XML 41 R21.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Components of Income Tax Expense
The following table presents the components of income tax expense (benefit) included in the amounts reported in the Company’s consolidated financial statements:
(for the year ended December 31, in millions)202420232022
Composition of income tax expense included in the consolidated statement of income
Current expense:
Federal$1,252 $477 $636 
Foreign70 20 97 
State14 7 8 
Total current tax expense1,336 504 741 
Deferred expense (benefit):
Federal(152)(163)(186)
Foreign(3)39 (43)
Total deferred tax benefit(155)(124)(229)
Total income tax expense included in the consolidated
 statement of income
1,181 380 512 
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)(79)520 (2,002)
Total income tax expense (benefit) included in the
 consolidated financial statements
$1,102 $900 $(1,490)
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)202420232022
Income before income taxes
U.S.$5,947 $3,122 $3,101 
Foreign233 249 253 
Total income before income taxes6,180 3,371 3,354 
Effective tax rate
Statutory tax rate21 %21 %21 %
Expected federal income tax expense1,298 708 704 
Tax effect of:
Nontaxable investment income(122)(132)(149)
Audit reserve9 (205)(40)
Other, net(4)9 (3)
Total income tax expense$1,181 $380 $512 
Effective tax rate19 %11 %15 %
The Company recognized a one-time tax benefit of $211 million in the first quarter of 2023 due to the expiration of the statute
of limitations with respect to a tax item impacted by the repeal of Internal Revenue Code Section 847, which related to the discounting of property-casualty loss reserves. This amount is included in the Audit reserve line in the table above.
The Company paid income taxes of $1.31 billion, $201 million and $817 million during the years ended December 31, 2024, 2023 and 2022, respectively.  The current income tax payable of $301 million and $285 million at December 31, 2024 and 2023, respectively, was included in other liabilities in the consolidated balance sheet.
Deferred Tax Asset
The net deferred tax asset comprises the tax effects of temporary differences related to the following assets and liabilities:
(at December 31, in millions)20242023
Deferred tax assets
Investments$659 $532 
Claims and claim adjustment expense reserves708 665 
Unearned premium reserves833 772 
Internally developed software303 204 
Other261 258 
Total gross deferred tax assets2,764 2,431 
Less: valuation allowance38 35 
Adjusted gross deferred tax assets2,726 2,396 
Deferred tax liabilities
Deferred acquisition costs673 627 
Intangibles87 70 
Depreciation118 125 
Other86 70 
Total gross deferred tax liabilities964 892 
Net deferred tax asset$1,762 $1,504 
If the Company determines that any of its deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized.  The net change in the valuation allowance for deferred tax assets was an increase of $3 million in 2024, driven by an increase in the Company’s Canadian subsidiary.  Based upon a review of the Company’s anticipated future taxable income, and also including all other available evidence, both positive and negative, the Company’s management concluded that it is more likely than not that the net deferred tax assets will be realized.
U.S. income taxes have not been recognized on any undistributed earnings that are intended to be permanently reinvested. Any potential U.S. income tax on these amounts is immaterial.
The Organization for Economic Cooperation and Development (OECD) has developed guidance known as base erosion and profit shifting as part of its initiative to address corporate tax planning strategies used by some multinationals to shift profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations. This guidance generally imposes rules with a global minimum tax of 15%, which is effective in 2024 for several of the jurisdictions in which the Company operates. The Company was not subject to any global minimum taxes imposed by these rules in 2024.
Net Operating Losses
For tax return purposes, as of December 31, 2024, the Company had net operating loss (NOL) carryforwards in the United States, Canada, the Republic of Ireland and the United Kingdom.  The amount and timing of realizing the benefits of NOL carryforwards depend on future taxable income and limitations imposed by tax laws.  All of the benefits of the United Kingdom NOL carryforwards, substantially all of the benefits of the United States NOL carryforwards, and a portion of the benefits of the Canada NOL carryforwards have been recognized in the consolidated financial statements and are included in net deferred tax assets. None of the Republic of Ireland NOL carryforwards have been recognized in the consolidated financial statements.  The NOL amounts by jurisdiction and year of expiration are as follows:
(in millions)AmountYear of 
expiration
United States$63 2035-2036
Canada$147 2035-2044
Republic of Ireland$114 None
United Kingdom$189 None
Uncertain Tax Positions
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2024 and 2023:
(in millions)20242023
Balance at January 1$14 $9 
Additions for tax positions of prior years1 3 
Reductions for tax positions of prior years(1)— 
Additions based on tax positions related to current year4 3 
Expiration of statute of limitations(1)(1)
Balance at December 31$17 $14 
Included in the balances at December 31, 2024 and 2023 were $17 million and $12 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.  Also included in the balances at those dates were $0 million and $2 million, respectively, of tax positions for which the ultimate deductibility is certain, but for which there is uncertainty about the timing of deductibility.  The timing of such deductibility could affect the annual effective tax rate depending on the year of deduction and tax rate at the time.
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income taxes.  During the years ended December 31, 2024, 2023 and 2022, the Company recognized approximately $5 million, $3 million and $(13) million in interest, respectively.  The Company had approximately $11 million and $6 million accrued for the payment of interest at December 31, 2024 and 2023, respectively.
The IRS has completed examination of the Company’s U.S. income tax returns for all years through 2018. The statute of limitations for federal income tax purposes has closed for all tax years prior to 2021. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months.