Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Impact of Tax Cuts and Jobs Act of 2017

The table below summarizes the impact of the Tax Act on the consolidated statements of operations.

Summary of the Tax Act Effect



	Year Ended December 31,
	2018			2017
	(in millions)
Transition tax	$	(1	)	$	93
Foreign tax credit realized	—			(31		)
Write down of unremitted earnings	—			(38		)
Net impact of repatriation	(1		)	24
Write down of deferred tax asset due to tax rate change	(3		)	37
Net impact of Tax Act	$	(4	)	$	61

Effective Tax Rate Reconciliation

A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below.

Effective Tax Rate Reconciliation



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Expected tax provision (benefit) at statutory rates in taxable jurisdictions	$	97		$	300		$	316
Tax-exempt interest	(23		)	(49		)	(49		)
Bargain purchase gain	—			(20		)	(125		)
Change in liability for uncertain tax positions	(15		)	(26		)	11
Effect of provision to tax return filing adjustments	(1		)	(8		)	(15		)
State taxes	6			9			3
Taxes on reinsurance	6			(4		)	(4		)
Effects of transitional adjustments related to the Tax Act	(4		)	61			—
Other	(7		)	(2		)	(1		)
Total provision (benefit) for income taxes	$	59		$	261		$	136
Effective tax rate	10.2		%	26.3		%	13.4		%

Pretax Income (Loss) by Tax Jurisdiction

The following tables present pretax income and revenue by jurisdiction.

Pretax Income (Loss) by Tax Jurisdiction



	Year Ended December 31,
	2018			2017			2016
	(in millions)
U.S.	$	461		$	873		$	921
Bermuda	121			145			126
U.K. and Other	(2		)	(27		)	(30		)
Total	$	580		$	991		$	1,017

Revenue by Tax Jurisdiction



	Year Ended December 31,
	2018		2017			2016
	(in millions)
U.S.	$	802	$	1,543		$	1,442
Bermuda	177		216			239
U.K. and Other	23		(20		)	(4		)
Total	$	1,002	$	1,739		$	1,677

Reconciliation of Uncertain Tax Positions

The following table provides a reconciliation of the beginning and ending balances of the total liability for unrecognized tax positions.



	2018			2017			2016
	(in millions)
Beginning of year	$	28		$	50		$	40
Effect of provision to tax return filing adjustments	1			8			6
Increase in unrecognized tax positions as a result of position taken during the current period	—			1			4
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period	—			(31		)	—
Reductions to unrecognized tax benefits as a result of the applicable statute of limitations	(15		)	—			—
Balance as of December 31,	$	14		$	28		$	50

Schedule of Deferred Tax Assets and Liabilities

Deferred and Current Tax Assets (Liabilities) (1)



	As of December 31, 2018		As of December 31, 2017
	(in millions)
Deferred tax assets (liabilities)	$	68	$	98
Current tax assets (liabilities)	22		21

____________________


(1)	Included in other assets or other liabilities on the consolidated balance sheets.

Components of Net Deferred Tax Assets



	As of December 31,
	2018		2017
	(in millions)
Deferred tax assets:
Unearned premium reserves, net	$	98	$	124
Investment basis differences	49		63
Foreign tax credit	36		43
Net operating loss	34		38
Deferred compensation	25		21
Alternative minimum tax credit	20		59
FG VIEs	9		13
Unrealized losses on credit derivative financial instruments, net	6		20
Other	20		14
Total deferred income tax assets	297		395
Deferred tax liabilities:
Unrealized appreciation on investments	54		91
Public debt	50		53
Market discount	31		28
DAC	23		12
Unrealized gains on CCS	16		13
Loss and LAE reserve	7		27
Other	12		30
Total deferred income tax liabilities	193		254
Less: Valuation allowance	36		43
Net deferred income tax asset	$	68	$	98