Prudential 2012 Annual Report Download - page 182

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
19. INCOME TAXES (continued)
The Company’s income (loss) from continuing operations before income taxes and equity in earnings of operating joint ventures
includes income (loss) from domestic and foreign operations, for the years ended December 31, as follows:
2012 2011 2010
(in millions)
Domestic operations ..................................................................................... $1,188 $1,923 $2,292
Foreign operations ...................................................................................... $ (512) $2,986 $1,848
The Company’s actual income tax expense on continuing operations before equity in earnings of operating joint ventures for the years
ended December 31, differs from the expected amount computed by applying the statutory federal income tax rate of 35% to income from
continuing operations before income taxes and equity in earnings of operating joint ventures for the following reasons:
2012 2011 2010
(in millions)
Expected federal income tax expense ......................................................................... $237 $1,718 $1,449
Reversal of acquisition opening balance sheet deferred tax items ................................................... 384 221 6
Non-taxable investment income ............................................................................. (302) (247) (214)
Low income housing and other tax credits ..................................................................... (78) (80) (58)
Foreign taxes at other than U.S. rate .......................................................................... (41) (30) (46)
Change in tax rate ........................................................................................ 1 18 91
Minority interest ......................................................................................... (27) (24) (4)
State taxes .............................................................................................. 16 (2) 4
Other .................................................................................................. 14 (86) 15
Total income tax expense on continuing operations before equity in earnings of operating joint ventures ................ $204 $1,488 $1,243
Total income tax expense includes additional tax expense related to the realization of deferred tax assets recorded in the Statement of
Financial Position as of the acquisition date for Prudential Gibraltar Financial Life Insurance Company, Ltd. (“PGFL”) and the Star and
Edison Businesses. The balance of additional U.S. GAAP tax expense to be recognized in the future related to the utilization of opening
balance sheet deferred tax assets is as follows:
PGFL
Star and
Edison
Businesses Total
(in millions)
Opening balance sheet deferred tax assets after valuation allowance that will result in additional tax expense ............. $56 $678 $734
Additional tax expense (benefit) recognized in the Statement of Operations:
2009 ........................................................................................... 13 0 13
2010 ........................................................................................... 6 0 6
2011 ........................................................................................... (29) 252 223
2012 ........................................................................................... 51 333 384
Subtotal .................................................................................... 41 585 626
Additional tax expense recognized in Other Comprehensive Income ............................................. 2 25 27
Additional tax expense to be recognized in future periods ..................................................... $13 $ 68 $ 81
On January 1, 2012, the Star and Edison Businesses merged into Gibraltar Life Insurance Company, Ltd. The majority of additional
U.S. tax expense recognized in 2012 is a result of the merger. The annual amount of additional tax expense related to the realization of
opening balance sheet deferred tax assets will be significantly lower in the future.
Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:
2012 2011
(in millions)
Deferred tax assets
Insurance reserves ......................................................................................... $ 3,952 $ 1,938
Policyholders’ dividends .................................................................................... 2,433 1,806
Net operating and capital loss carryforwards .................................................................... 866 1,108
Employee benefits ......................................................................................... 718 582
Other ................................................................................................... 304 855
Deferred tax assets before valuation allowance .................................................................. 8,273 6,289
Valuation allowance ....................................................................................... (280) (392)
Deferred tax assets after valuation allowance .................................................................... 7,993 5,897
Deferred tax liabilities
Net unrealized investment gains .............................................................................. 8,451 4,794
Deferred policy acquisition costs ............................................................................. 3,559 2,929
Investments .............................................................................................. 1,753 2,140
Unremitted foreign earnings ................................................................................. 1,216 1,336
Value of business acquired .................................................................................. 1,029 1,225
Deferred tax liabilities ...................................................................................... 16,008 12,424
Net deferred tax liability ........................................................................................ $(8,015) $ (6,527)
180 Prudential Financial, Inc. 2012 Annual Report