Taxation (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of components of income tax provision

The following table presents pre-tax income and the related provision for income taxes:



	Year Ended December 31
(in millions of U.S. dollars)	2016			2015		2014
Pre-tax income:
Switzerland	$	766		$	469	$	404
Outside Switzerland	4,184			2,827		3,083
Total pre-tax income	$	4,950		$	3,296	$	3,487
Provision for income taxes:
Current tax expense:
Switzerland	$	97		$	38	$	31
Outside Switzerland	727			266		450
Total current tax expense	824			304		481
Deferred tax expense:
Switzerland	(27		)	4		9
Outside Switzerland	18			154		144
Total deferred tax expense	(9		)	158		153
Provision for income taxes	$	815		$	462	$	634

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:



	Year Ended December 31
(in millions of U.S. dollars)	2016			2015			2014
Expected tax provision at Swiss statutory tax rate	$	388		$	258		$	273
Permanent differences:
Taxes on earnings subject to rate other than Swiss statutory rate	582			193			224
Change to deferred taxes related to unrealized foreign exchange losses⁽¹⁾	—			—			139
Tax-exempt interest and dividends received deduction, net of proration	(200		)	(32		)	(33		)
Net withholding taxes	20			35			33
Change in valuation allowance⁽¹⁾	(1		)	2			(20		)
Other	26			6			18
Total provision for income taxes	$	815		$	462		$	634

⁽¹⁾2014 includes a charge to deferred taxes related to non-recognition of foreign tax credits related to unrealized foreign exchange losses.

Schedule of the components of net deferred tax assets

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



	December 31			December 31
(in millions of U.S. dollars)	2016			2015 ⁽¹⁾
Deferred tax assets:
Loss reserve discount	$	1,269		$	663
Unearned premiums reserve	498			190
Foreign tax credits	2,115			969
Provision for uncollectible balances	72			65
Loss carry-forwards	92			72
Debt related amounts	219			3
Compensation related amounts	449			189
Cumulative translation adjustments	59			17
Other, net	69			80
Total deferred tax assets	4,842			2,248
Deferred tax liabilities:
Deferred policy acquisition costs	842			412
Other intangible assets, including VOBA	2,352			384
Un-remitted foreign earnings	2,001			827
Investments	406			6
Unrealized appreciation on investments	60			195
Depreciation	91			68
Total deferred tax liabilities	5,752			1,892
Valuation allowance	78			38
Net deferred tax assets (liabilities)	$	(988	)	$	318

⁽¹⁾Certain amounts within the components of deferred taxes at December 31, 2015 have been reclassified to conform to the new presentation at December 31, 2016.

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)	2016			2015
Balance, beginning of year	$	16		$	23
Additions based on tax positions related to the current year	3			1
Additions based on tax positions related to prior years ⁽¹⁾	2			—
Reductions for tax positions of prior years	(4		)	(7		)
Reductions for the lapse of the applicable statutes of limitations	—			(1		)
Balance, end of year	$	17		$	16

⁽¹⁾Assumed in connection with the Chubb Corp acquisition.