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Taxation | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Taxation | Taxation Under Swiss law through December 31, 2021, a resident company is subject to income tax at the federal, cantonal, and communal levels that is levied on net worldwide income. Income attributable to permanent establishments or real estate located abroad is excluded from the Swiss tax base. Furthermore, participation relief (i.e., tax relief) is granted to Chubb Limited at the federal, cantonal, and communal level for qualifying dividend income. Chubb Limited is subject to an annual cantonal and communal capital tax on the taxable equity of Chubb Limited in Switzerland. Chubb has two Swiss operating subsidiaries, an insurance company, Chubb Insurance (Switzerland) Limited and a reinsurance company, Chubb Reinsurance (Switzerland) Limited. Both are subject to federal, cantonal, and communal income tax and to annual cantonal and communal capital tax. Under current Bermuda law, Chubb Limited and its Bermuda subsidiaries are not required to pay any taxes on income or capital gains. If a Bermuda law were enacted that would impose taxes on income or capital gains, Chubb Limited and the Bermuda subsidiaries have received written assurances from the Minister of Finance in Bermuda that would exempt such companies from Bermudian taxation until March 2035. Income from Chubb's operations at Lloyd's is subject to United Kingdom (U.K.) corporation income taxes. Lloyd's is required to pay U.S. income tax on U.S. connected income written by Lloyd's syndicates. Lloyd's has a closing agreement with the Internal Revenue Service (IRS) whereby the amount of tax due on this business is calculated by Lloyd's and remitted directly to the IRS. These amounts are then charged to the accounts of Chubb's Corporate Members in proportion to their participation in the relevant syndicates. Chubb's Corporate Members are subject to this arrangement but, as U.K. domiciled companies, will receive U.K. corporation tax credits for any U.S. income tax incurred up to the value of the equivalent U.K. corporation income tax charge on this income. Chubb Group Holdings and its respective subsidiaries are subject to income taxes imposed by U.S. authorities and file a consolidated U.S. Federal income tax return. Should Chubb Group Holdings pay a dividend to Chubb Limited, withholding taxes would apply. Currently, however, no withholding taxes are accrued with respect to such un-remitted earnings as management has no intention of remitting these earnings. Similarly, no taxes have been provided on the un-remitted earnings of certain foreign subsidiaries (Hong Kong and Korea life insurance companies) as management has no intention of remitting these earnings. The cumulative amount that would be subject to withholding tax, if distributed, as well as the determination of the associated tax liability are not practicable to compute; however, such amount would be material. Certain international operations of Chubb are also subject to income taxes imposed by the jurisdictions in which they operate. Chubb's domestic operations are in Switzerland, the jurisdiction where we are legally organized, incorporated, and registered. As a result of Swiss federal tax reform which was effective in 2020, the tax rate changed from 7.83 percent to 21.2 percent and further changed in 2021 to 19.7 percent due to Cantonal tax rates. The following table presents pre-tax income and the related provision for income taxes:
| Year Ended December 31
(in millions of U.S. dollars) | 2021 |  | 2020 |  | 2019
Pre-tax income: |  |  |  |  |
Switzerland | $ | 349 |  |  | $ | 350 |  |  | $ | 440 |
Outside Switzerland | 9,467 |  |  | 3,812 |  |  | 4,809 |
Total pre-tax income | $ | 9,816 |  |  | $ | 4,162 |  |  | $ | 5,249 |
Provision for income taxes |  |  |  |  |
Current tax expense: |  |  |  |  |
Switzerland | $ | 65 |  |  | $ | 52 |  |  | $ | 29 |
Outside Switzerland | 1,294 |  |  | 876 |  |  | 879 |
Total current tax expense | 1,359 |  |  | 928 |  |  | 908 |
Deferred tax expense (benefit): |  |  |  |  |
Switzerland | (15) |  |  | 2 |  |  | 11 |
Outside Switzerland | (67) |  |  | (301) |  |  | (124) |
Total deferred tax expense (benefit) | (82) |  |  | (299) |  |  | (113) |
Provision for income taxes | $ | 1,277 |  |  | $ | 629 |  |  | $ | 795 |
The most significant jurisdictions contributing to the overall taxation of Chubb are calculated using the following rates in 2021: Switzerland 19.7 percent, U.S. 21.0 percent, U.K. 19.0 percent, and Bermuda 0.0 percent. The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate:
| Year Ended December 31
(in millions of U.S. dollars) | 2021 |  | 2020 |  |  | 2019 |
Expected tax provision at Swiss statutory tax rate | $ | 1,934 |  |  | $ | 880 |  |  | $ | 411 |
Permanent differences: |  |  |  |  |
Taxes on earnings subject to rate other than Swiss statutory rate | (740) |  |  | (337) |  |  | 376 |
