Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Effective Tax Rate Reconciliation

	Year Ended December 31,
	2011			2010			2009
	(in millions)
Expected tax provision (benefit) at statutory rates in taxable jurisdictions	$	316.0		$	179.2		$	111.9
Tax-exempt interest		(61.6	)		(61.4	)		(42.6	)
True-up from tax return filings(1)		(3.2	)		(51.6	)		—
Goodwill		—			—			(51.5	)
Change in liability for uncertain tax positions(1)		2.1			(5.6	)		9.5
Change in valuation allowance		—			(7.0	)		—
Other		5.5			2.0			4.8
Total provision (benefit) for income taxes	$	258.8		$	55.6		$	32.1
Effective tax rate		25.0	%		10.1	%		27.5	%

(1)

For the year ended December 31, 2010, the Company recorded a $55.8 million tax benefit related to an amended return for a period prior to the AGMH Acquisition, $9.2 million was related to a change in liability for uncertain tax positions.

Pretax Income (Loss) by Tax Jurisdiction

	Year Ended December 31,
	2011		2010		2009
	(in millions)
United States	$	902.7	$	511.6	$	319.6
Bermuda		131.4		37.3		(202.8	)
UK		0.3		0.4		0.1
Total	$	1,034.4	$	549.3		116.9

Revenue by Tax Jurisdiction

	Year Ended December 31,
	2011		2010		2009
	(in millions)
United States	$	1,518.0	$	1,094.5	$	719.8
Bermuda		301.3		219.0		197.3
UK		—		—		—
Total		1,819.3		1,313.5		917.1

(1)

In the above tables, pretax income and revenues of the Company's subsidiaries which are not U.S. domiciled but are subject to U.S. tax by election or as controlled foreign corporations are included in the U.S. amounts.

Schedule of components of Net Deferred Tax Assets

	As of December 31,
	2011		2010
	(in millions)
Deferred tax assets:
Unrealized losses on credit derivative financial instruments, net	$	266.9	$	401.6
Unearned premium reserves, net		424.2		641.6
Loss and LAE reserve		—		72.2
Tax and loss bonds		71.2		56.7
NOL carry forward		9.4		15.0
AMT credit		32.0		11.4
Tax basis step-up		6.0		6.7
Foreign tax credit		30.2		22.3
DAC		4.7		—
FG VIEs		220.9		199.2
Other		112.1		63.0
Total deferred income tax assets		1,177.6		1,489.7
Deferred tax liabilities:
DAC		—		2.3
Contingency reserves		75.6		61.1
Loss and LAE reserve		1.0		—
Tax basis of public debt		104.8		107.1
Unrealized appreciation on investments		135.9		18.3
Unrealized gains on CCS		19.1		6.6
Other		70.3		35.2
Total deferred income tax liabilities		406.7		230.6
Net deferred income tax asset	$	770.9	$	1,259.1

Schedule of reconciliation of total liability for unrecognized tax benefits

	2011		2010			2009
	(in millions)
Balance as of January 1,	$	18.3	$	23.9		$	5.1
Impact from AGMH Acquisition		—		—			9.3
True-up from tax return filings		—		(7.7	)		—
Increase in unrecognized tax benefits as a result of position taken during the current period		2.1		2.1			9.5
Balance as of December 31,	$	20.4	$	18.3		$	23.9