Income taxes (Tables)

12 Months Ended

Dec. 31, 2016

The Company’s income (loss) before income taxes for the years ended December 31, 2016, 2015 and 2014 was generated in the following domestic and foreign jurisdictions:



	Years Ended December 31,
	2016			2015			2014
Domestic
Bermuda	$	447,257		$	470,454		$	518,476
Foreign
U.K.	4,308			13,621			10,824
U.S.	4,038			(4,176		)	(11,752		)
Switzerland	(1,084		)	2,276			9,941
Canada	2,599			493			2,773
Other	33,736			(2,074		)	29,076
Total income before income taxes	$	490,854		$	480,594		$	559,338

Components of income tax expense

Income tax (benefit) expense is comprised of both current and deferred tax attributable to U.S. and Non-U.S. jurisdictions as follows:



	Years Ended December 31,
	2016			2015			2014
Current income tax expense
U.S.	$	2,042		$	739		$	21,257
Non-U.S.	711			6,028			26,179
Total current income tax expense	$	2,753		$	6,767		$	47,436

Deferred income tax (benefit) expense
U.S.	$	(3,487	)	$	1,360		$	(24,998	)
Non-U.S.	(18,995		)	(1,751		)	(22,283		)
Total deferred income tax benefit	$	(22,482	)	$	(391	)	$	(47,281	)

Total income tax (benefit) expense
U.S.	$	(1,445	)	$	2,099		$	(3,741	)
Non-U.S.	(18,284		)	4,277			3,896
Total income tax (benefit) expense	$	(19,729	)	$	6,376		$	155

Effective tax rate reconciliation

The table below is a reconciliation of the actual income tax (benefit) expense for the years ended December 31, 2016, 2015 and 2014 to the amount computed by applying the effective tax rate of 0% under Bermuda law to income before taxes:



	Years Ended December 31,
	2016			2015			2014
Expected tax expense at Bermuda statutory rate of 0%	$	—		$	—		$	—
Foreign tax rate differential	11,394			6,462			7,993
Changes in valuation allowance	(36,990		)	9,830			(7,284		)
Tax exempt income and expenses not deductible	(1,960		)	393			(6,055		)
Share compensation tax windfall	1,203			906			3,513
Impact of enacted changes in tax rates	8,931			69			250
Prior years tax adjustments	(5,199		)	(12,272		)	666
Other	2,892			988			1,072
Actual income tax (benefit) expense	$	(19,729	)	$	6,376		$	155

Components of deferred tax assets and liabilities

Significant components of the Company’s deferred tax assets and liabilities as at December 31, 2016 and 2015 were as follows:



	December 31, 2016			December 31, 2015
Deferred tax asset
Tax losses carried forward	$	116,416		$	167,929
Deferred compensation	6,915			7,504
Deferred interest expense	2,039			2,047
Tax credits carried forward	5,469			2,761
Discounting of loss reserves	9,938			11,882
Unearned premiums reserve	6,647			4,291
Pension	5,943			5,503
Lloyd’s underwriting loss deductible in future periods	581			47
Other	4,943			4,111
Deferred tax asset, gross of valuation allowance	158,891			206,075
Valuation allowance	(98,065		)	(167,929		)
Net deferred tax asset	$	60,826		$	38,146

Deferred tax liability
Deferred acquisition costs	4,633			1,989
Intangibles	7,583			8,111
Unrealized appreciation on investments	3,179			7,073
Properties and fixed assets	2,593			2,044
Other	2,640			1,115
Deferred tax liability	20,628			20,332
Net deferred tax asset	$	40,198		$	17,814

Movement in deferred tax asset and related valuation allowance

The movement in deferred tax asset on tax losses carried forward and related valuation allowance from December 31, 2015 to December 31, 2016 can be explained as follows:



	Deferred Tax Asset on Tax Losses Carried Forward			Valuation Allowance
Balance as at December 31, 2015	$	167,929		$	(167,929	)
Movement due to use of tax losses carried forward	(10,990		)	10,990
Movement due to provision to return adjustments	1,108			(1,108		)
Movement due to changes in enacted tax rates	(8,757		)	8,757
Movement due to change in assessment of deferred tax asset recoverability	—			18,351
Forfeiture of tax losses carried forward	(32,927		)	32,927
Other	53			(53		)
Balance as at December 31, 2016	$	116,416		$	(98,065	)

Net operating loss and capital loss carryforwards

As at December 31, 2016, the Company had net operating and capital losses carried forward, inclusive of cumulative currency translation adjustments, as follows:



Tax Jurisdiction	Losses carried forward		Tax effect		Expiration
U.S.	$	11,195	$	3,918	2029 - 2035
Switzerland	$	157,512	$	33,078	2018 - 2020
Luxembourg	$	300,121	$	78,310	None
Singapore	$	11,090	$	1,109	None