Tax-exempt interest and dividends received deduction, net of proration | (38) |  |  | (41) |  |  | (49) |
Net withholding taxes | 78 |  |  | 67 |  |  | 40 |
Other | 43 |  |  | 60 |  |  | 17 |
Provision for income taxes | $ | 1,277 |  |  | $ | 629 |  |  | $ | 795 |
The following table presents the components of net deferred tax assets and liabilities:
| December 31
(in millions of U.S. dollars) | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |
Loss reserve discount | $ | 950 |  |  | $ | 884 |
Unearned premiums reserve | 544 |  |  | 496 |
Foreign tax credits | 156 |  |  | 222 |
Provision for uncollectible balances | 32 |  |  | 46 |
Loss carry-forwards | 139 |  |  | 123 |
Debt related amounts | 70 |  |  | 69 |
Compensation related amounts | 178 |  |  | 281 |
Cumulative translation adjustments | 28 |  |  | 120 |
Investments | — |  |  | 75 |
Lease liability | 111 |  |  | 121 |
Depreciation | 190 |  |  | — |
Total deferred tax assets | 2,398 |  |  | 2,437 |
Deferred tax liabilities: |  |  |
Deferred policy acquisition costs | 679 |  |  | 522 |
Other intangible assets, including VOBA | 1,268 |  |  | 1,425 |
Un-remitted foreign earnings | 121 |  |  | 77 |
Investments | 144 |  |  | — |
Unrealized appreciation on investments | 360 |  |  | 957 |
Depreciation | — |  |  | 123 |
Lease right-of-use asset | 100 |  |  | 111 |
Other, net | 23 |  |  | 31 |
Total deferred tax liabilities | 2,695 |  |  | 3,246 |
Valuation allowance | 92 |  |  | 83 |
Net deferred tax liabilities | $ | (389) |  |  | $ | (892) |
The valuation allowance of $92 million and $83 million at December 31, 2021 and 2020, respectively, reflects management's assessment, based on available information, that it is more likely than not that a portion of the deferred tax assets will not be realized due to the inability of certain non-U.S. subsidiaries to generate sufficient taxable income. Adjustments to the valuation allowance are made when there is a change in management's assessment of the amount of deferred tax assets that are realizable. At December 31, 2021, Chubb has net operating loss carry-forwards of $461 million which, if unused, will expire starting in 2022, and a foreign tax credit carry-forward in the amount of $156 million which, if unused, will expire starting in 2026. The following table presents a reconciliation of the beginning and ending amount of gross unrecognized tax benefits:
| Year Ended December 31
(in millions of U.S. dollars) | 2021 |  |  | 2020 |
Balance, beginning of year | $ | 76 |  |  | $ | 47 |
Additions based on tax positions related to the current year | — |  |  | 5 |
Additions based on tax positions related to prior years | 7 |  |  | 24 |
Reductions for settlements with taxing authorities | (19) |  |  | — |
Balance, end of year | $ | 64 |  |  | $ | 76 |
At December 31, 2021 and 2020, the gross unrecognized tax benefits of $64 million and $76 million, respectively, can be reduced by $26 million and $31 million, respectively, associated with foreign tax credits. The net amounts of $38 million and $45 million at December 31, 2021 and 2020, respectively, if recognized, would favorably affect the effective tax rate. It is reasonably possible that over the next twelve months, that the amount of unrecognized tax benefits may change further resulting from the re-evaluation of unrecognized tax benefits arising from examinations by taxing authorities and the lapses of statutes of limitations. Chubb recognizes accruals for interest and penalties, if any, related to unrecognized tax benefits in Income tax expense in the Consolidated statements of operations. Tax-related interest expense and penalties reported in the Consolidated statements of operations were $1 million, $8 million, and $5 million at December 31, 2021, 2020, and 2019, respectively. Liabilities for tax-related interest and penalties in our Consolidated balance sheets were $14 million and $16 million at December 31, 2021 and 2020, respectively. In March 2017, the IRS commenced its field examination of Chubb Group Holdings’ U.S. Federal income tax returns for 2014 and 2015 which is still ongoing. In July 2020, the IRS commenced its field examination of Chubb Group Holdings' U.S. Federal income tax returns for 2016, 2017 and 2018 which is also still ongoing. No material adjustments have been proposed by the IRS for any year under examination. As a multinational company, we also have examinations under way in several foreign jurisdictions. With few exceptions, Chubb is no longer subject to income tax examinations for years prior to 2011. The following table summarizes tax years open for examination by major income tax jurisdiction:
At December 31, 2021 |  |  |
Australia | 2015 | - | 2021
Canada | 2012 | - | 2021
France | 2019 | - | 2021
Germany | 2015 | - | 2021
Italy | 2011 | - | 2021
Mexico | 2014 | - | 2021
Spain | 2012 | - | 2021
Switzerland | 2016 | - | 2021
United Kingdom | 2015 | - | 2021
United States | 2014 | - | 2021

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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