Taxation (Tables)

12 Months Ended

Dec. 31, 2015

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
Germany	2010 - 2013
France	2013 - 2014

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.	2012 - 2015
Ireland	2006 - 2015
U.K.	2013 - 2015
Germany	2010 - 2015
Switzerland	2011 - 2015
France	2013 - 2015

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, 2015, 2014 and 2013 as follows:



Income (loss) before income tax: (U.S. dollars in thousands)	2015			2014		2013
U.S.	$	(5,931	)	$	228,708	$	188,503
Non U.S.	1,300,109			137,027		1,025,649
Total	$	1,294,178		$	365,735	$	1,214,152

Components of income tax expense

The income tax provisions for the years ended December 31, 2015, 2014 and 2013 were as follows:



(U.S. dollars in thousands)	2015			2014			2013
Current expense (benefit):
U.S.	$	(22,698	)	$	45,598		$	49,566
Non U.S.	67,784			81,371			41,921
Total current expense (benefit)	$	45,086		$	126,969		$	91,487
Deferred expense (benefit):
U.S.	$	(63,491	)	$	8,572		$	700
Non U.S.	(756		)	(38,644		)	(14,682		)
Total deferred expense (benefit)	$	(64,247	)	$	(30,072	)	$	(13,982	)
Total tax expense (benefit)	$	(19,161	)	$	96,897		$	77,505

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.	20.25	%
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, 2015, 2014 and 2013 is provided below:



(U.S. dollars in thousands)	2015			2014			2013
Expected tax (benefit) provision at weighted average rate	$	(50,797	)	$	132,775		$	43,092
Permanent differences:
Non-taxable (income) loss	(23,036		)	(19,870		)	(50,745		)
Revision to prior year estimates	7,402			2,016			8,551
State, local and foreign taxes	27,499			47,078			12,225
Valuation allowance	9,517			(181		)	5,754
Net allocated investment income	(405		)	3,399			5,949
Stock options	(433		)	411			1,501
Non-deductible expenses	42,839			22,556			23,662
Other investment related adjustments	2,075			(2,916		)	—
Adjustments related to GreyCastle Life Retro Arrangements	(35,045		)	(99,535		)	—
Change in tax rates	(11,877		)	3,974			(2,484		)
Uncertain tax positions	13,100			7,190			30,000
Total tax expense (benefit)	$	(19,161	)	$	96,897		$	77,505

Components of net deferred tax assets

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014 were as follows:



(U.S. dollars in thousands)	2015		2014
Deferred tax asset:
Net unpaid loss reserve discount	$	111,584	$	90,262
Net unearned premiums	80,434		72,752
Compensation liabilities	94,013		77,578
Net operating losses	181,295		49,834
Investment adjustments	14,399		13,022
Pension	10,370		8,114
Bad debt reserve	7,425		6,626
Amortizable goodwill	5,396		6,694
Net unrealized depreciation on investments	5,051		1,484
Stock options	16,192		11,985
Depreciation	13,299		7,599
Net realized capital losses	98,756		97,189
Deferred intercompany capital losses	26,164		57,427
Untaxed Lloyd's result	3,769		7,254
Deferred acquisition costs	31,133		11,386
Currency translation adjustments	6,280		—
Other	24,977		2,282
Deferred tax asset, gross of valuation allowance	$	730,537	$	521,488
Valuation allowance	276,301		207,062
Deferred tax asset, net of valuation allowance	$	454,236	$	314,426



(U.S. dollars in thousands)	2015		2014
Deferred tax liability:
Net unrealized appreciation on investments	$	51,010	$	63,642
Unremitted earnings	$	3,739	$	5,125
Deferred acquisition costs	8,308		2,737
Currency translation adjustments	1,210		3,969
Regulatory reserves	64,352		65,965
Investment adjustment	6,373		12,061
Untaxed Lloyd’s result	—		11,422
Depreciation	11,500		—
Syndicate capacity	92,756		—
Intangible asset	40,126		—
Other	13,202		11,260
Deferred tax liability	$	292,576	$	176,181
Net Deferred Tax Asset	$	161,660	$	138,245

Summary of valuation allowance

At December 31, 2015 and 2014, the valuation allowance of $276.3 million and $207.1 million, respectively, related primarily to net operating loss and realized capital loss carryforwards in the following jurisdictions:



Jurisdiction (U.S. dollars in thousands)	2015		2014
Switzerland	$	7,818	$	1,459
Ireland	93,396		72,363
U.S.	106,624		123,695
U.K.	46,732		1,632
Other	21,731		7,913
Valuation Allowance Total	$	276,301	$	207,062

Reconciliation of unrecognized tax benefits

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



(U.S. dollars in thousands)	2015			2014			2013
Unrecognized tax benefits, beginning of the year	$	37,190		$	30,000		$	—
Increases for tax positions taken during the year	20,370			12,182			9,591
Increases for tax positions taken in prior years (1)	38,650			15,304			20,409
Decreases for tax positions taken in prior years	(4,850		)	(20,296		)	—
Decreases for lapse of the applicable statute of limitations	(10,770		)	—			—
Unrecognized tax benefits, end of year	$	80,590		$	37,190		$	30,000