Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Composition of income tax expense included in consolidated statement of income and shareholders' equity [Table Text Block]

The following table presents the components of income tax expense included in the amounts reported in the Company’s consolidated financial statements:



(for the year ended December 31, in millions)	2018			2017			2016
Composition of income tax expense included in the consolidated statement of income
Current expense:
Federal	$	424		$	314		$	899
Impact of TCJA at enactment	—			21			—
Foreign	41			56			21
State	8			4			8
Total current tax expense	473			395			928
Deferred expense (benefit):
Federal	(13		)	229			110
Impact of TCJA at enactment	—			108			—
Foreign	(22		)	(58		)	1
Total deferred tax expense (benefit)	(35		)	279			111
Total income tax expense included in the consolidated statement of income	438			674			1,039
Composition of income tax expense (benefit) included in shareholders’ equity
Expense (benefit) relating to changes in the unrealized gain (loss) on investments, unrealized loss on foreign exchange and other items in other comprehensive income (loss)	(349		)	110			(289		)
Total income tax expense included in the consolidated financial statements	$	89		$	784		$	750

Effective tax rate [Table Text Block]

The following is a reconciliation of income tax expense at the U.S. federal statutory income tax rate to the income tax expense reported in the Company’s consolidated statement of income:



(for the year ended December 31, in millions)	2018			2017			2016
Income (loss) before income taxes
U.S.	$	3,039		$	2,798		$	3,946
Foreign	(78		)	(68		)	107
Total income before income taxes	2,961			2,730			4,053
Effective tax rate
Statutory tax rate	21		%	35		%	35		%
Expected federal income tax expense	622			956			1,419
Tax effect of:
Nontaxable investment income	(150		)	(297		)	(323		)
TCJA at enactment	—			129			—
Other, net	(34		)	(114		)	(57		)
Total income tax expense	$	438		$	674		$	1,039
Effective tax rate	15		%	25		%	26		%

Deferred tax assets and liabilities [Table Text Block]

The net deferred tax asset comprises the tax effects of temporary differences related to the following assets and liabilities:



(at December 31, in millions)	2018		2017
Deferred tax assets
Claims and claim adjustment expense reserves	$	571	$	930
Unearned premium reserves	503		478
Compensation-related liabilities	92		61
Other	200		191
Total gross deferred tax assets	1,366		1,660
Less: valuation allowance	8		6
Adjusted gross deferred tax assets	1,358		1,654
Deferred tax liabilities
Claims and claim adjustment expense reserve discounting (transition rule)	159		560
Deferred acquisition costs	397		376
Investments	152		454
Internally developed software	92		97
Depreciation	67		57
Other	46		40
Total gross deferred tax liabilities	913		1,584
Net deferred tax asset	$	445	$	70

Net operating loss amounts by jurisdiction and year of expiration [Table Text Block]

The NOL amounts by jurisdiction and year of expiration are as follows:



(in millions)	Amount		Year of expiration
United States	$	2	2035 - 2036
Brazil	$	19	None
Canada	$	1	2037 - 2038
United Kingdom	$	146	None

Reconciliation of unrecognized tax benefits [Table Text Block]

The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2018 and 2017:



(in millions)	2018		2017
Balance at January 1	$	6	$	13
Additions for tax positions of prior years	25		—
Reductions for tax positions of prior years	—		(1		)
Reductions based on tax positions related to current year	—		(6		)
Balance at December 31	$	31	$	6