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Taxation | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Taxation | Taxation Under Swiss law through December 31, 2023, 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 Bermuda law, Chubb Limited and its Bermuda subsidiaries are not required to pay any taxes on income or capital gains. However, on December 27, 2023, the Government of Bermuda enacted the Corporate Income Tax Act of 2023 which established a 15 percent income tax on net taxable income of Bermuda entities effective January 1, 2025. Chubb's Bermuda subsidiaries will pay taxes on their income beginning in 2025. 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 (Chubb Life Insurance Hong Kong and Chubb Life Insurance Korea Company Ltd.) as management has no intention of remitting these earnings. Finally, we have made a partial reinvestment assertion on historical earnings for LINA Life Insurance Company of Korea and Huatai Insurance Group Co., Ltd. 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. The following table presents pre-tax income and the related provision for income taxes:
| Year Ended December 31
(in millions of U.S. dollars) | 2023 |  | 2022 |  | 2021
Pre-tax income: |  |  |  |  |
Switzerland | $ | 44 |  |  | $ | 234 |  |  | $ | 349 |
Outside Switzerland | 9,482 |  |  | 6,251 |  |  | 9,445 |
Total pre-tax income | $ | 9,526 |  |  | $ | 6,485 |  |  | $ | 9,794 |
Provision for income taxes |  |  |  |  |
Current tax expense: |  |  |  |  |
Switzerland | $ | 25 |  |  | $ | 15 |  |  | $ | 65 |
Outside Switzerland | 1,570 |  |  | 1,066 |  |  | 1,294 |
Total current tax expense | 1,595 |  |  | 1,081 |  |  | 1,359 |
Deferred tax expense (benefit): |  |  |  |  |
Switzerland | (63) |  |  | 34 |  |  | (15) |
Outside Switzerland | (1,021) |  |  | 124 |  |  | (75) |
Total deferred tax expense (benefit) | (1,084) |  |  | 158 |  |  | (90) |
Provision for income taxes | $ | 511 |  |  | $ | 1,239 |  |  | $ | 1,269 |
The most significant jurisdictions contributing to the overall taxation of Chubb are calculated using the following rates in 2023: Switzerland 19.7 percent, U.S. 21.0 percent, U.K. 23.5 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) | 2023 |  | 2022 |  |  | 2021 |
Expected tax provision at Swiss statutory tax rate | $ | 1,872 |  |  | $ | 1,274 |  |  | $ | 1,929 |
Permanent differences: |  |  |  |  |
Taxes on earnings subject to rate other than Swiss statutory rate | (389) |  |  | (243) |  |  | (743) |
Bermuda tax law enactment | (1,135) |  |  | — |  |  | — |
Net withholding taxes | 15 |  |  | 75 |  |  | 78 |
Other | 148 |  |  | 133 |  |  | 5 |
Provision for income taxes | $ | 511 |  |  | $ | 1,239 |  |  | $ | 1,269 |
The following table presents the components of net deferred tax assets and liabilities:
| December 31
(in millions of U.S. dollars) | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |
Loss reserve discount | $ | 1,643 |  |  | $ | 1,048 |
Unearned premiums reserve | 678 |  |  | 424 |
Foreign tax credits | 19 |  |  | 76 |
Loss carry-forwards | 149 |  |  | 104 |
Investments | — |  |  | 62 |
Unrealized depreciation on investments | 662 |  |  | 1,387 |
Depreciation | 37 |  |  | 126 |
Other | 147 |  |  | 85 |
Total deferred tax assets | 3,335 |  |  | 3,312 |
Valuation allowance | 716 |  |  | 916
Deferred tax assets, net of valuation allowance | 2,619 |  |  | 2,396 |
Deferred tax liabilities: |  |  |
Deferred policy acquisition costs | 675 |  |  | 311 |
Other intangible assets, including VOBA | 1,444 |  |  | 2,213 |
Un-remitted foreign earnings | 176 |  |  | 249 |
Investments | 138 |  |  | — |
Total deferred tax liabilities | 2,433 |  |  | 2,773 |
Net deferred tax assets (liabilities) | $ | 186 |  |  | $ | (377) |
The valuation allowance of $716 million and $916 million at December 31, 2023 and 2022, 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 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. For the year ended December 31, 2023, the tax benefit on certain unrealized losses in our investment portfolio was reduced by a valuation allowance of $441 million necessary due to limitations on the utilization of these losses. As part of evaluating whether it was more likely than not that we could realize these losses, we considered realized gains, carryback capacity and available tax planning strategies. At December 31, 2023, Chubb has net operating loss carry-forwards of $497 million which, if unused, will expire starting in 2024, and a U.S. life capital loss carry-forward of $25 million which, if unused, will expire starting in 2028. 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) | 2023 |  |  | 2022 |
Balance, beginning of year | $ | 67 |  |  | $ | 64 |
Additions based on tax positions related to prior years | 9 |  |  | 4 |
Reductions for settlements with taxing authorities | (3) |  |  | (1) |
Balance, end of year | $ | 73 |  |  | $ | 67 |
At December 31, 2023 and 2022, the gross unrecognized tax benefits of $73 million and $67 million, respectively, can be reduced by $19 million and $21 million, respectively, associated with foreign tax credits. The net amounts of $54 million and $46 million at December 31, 2023 and 2022, 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 $7 million, $4 million, and $1 million at December 31, 2023, 2022, and 2021, respectively. Liabilities for tax-related interest and penalties in our Consolidated balance sheets were $25 million and $18 million at December 31, 2023 and 2022, 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 non-US jurisdictions. With few exceptions, Chubb is no longer subject to income tax examinations for years prior to 2012. The following table summarizes tax years open for examination by major income tax jurisdiction:
At December 31, 2023 |  |  |
Australia | 2017 | - | 2023
Brazil | 2017 | - | 2023
Canada | 2012 | - | 2023
China | 2020 | - | 2023
France | 2021 | - | 2023
Germany | 2016 | - | 2023
Italy | 2019 | - | 2023
Korea | 2018 | - | 2023
Mexico | 2016 | - | 2023
Spain | 2012 | - | 2023
Switzerland | 2019 | - | 2023
United Kingdom | 2015 | - | 2023
United States | 2014 | - | 2023

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