Federal and Foreign Income Tax

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Federal and Foreign Income Tax

(7)  Federal and Foreign Income Tax

(a)  Income tax expense and taxes paid consisted of the following components:

	Years Ended December 31
	2013		2012		2011
	(in millions)
Income tax expense
Current tax
United States	$	791	$	276	$	260
Foreign		91		143		236
Deferred tax, principally United States		10		32		25
	$	892	$	451	$	521
Federal and foreign income taxes paid	$	789	$	472	$	598

Income before federal and foreign income taxes from U.S. operations was $2,766 million, $1,373 million and $1,666 million in 2013, 2012 and 2011, respectively. Income before federal and foreign income taxes from foreign operations was $471 million, $623 million and $533 million in 2013, 2012 and 2011, respectively.

(b)  The effective income tax rate is different than the statutory federal corporate tax rate. The reasons for the different effective tax rate were as follows:

	Years Ended December 31
	2013						2012						2011
	Amount			% of Pre-Tax Income			Amount			% of Pre-Tax Income			Amount			% of Pre-Tax Income
	(in millions)
Income before federal and foreign income tax	$	3,237					$	1,996					$	2,199
Tax at statutory federal income tax rate	$	1,133			35.0	%	$	699			35.0	%	$	770			35.0	%
Tax exempt interest income		(222	)		(6.8	)		(233	)		(11.7	)		(243	)		(11.0	)
Other, net		(19	)		(.6	)		(15	)		(.7	)		(6	)		(.3	)
Federal and foreign income tax	$	892			27.6	%	$	451			22.6	%	$	521			23.7	%

(c)  The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities were as follows:

	December 31
	2013		2012
	(in millions)
Deferred income tax assets
Unpaid losses and loss expenses	$	524	$	605
Unearned premiums		350		341
Foreign tax credits		867		870
Employee compensation		142		119
Postretirement benefits		95		324
Other-than-temporary impairment losses		291		294
Total		2,269		2,553
Deferred income tax liabilities
Deferred policy acquisition costs		356		341
Unremitted earnings of foreign subsidiaries		970		951
Unrealized appreciation of investments		660		1,084
Other invested assets		184		225
Other, net		52		114
Total		2,222		2,715
Net deferred income tax asset (liability)	$	47	$	(162	)

Deferred income tax assets were established related to the expected future U.S. tax benefit of losses incurred by a foreign subsidiary of the Corporation. Realization of these deferred tax assets depends on the subsidiary’s ability to generate sufficient taxable income in future periods. A valuation allowance of $13 million and $12 million was recorded at December 31, 2013 and 2012, respectively, to reflect management’s assessment that the realization of a portion of the deferred tax assets is uncertain due to the inability of the foreign subsidiary to generate sufficient taxable income in the near term. Although realization of the remaining deferred tax assets is not assured, management believes it is more likely than not that such deferred tax assets will be realized.

(d)  Chubb and its U.S. subsidiaries file a consolidated federal income tax return with the U.S. Internal Revenue Service (IRS). The Corporation also files income tax returns with various state and foreign tax authorities. The U.S. income tax returns for years prior to 2010 are no longer subject to examination by the IRS. The examination of the U.S. income tax returns for 2010 and 2011 is expected to be completed in 2014. Management does not anticipate any assessments for tax years that remain subject to examination that would have a material effect on the Corporation’s financial position or results of operations.