Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Impact of Tax Cuts and Jobs Act of 2017

The table below summarizes the impact of the Tax Act on the consolidated statements of operations.

Summary of the Tax Act Effect



	Year Ended December 31, 2017
	(in millions)
Transition tax	$	93
Foreign tax credit realized	(31		)
Write down of unremitted earnings	(38		)
Net impact of repatriation	24
Write down of deferred tax asset due to tax rate change	37
Net impact of Tax Act	$	61

Effective Tax Rate Reconciliation

A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below.

Effective Tax Rate Reconciliation



	Year Ended December 31,
	2017			2016			2015
	(in millions)
Expected tax provision (benefit) at statutory rates in taxable jurisdictions	$	300		$	316		$	443
Tax-exempt interest	(49		)	(49		)	(54		)
Goodwill impairment and gain on bargain purchase price	(20		)	(125		)	(19		)
Change in liability for uncertain tax positions	(26		)	11			12
Effect of provision to tax return filing adjustments	(8		)	(15		)	(11		)
State taxes	9			3			1
Effect of Tax Act	61			—			—
Other	(6		)	(5		)	3
Total provision (benefit) for income taxes	$	261		$	136		$	375
Effective tax rate	26.3		%	13.4		%	26.2		%

Pretax Income (Loss) by Tax Jurisdiction

The following table presents pretax income and revenue by jurisdiction.

Pretax Income (Loss) by Tax Jurisdiction



	Year Ended December 31,
	2017			2016			2015
	(in millions)
United States	$	873		$	921		$	1,284
Bermuda	145			126			177
U.K.	(27		)	(30		)	(30		)
Total	$	991		$	1,017		$	1,431

Revenue by Tax Jurisdiction



	Year Ended December 31,
	2017			2016			2015
	(in millions)
United States	$	1,543		$	1,442		$	1,853
Bermuda	216			239			361
U.K.	(20		)	(4		)	(7		)
Total	$	1,739		$	1,677		$	2,207

Components of Deferred Tax Assets and Liabilities

Components of Net Deferred Tax Assets



	As of December 31,
	2017		2016
	(in millions)
Deferred tax assets:
Unrealized losses on credit derivative financial instruments, net	$	20	$	66
Unearned premium reserves, net	124		229
Loss and LAE reserve	—		216
Tax and loss bonds	—		50
Alternative minimum tax credit	59		17
Foreign tax credit	43		20
DAC	—		29
Investment basis difference	63		76
Deferred compensation	21		40
Net operating loss	38		64
FG VIE	13		14
Other	14		29
Total deferred income tax assets	395		850
Deferred tax liabilities:
Contingency reserves	—		82
Public debt	53		91
Unrealized appreciation on investments	91		84
Unrealized gains on CCS	13		22
Market discount	28		22
Loss and LAE reserve	27		—
DAC	12		—
Deferred balances related to non-US affiliates	16		3
Other	14		30
Total deferred income tax liabilities	254		334
Less: Valuation allowance	43		19
Net deferred income tax asset	$	98	$	497

Reconciliation of Uncertain Tax Positions

The following table provides a reconciliation of the beginning and ending balances of the total liability for unrecognized tax positions.



	2017			2016		2015
	(in millions)
Balance as of January 1,	$	50		$	40	$	28
Effect of provision to tax return filing adjustments	8			6		10
Increase in unrecognized tax positions as a result of position taken during the current period	1			4		2
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period	(31		)	—		—
Balance as of December 31,	$	28		$	50	$	40