INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

SCHEDULE OF INCOME TAX EXPENSE AND NET TAX ASSETS

An analysis of income tax expense and net tax assets is shown in the following table:




Year ended December 31,	2017			2016			2015

Current income tax expense (benefit)
U.S.	$	(6,207	)	$	606		$	4,927
Europe	10,249			7,451			144
Other	—			—			5
Deferred income tax expense (benefit)
U.S.	18,495			(1,829		)	(267		)
Europe	(30,079		)	112			(1,781		)
Total income tax expense (benefit)	$	(7,542	)	$	6,340		$	3,028

Net current tax receivables (payables)	$	(639	)	$	3,540		$	(69	)
Net deferred tax assets	4,438			103,313			104,762

Net tax assets	$	3,799		$	106,853		$	104,693

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

The significant components of deferred tax assets and liabilities were as follows:




At December 31,	2017			2016

Deferred tax assets:
Discounting of net reserves for losses and loss expenses	$	27,804		$	47,258
Unearned premiums	25,188			41,797
Operating and capital loss carryforwards	53,095			43,687
Accruals not currently deductible	31,560			59,098
Other investment adjustments and impairments	—			84
Tax credits	29,929			10,139
Other deferred tax assets	15,047			3,684
Deferred tax assets before valuation allowance	182,623			205,747
Valuation allowance	(16,157		)	(41,100		)
Deferred tax assets net of valuation allowance	166,466			164,647

Deferred tax liabilities:
Deferred acquisition costs	(24,249		)	(45,788		)
Net unrealized investments gains	(8,033		)	(1,168		)
Amortization of VOBA, intangible assets and goodwill	(85,296		)	(13,096		)
Equalization reserves	(23,274		)	—
Other deferred tax liabilities	(21,176		)	(1,282		)
Deferred tax liabilities	(162,028		)	(61,334		)
Net deferred tax assets	$	4,438		$	103,313

SUMMARY OF TAX CREDITS

Total operating and capital loss carryforwards and tax credits are summarized in the following table:




At December 31,	2017		2016

Operating and Capital Loss Carryforwards⁽¹⁾
Singapore (branch) operating loss carryforward	$	77,467	$	83,532
Australia (branch) operating loss carryforward⁽²⁾	—		147,193
Australia (branch) capital loss carryforward⁽²⁾	—		4,207
U. K. operating loss carryforward⁽³⁾	126,839		19,306
Ireland capital loss carryforward	716		716
U.S. operating loss carryforward	115,236		14,221

Tax Credits⁽¹⁾
Ireland foreign tax credit	$	3,566	$	3,298
U.S. alternative minimum tax credit	12,052		6,840
U.K. tax credit⁽³⁾	14,310		—


(1)	All operating and capital loss carryforwards and tax credits can be carried forward indefinitely with the exception of the U.S. net operating loss which will expire in 2037.


(2)	As a result of ceasing the Company's Australian operations, operating loss and capital loss carryforwards were written off.


(3)	As a result of the Company's acquisition of Novae, these amounts include $23.0 million and $14.8 million of acquired operating loss and tax credit carryforwards, respectively.

SUMMARY OF OPERATING AND CAPITAL LOSS CARRYFORWARDS

Total operating and capital loss carryforwards and tax credits are summarized in the following table:




At December 31,	2017		2016

Operating and Capital Loss Carryforwards⁽¹⁾
Singapore (branch) operating loss carryforward	$	77,467	$	83,532
Australia (branch) operating loss carryforward⁽²⁾	—		147,193
Australia (branch) capital loss carryforward⁽²⁾	—		4,207
U. K. operating loss carryforward⁽³⁾	126,839		19,306
Ireland capital loss carryforward	716		716
U.S. operating loss carryforward	115,236		14,221

Tax Credits⁽¹⁾
Ireland foreign tax credit	$	3,566	$	3,298
U.S. alternative minimum tax credit	12,052		6,840
U.K. tax credit⁽³⁾	14,310		—


(1)	All operating and capital loss carryforwards and tax credits can be carried forward indefinitely with the exception of the U.S. net operating loss which will expire in 2037.


(2)	As a result of ceasing the Company's Australian operations, operating loss and capital loss carryforwards were written off.


(3)	As a result of the Company's acquisition of Novae, these amounts include $23.0 million and $14.8 million of acquired operating loss and tax credit carryforwards, respectively.

VALUATION ALLOWANCE ROLL FORWARD

An analysis of the movement in the Company's valuation allowance is shown in the following table:




At December 31,	2017			2016

Income tax expense:
Valuation allowance - beginning of year	$	41,100		$	40,331
Operating loss carryforwards	(27,116		)	3,857
Foreign tax credit	267			(2,775		)
Australian CTA and accruals and other foreign rate differentials	1,006			(313		)
Change in investment-related items	900			—
Valuation allowance - end of year	$	16,157		$	41,100

EFFECTIVE TAX RATE RECONCILIATION

The following table presents the distribution of income before income taxes between domestic and foreign jurisdictions as well as a reconciliation of the actual income tax rate to the amount computed by applying the effective tax rate of 0% under Bermuda law to income before income taxes:




Year ended December 31,	2017			2016			2015

Income (loss) before income taxes
Bermuda (domestic)	$	(188,420	)	$	469,306		$	652,235
Foreign	(188,091		)	50,402			(7,576		)
Total income before income taxes	$	(376,511	)	$	519,708		$	644,659

Reconciliation of effective tax rate (% of income before income taxes)
Expected tax rate	0.0		%	0.0		%	0.0		%
Foreign taxes at local expected rates:
U.S.	6.6		%	(0.6		)%	0.8		%
Europe	5.8		%	1.5		%	(0.2		)%
Other	0.3		%	0.0		%	(0.3		)%
Valuation allowance	0.0		%	0.2		%	1.2		%
Net tax exempt income	0.1		%	(0.2		)%	(0.1		)%
Change in U.S. enacted tax rate	(11.1		)%	0.0		%	0.0		%
Other	0.3		%	0.3		%	(0.9		)%
Actual tax rate	2.0		%	1.2		%	0.5		%