Allstate 2012 Annual Report Download - page 248

The reconciliation of the change in the amount of unrecognized tax benefits for the years ended December 31 is as
follows:
($ in millions) 2011 2010 2009
Balance – beginning of year $ 25 $ 22 $ 21
Increase for tax positions taken in a prior year — 1 —
Decrease for tax positions taken in a prior year — — —
Increase for tax positions taken in the current
year — 2 1
Decrease for tax positions taken in the current
year — — —
(Decrease) increase for settlements — — —
Reductions due to lapse of statute of limitations — — —
Balance – end of year $ 25 $ 25 $ 22
The Company believes it is reasonably possible that the liability balance will be reduced by $25 million within the
next twelve months upon the resolution of an outstanding issue resulting from the 2005-2006 IRS examination.
Because of the impact of deferred tax accounting, recognition of previously unrecognized tax benefits is not expected to
impact the Company’s effective tax rate.
The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. The
Company did not record interest income or expense relating to unrecognized tax benefits in income tax expense in 2011
or 2010. The Company recorded $0.1 million of interest income relating to unrecognized tax benefits in income tax
expense in 2009. As of December 31, 2011 and 2010, there was no interest accrued with respect to unrecognized tax
benefits. No amounts have been accrued for penalties.
The components of the deferred income tax assets and liabilities as of December 31 are as follows:
($ in millions) 2011 2010
Deferred assets
Unearned premium reserves $ 656 $ 637
Difference in tax bases of invested assets 564 521
Discount on loss reserves 315 310
Pension 255 229
Alternative minimum tax credit carryforward 255 168
Accrued compensation 213 201
Net operating loss carryforwards 203 —
Other postretirement benefits 188 157
Life and annuity reserves 10 227
Other assets 67 50
Total deferred assets 2,726 2,500
Valuation allowance (67) (6)
Net deferred assets 2,659 2,494
Deferred liabilities
DAC (1,102) (1,139)
Unrealized net capital gains (737) (504)
Other intangible assets (142) (6)
Other liabilities (158) (61)
Total deferred liabilities (2,139) (1,710)
Net deferred asset $ 520 $ 784
Although realization is not assured, management believes it is more likely than not that the deferred tax assets, net
of valuation allowance, will be realized based on the Company’s assessment that the deductions ultimately recognized
for tax purposes will be fully utilized. The valuation allowance for deferred tax assets increased by $61 million in 2011
primarily as a result of the acquisition of Answer Financial. The valuation allowance relates to the portion of Answer
162