Taxation (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of components of income tax provision

The following table presents the provision for income taxes:



	Years Ended December 31
(in millions of U.S. dollars)	2012			2011		2010
Current tax expense	$	305		$	485	$	443
Deferred tax expense (benefit)	(35		)	17		110
Provision for income taxes	$	270		$	502	$	553

Reconciliation schedule of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate

The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate:



	Years Ended December 31
(in millions of U.S. dollars)	2012			2011			2010
Expected tax provision at Swiss statutory tax rate	$	233		$	160		$	285
Permanent differences:
Taxes on earnings subject to rate other than Swiss statutory rate	129			323			327
Tax-exempt interest and dividends received deduction, net of proration	(24		)	(21		)	(20		)
Net withholding taxes	23			19			15
Favorable resolution of prior years' tax matters and closing statutes of limitations	(124		)	—			(21		)
Change in valuation allowance	4			(2		)	(3		)
Non-taxable acquisition gain	—			—			(61		)
Other	29			23			31
Total provision for income taxes	$	270		$	502		$	553

Schedule of the components of net deferred tax assets

The following table presents the components of the net deferred tax assets:



	December 31		December 31
(in millions of U.S. dollars)	2012		2011
Deferred tax assets:
Loss reserve discount	$	849	$	933
Unearned premiums reserve	98		85
Foreign tax credits	1,131		1,074
Investments	43		67
Provision for uncollectible balances	110		113
Loss carry-forwards	55		43
Other, net	110		31
Cumulative translation adjustment	—		5
Total deferred tax assets	2,396		2,351
Deferred tax liabilities:
Deferred policy acquisition costs	68		47
VOBA and other intangible assets	379		372
Un-remitted foreign earnings	795		810
Unrealized appreciation on investments	586		392
Cumulative translation adjustment	59		—
Total deferred tax liabilities	1,887		1,621
Valuation allowance	56		57
Net deferred tax assets	$	453	$	673

Reconciliation schedule of unrecognized tax benefits

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:



	December 31			December 31
(in millions of U.S. dollars)	2012			2011
Balance, beginning of year	$	134		$	139
Additions based on tax provisions related to the current year	19			1
Reductions for tax positions of prior years	—			(6		)
Reductions for settlements with tax authorities	(16		)	—
Reductions for the lapse of the applicable statutes of limitations	(111		)	—
Balance, end of year	$	26		$	134

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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