Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income (Loss) From Operations Before Provision (Benefit) For Income Taxes

	Years Ended December 31,
In millions	2012		2011		2010
Domestic	$	1,486	$	(2,231)	$	(146)
Foreign		112		(8)		51
Income (loss) before income taxes	$	1,598	$	(2,239)	$	(95)

Income Tax Expense (Benefit) On Income (Loss) And Shareholders' Equity

	Years Ended December 31,
In millions	2012		2011		2010
Current taxes:
Federal	$	3	$	(1)	$	91
State		2		1		(17)
Foreign		(6)		15		(1)
Deferred taxes:
Federal		350		(919)		(239)
Foreign		15		(16)		18
Provision (benefit) for income taxes		364		(920)		(148)
Income taxes charged (credited) to shareholders’ equity related to:
Total adjustments due to the adoption of new accounting standards		—		—		(21)
Change in unrealized gains and losses on investments		75		119		112
Change in other-than-temporary impairment losses		42		3		(4)
Change in fair value of derivative instruments		11		3		(7)
Change in foreign currency translation		(2)		(1)		2
Share-based compensation		7		4		3
Total income taxes charged (credited) to shareholders’ equity		133		128		85
Total effect of income taxes	$	497	$	(792)	$	(63)

Effective Income Tax Rate Reconciliation From Statutory Rate Due To Tax Effect

	Years Ended December 31,
	2012		2011		2010
Federal income tax computed at the statutory rate		35.0%		35.0%		35.0%
Increase (reduction) in taxes resulting from:
Tax-exempt interest		(0.7)%		1.5%		40.2%
Mark-to-market on warrants		(0.7)%		0.3%		(11.2)%
Change in valuation allowance		(5.6)%		6.2%		119.4%
Change in uncertain tax positions		(0.1)%		(1.0)%		(22.3)%
State income tax, net of federal benefit		0.1%		0.0%		11.5%
Out-of-period adjustment		(3.8)%		0.0%		0.0%
Tax return and deferred inventory adjustments		(0.3)%		(0.2)%		(13.6)%
Foreign taxes		(1.2)%		0.1%		(1.8)%
Other		0.1%		(0.8)%		(1.4)%
Effective tax rate		22.8%		41.1%		155.8%

Deferred Tax Assets And Liabilities

	As of December 31,
In millions	2012		2011
Deferred tax liabilities:
Unearned premium revenue	$	241	$	174
Loss and loss adjustment expense reserves		—		31
Deferral of cancellation of indebtedness income		114		119
Deferred acquisition costs		102		123
Investments in VIEs		—		154
Net unrealized gains in accumulated other comprehensive income		32		—
Other		64		—
Total gross deferred tax liabilities		553		601
Deferred tax assets:
Compensation and employee benefits		23		40
Loss and loss adjustment expense reserves		112		—
Net operating loss and tax credit carryforwards		441		330
Capital loss carryforward and other-than-temporary impairments		183		236
Net unrealized losses on insured derivatives		982		1,614
Net losses on financial instruments at fair value and foreign exchange		98		58
Net unrealized losses in accumulated other comprehensive income		—		105
Alternative minimum tax credit carryforward		19		22
Net deferred taxes on VIEs		40		73
Other		—		104
Total gross deferred tax assets		1,898		2,582
Valuation allowance		146		236
Net deferred tax asset	$	1,199	$	1,745

Change In Unrecognized Tax Benefits ("UTB") And Related Interest And Penalties To Income Tax

In millions
Unrecognized tax benefit as of January 1, 2010	$	10
The gross amount of the increase/(decrease) in the UTB as a result of tax positions taken:
During a prior year		21
The amounts of decreases in the UTB as a result of the applicable statute of limitations		(5)
Unrecognized tax benefit as of December 31, 2010	$	26
The gross amount of the increase/(decrease) in the UTB as a result of tax positions taken:
During a prior year		21
Unrecognized tax benefit as of December 31, 2011	$	47
The gross amount of the increase/(decrease) in the UTB as a result of tax positions taken:
During the current year		26
The amounts of decreases in the UTB related to settlements with taxing authorities		(26)
Unrecognized tax benefit as of December 31, 2012	$	47