Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of total income tax benefit (expense)

The total income tax benefit for the years ended December 31, 2016, 2015 and 2014 consisted of the following:



	Year Ended December 31,
Millions	2016			2015			2014
Current tax benefit (expense):
U.S. federal	$	50.7		$	9.1		$	(4.3	)
State	(1.6		)	(1.8		)	(2.0		)
Non-U.S.	(.8		)	(1.5		)	(1.4		)
Total current tax benefit (expense)	48.3			5.8			(7.7		)
Deferred tax (expense) benefit:
U.S. federal	(2.3		)	(6.7		)	22.8
State	(.6		)	1.1			(.3		)
Total deferred tax (expense) benefit	(2.9		)	(5.6		)	22.5
Total income tax benefit	$	45.4		$	.2		$	14.8

Reconciliation of the U.S. federal statutory income tax rate and actual effective tax rate on pre-tax income

A reconciliation of taxes calculated using the 35% U.S. statutory rate (the tax rate at which the majority of White Mountains’s worldwide operations are taxed) to the income tax (expense) benefit on pre-tax income follows:



	Year Ended December 31,
Millions	2016			2015			2014
Tax benefit (expense) at the U.S. statutory rate	$	14.1		$	(55.1	)	$	10.3
Differences in taxes resulting from:
Tax reserve adjustments	13.7			(1.7		)	5.2
Change in valuation allowance	9.1			(19.4		)	(35.7		)
Non-U.S. earnings, net of foreign taxes	6.9			76.7			37.8
Tax rate changes	(3.5		)	—			—
Tax exempt interest and dividends	2.5			2.6			2.5
Withholding tax	(.5		)	(1.2		)	(2.4		)
Other, net	3.1			(1.7		)	(2.9		)
Total income tax benefit on pre-tax income	$	45.4		$	.2		$	14.8

Schedule of components of deferred income tax assets and liabilities

An outline of the significant components of White Mountains’s deferred tax assets and liabilities follows:



	December 31,
Millions	2016			2015
Deferred income tax assets related to:
U.S. federal net operating and capital loss carryforwards	$	189.3		$	191.0
Incentive compensation	42.5			49.0
Unearned premiums	37.8			37.5
Non-U.S. net operating loss carryforwards	29.5			33.8
Tax credit carryforwards	20.7			16.9
Loss reserve discount	18.1			26.8
Runoff Transaction	12.6			12.6
Deferred compensation	5.7			6.2
Accrued interest	2.2			1.3
Other items	4.0			8.6
Total gross deferred income tax assets	362.4			383.7
Less: valuation allowances	(146.6		)	(165.4		)
Total net deferred income tax assets	215.8			218.3
Deferred income tax liabilities related to:
Deferred acquisition costs	33.6			34.9
Members surplus contributions	30.0			19.0
SSIE Surplus Notes	7.1			—
Pension and benefit accruals	6.4			3.5
Capitalized software	4.7			4.5
Investment basis difference	4.1			15.2
Net unrealized investment gains	2.9			28.4
Other items	.3			—
Total deferred income tax liabilities	89.1			105.5
Net deferred tax asset	$	126.7		$	112.8

Schedule of net operating and capital loss carryforwards by expiration dates and the deferred tax assets thereon

Net operating loss and capital loss carryforwards as of December 31, 2016, the expiration dates and the deferred tax assets thereon are as follows:



	December 31, 2016
Millions	United States			Luxembourg			United Kingdom			Israel			Total
2017-2021	$	.8		$	—		$	—		$	—		$	.8
2022-2026	1.6			—			—			—			1.6
2027-2036	556.3			—			—			—			556.3
No expiration date	—			93.8			3.2			19.8			116.8
Total	$	558.7		$	93.8		$	3.2		$	19.8		$	675.5
Gross deferred tax asset	189.3			24.4			.5			4.6			218.8
Valuation allowance	(115.4		)	(24.4		)	(.5		)	(4.6		)	(144.9		)
Net deferred tax asset	$	73.9		$	—		$	—		$	—		$	73.9

Reconciliation of changes in the amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



Millions	Permanent Differences⁽¹⁾			Temporary Differences⁽²⁾			Interest and Penalties⁽³⁾			Total
Balance at January 1, 2014	$	8.4		$	16.6		$	8.7		$	33.7
Changes in prior year tax positions	(2.2		)	(.8		)	(1.9		)	(4.9		)
Tax positions taken during the current year	—			7.3			—			7.3
Lapse in statute of limitations	(.8		)	—			(.3		)	(1.1		)
Balance at December 31, 2014	5.4			23.1			6.5			35.0
Changes in prior year tax positions	—			(12.4		)	1.7			(10.7		)
Balance at December 31, 2015	5.4			10.7			8.2			24.3
Changes in prior year tax positions	—			(5.5		)	.1			(5.4		)
Settlements with tax authorities	(5.4		)	—			(8.3		)	(13.7		)
Balance at December 31, 2016	$	—		$	5.2		$	—		$	5.2


⁽¹⁾	Represents the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate.


⁽²⁾	Represents the amount of unrecognized tax benefits that, if recognized would create a temporary difference between the reported amount of an item in White Mountains’s Consolidated Balance Sheet and its tax basis.


⁽³⁾	Net of tax benefit.