The Company estimates that the total amount of gross unrecognized tax benefits may decrease by $50 million to $60 million in the next 12 months primarily         141
