Taxation (Tables)

12 Months Ended

Dec. 31, 2014

The following table details the years that are the subject of open examinations, by major tax jurisdiction. While the Company cannot estimate with certainty the outcome of these examinations, the Company does not believe that adjustments from open tax years will result in a significant change to the Company's results from operations.



Jurisdiction	Tax Years
U.S.	2013
Ireland	2006 - 2009
U.K.	2007 - 2010
Germany	2006 - 2009
Switzerland	2009 - 2010

The following table details open tax years that are open to assessment by local tax authorities, in the following major tax jurisdictions.



Jurisdiction	Tax Years
U.S.	2011 - 2014
Ireland	2006 - 2014
U.K.	2007 - 2010, 2012 - 2014
Germany	2007 - 2014
Switzerland	2009 - 2014
France	2012 - 2014

Distribution of income (loss) before income tax, by jurisdiction

The Company’s income (loss) before income tax and non-controlling interests was distributed between U.S. and non-U.S. for the years ended December 31, 2014, 2013 and 2012 as follows:



Income (loss) before income tax: (U.S. dollars in thousands)	2014		2013		2012
U.S.	$	228,708	$	188,503	$	50,439
Non U.S.	137,027		1,025,649		713,972
Total	$	365,735	$	1,214,152	$	764,411

Components of income tax expense

The income tax provisions for the years ended December 31, 2014, 2013 and 2012 were as follows:



(U.S. dollars in thousands)	2014			2013			2012
Current expense:
U.S.	$	45,598		$	49,566		$	11,966
Non U.S.	81,371			41,921			45,614
Total current expense	$	126,969		$	91,487		$	57,580
Deferred expense (benefit):
U.S.	$	8,572		$	700		$	(56,602	)
Non U.S.	(38,644		)	(14,682		)	33,050
Total deferred expense (benefit)	$	(30,072	)	$	(13,982	)	$	(23,552	)
Total tax expense	$	96,897		$	77,505		$	34,028

Applicable statutory tax rates by jurisdiction

The applicable statutory tax rates of the most significant jurisdictions contributing to the overall taxation of the Company are:



Jurisdiction	Applicable Statutory Taxation Rates
Ireland (1)	12.50	%
Ireland (1)	25.00	%
Bermuda	—	%
U.S.	35.00	%
U.K.	21.50	%
Switzerland (2)	7.83	%
Switzerland (2)	21.20	%
Germany	15.00	%
France	38.00	%

____________


(1)	The different applicable statutory taxation rates in Ireland relate to entities classified as trading or non-trading companies.


(2)	The different applicable statutory taxation rates in Switzerland relate to entities classified as trading or holding companies

Reconciliation of effective tax rate

A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate for the years ended December 31, 2014, 2013 and 2012 is provided below:



(U.S. dollars in thousands)	2014			2013			2012
Expected tax (benefit) provision at weighted average rate	$	132,775		$	43,092		$	53,358
Permanent differences:
Non-taxable (income) loss	(19,870		)	(50,745		)	(42,428		)
Prior year adjustments	5,990			6,067			(622		)
Prior year adjustments on completion of IRS examinations	—			—			(19,192		)
State, local and foreign taxes	47,078			12,225			18,312
Valuation allowance	(181		)	5,754			(16,644		)
Net allocated investment income	3,399			5,949			41,727
Stock options	411			1,501			4,749
Non-deductible expenses	22,556			23,662			16,145
Net realized capital loss carry-forward valuation allowance reduction	(2,916		)	—			(24,473		)
Adjustments related to Life Retro Arrangements	(99,535		)	—			—
Non-taxable reserve release	—			—			3,096
Uncertain tax positions	7,190			30,000			—
Total tax expense	$	96,897		$	77,505		$	34,028

Components of net deferred tax assets

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2014 and 2013 were as follows:



(U.S. dollars in thousands)	2014		2013
Deferred tax asset:
Net unpaid loss reserve discount	$	90,262	$	105,511
Net unearned premiums	72,752		69,811
Compensation liabilities	77,578		62,710
Net operating losses	49,834		89,233
Investment adjustments	13,022		12,573
Pension	8,114		5,695
Bad debt reserve	6,626		7,337
Amortizable goodwill	6,694		7,976
Net unrealized depreciation on investments	1,484		9,984
Stock options	11,985		12,171
Depreciation	7,599		3,501
Net realized capital losses	97,189		140,993
Deferred intercompany capital losses	57,427		69,500
Untaxed Lloyd's result	7,254		2,533
Deferred acquisition costs	11,386		—
Other	2,282		9,638
Deferred tax asset, gross of valuation allowance	$	521,488	$	609,166
Valuation allowance	207,062		261,924
Deferred tax asset, net of valuation allowance	$	314,426	$	347,242
Deferred tax liability:
Net unrealized appreciation on investments	$	63,642	$	28,843
Unremitted earnings	$	5,125	$	6,717
Deferred acquisition costs	2,737		7,057
Currency translation adjustments	3,969		7,195
Regulatory reserves	65,965		131,750
Investment adjustment	12,061		6,112
Untaxed Lloyd’s result	11,422		—
Other	11,260		8,014
Deferred tax liability	$	176,181	$	195,688
Net Deferred Tax Asset	$	138,245	$	151,554

Summary of valuation allowance

At December 31, 2014 and 2013, the valuation allowance of $207.1 million and $261.9 million, respectively, related primarily to net operating loss carry forwards and realized capital loss carry forwards in the following jurisdictions:



Jurisdiction (U.S. dollars in thousands)	2014		2013
Switzerland	$	1,459	$	11,457
Ireland	72,363		60,133
U.S.	123,695		175,372
Other	9,545		14,962
Valuation Allowance Total	$	207,062	$	261,924

Reconciliation of unrecognized tax benefits

The following table presents a reconciliation of the Company’s unrecognized tax benefits:



(U.S. dollars in thousands)	2014			2013
Unrecognized tax benefits, beginning of the year	$	30,000		$	—
Increases for tax positions taken during the year	12,182			9,591
Increases for tax positions taken in prior years	15,304			20,409
Decreases for tax positions taken during the year	—			—
Decreases for tax positions taken in prior years	(20,296		)	—
Decreases for settlement with taxing authorities	—			—
Decreases for lapse of the applicable statute of limitations	—			—
Unrecognized tax benefits, end of year	$	37,190		$	30,000