Taxation (Tables)

12 Months Ended

Dec. 31, 2014

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)	2014		2013		2012
Current tax expense	$	481	$	231	$	305
Deferred tax expense (benefit)	153		249		(35		)
Provision for income taxes	$	634	$	480	$	270

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)	2014			2013			2012
Expected tax provision at Swiss statutory tax rate	$	273		$	331		$	233
Permanent differences:
Taxes on earnings subject to rate other than Swiss statutory rate	224			124			129
Change to deferred taxes related to unrealized foreign exchange losses ⁽¹⁾	139			—			—
Tax-exempt interest and dividends received deduction, net of proration	(33		)	(27		)	(24		)
Net withholding taxes	33			27			23
Favorable resolution of prior years' tax matters and closing statutes of limitations	(1		)	(5		)	(124		)
Change in valuation allowance⁽¹⁾	(20		)	4			4
Other	19			26			29
Total provision for income taxes	$	634		$	480		$	270

⁽¹⁾Includes charge to deferred taxes related to non-recognition of foreign tax credits related to unrealized foreign exchange losses. Includes $71 million of net charges related to income taxes to correct prior periods. Such amounts are not material to any period presented.

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)	2014		2013
Deferred tax assets:
Loss reserve discount	$	794	$	807
Unearned premiums reserve	99		93
Foreign tax credits	1,103		1,236
Investments	9		3
Provision for uncollectible balances	81		78
Loss carry-forwards	40		54
Compensation related amounts	185		177
Other	—		7
Total deferred tax assets	2,311		2,455
Deferred tax liabilities:
Deferred policy acquisition costs	213		138
VOBA and other intangible assets	321		351
Un-remitted foreign earnings	939		982
Unrealized appreciation on investments	406		210
Depreciation	77		66
Other	43		28
Total deferred tax liabilities	1,999		1,775
Valuation allowance	17		64
Net deferred tax assets	$	295	$	616

Reconciliation schedule of unrecognized tax benefits

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



	December 31			December 31
(in millions of U.S. dollars)	2014			2013
Balance, beginning of year	$	27		$	26
Additions based on tax provisions related to the current year	2			5
Reductions for the lapse of the applicable statutes of limitations	(6		)	(4		)
Balance, end of year	$	23		$	27

- 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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