Federal and Foreign Income Tax

12 Months Ended

Dec. 31, 2014

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
	2014		2013		2012
	(in millions)
Income tax expense
Current tax
United States	$	617	$	791	$	276
Foreign		124		91		143
Deferred tax, principally United States		20		10		32
	$	761	$	892	$	451
Federal and foreign income taxes paid	$	571	$	789	$	472

Income before federal and foreign income taxes from U.S. operations was $2,424 million, $2,766 million and $1,373 million in 2014, 2013 and 2012, respectively. Income before federal and foreign income taxes from foreign operations was $437 million, $471 million and $623 million in 2014, 2013 and 2012, 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
	2014						2013						2012
	Amount			% of Pre-Tax Income			Amount			% of Pre-Tax Income			Amount			% of Pre-Tax Income
	(in millions)
Income before federal and foreign income tax	$	2,861					$	3,237					$	1,996
Tax at statutory federal income tax rate	$	1,001			35.0	%	$	1,133			35.0	%	$	699			35.0	%
Tax exempt interest income		(212	)		(7.4	)		(222	)		(6.8	)		(233	)		(11.7	)
Other, net		(28	)		(1.0	)		(19	)		(.6	)		(15	)		(.7	)
Federal and foreign income tax	$	761			26.6	%	$	892			27.6	%	$	451			22.6	%

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

	December 31
	2014			2013
	(in millions)
Deferred income tax assets
Unpaid losses and loss expenses	$	509		$	524
Unearned premiums		364			350
Foreign tax credits		963			867
Employee compensation		144			142
Postretirement benefits		272			95
Other-than-temporary impairment losses		298			291
Other, net		29			—
Total		2,579			2,269
Deferred income tax liabilities
Deferred policy acquisition costs		367			356
Unremitted earnings of foreign subsidiaries		1,075			970
Unrealized appreciation of investments		944			660
Other invested assets		208			184
Other, net		—			52
Total		2,594			2,222
Net deferred income tax asset (liability)	$	(15	)	$	47

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 was recorded at December 31, 2014 and 2013 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 2015. 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.