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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Components of income taxes attributable to operations | The components of income taxes attributable to operations were as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Current expense (benefit): |  |  |  |  |
United States | $ | 181,571 |  |  | $ | 139,407 |  |  | $ | 73,078 |
Non-U.S. | 16,091 |  |  | 4,954 |  |  | 12,785 |
| 197,662 |  |  | 144,361 |  |  | 85,863 |
Deferred expense (benefit): |  |  |  |  |
United States | (89,170) |  |  | 11,849 |  |  | 19,544 |
Non-U.S. | 3,346 |  |  | (400) |  |  | 8,544 |
| (85,824) |  |  | 11,449 |  |  | 28,088 |
Income tax expense | $ | 111,838 |  |  | $ | 155,810 |  |  | $ | 113,951 |
Schedule of income or loss before income taxes by jurisdiction | The Company’s income or loss before income taxes was earned in the following jurisdictions:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Income (Loss) Before Income Taxes: |  |
Bermuda | $ | 1,114,117 |  |  | $ | 1,122,952 |  |  | $ | 388,492 |
United States | 409,893 |  |  | 701,480 |  |  | 440,823 |
Other | 53,539 |  |  | 24,678 |  |  | 12,457 |
Total | $ | 1,577,549 |  |  | $ | 1,849,110 |  |  | $ | 841,772 |
Reconciliation of the differences between the provision for income taxes and the expected tax provision at the weighted average tax rate | A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Expected income tax expense (benefit) computed on pre-tax income at weighted average income tax rate | $ | 111,947 |  |  | $ | 149,799 |  |  | $ | 91,529 |
Addition (reduction) in income tax expense (benefit) resulting from: |  |  |  |  |
Tax-exempt investment income | (1,824) |  |  | (3,091) |  |  | (4,790) |
Meals and entertainment | 547 |  |  | 1,134 |  |  | 1,060 |
State taxes, net of U.S. federal tax benefit | 5,027 |  |  | 3,314 |  |  | 2,086 |
Foreign branch taxes | 2,094 |  |  | 1,231 |  |  | 5,428 |
Prior year adjustment | 3,983 |  |  | 632 |  |  | (2,522) |
Foreign exchange gains & losses | (1,736) |  |  | 436 |  |  | 1,293 |
Changes in applicable tax rate | — |  |  | — |  |  | (128) |
Dividend withholding taxes | 7,105 |  |  | 6,510 |  |  | 6,594 |
Change in valuation allowance | 13,190 |  |  | 1,628 |  |  | 18,396 |
Contingent consideration | 9 |  |  | 190 |  |  | 740 |
Share based compensation | (2,533) |  |  | (6,592) |  |  | (5,356) |
Intercompany loan write-off | (22,083) |  |  | — |  |  | — |
Other | (3,888) |  |  | 619 |  |  | (379) |
Income tax expense (benefit) | $ | 111,838 |  |  | $ | 155,810 |  |  | $ | 113,951 |
Significant components of deferred income tax assets and liabilities | Significant components of the Company’s deferred income tax assets and liabilities were as follows:
| December 31,
| 2020 |  | 2019
Deferred income tax assets: |  |  |
Net operating loss | $ | 67,142 |  |  | $ | 30,836 |
Uncrystallized losses | 2,926 |  |  | 1,565 |
AMT credit carryforward | — |  |  | 1,323 |
Discounting of net loss reserves | 74,247 |  |  | 52,582 |
Net unearned premium reserve | 66,368 |  |  | 64,269 |
Compensation liabilities | 27,351 |  |  | 21,693 |
Foreign tax credit carryforward | 19,160 |  |  | 9,521 |
Interest expense | 622 |  |  | — |
Goodwill and intangible assets | 14,450 |  |  | 11,644 |
Bad debt reserves | 1,864 |  |  | 5,983 |
Lease liability | 23,604 |  |  | 26,438 |
Net unrealized foreign exchange gains | 165 |  |  | 598 |
Other, net | 1,725 |  |  | 206 |
Deferred tax assets before valuation allowance | 299,624 |  |  | 226,658 |
Valuation allowance | (88,255) |  |  | (48,219) |
Deferred tax assets net of valuation allowance | 211,369 |  |  | 178,439 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | (495) |  |  | (1,215) |
Deposit accounting liability | (1,751) |  |  | (2,169) |
Contingency reserve | (64,593) |  |  | (132,831) |
Deferred policy acquisition costs | (42,045) |  |  | (29,847) |
Net unrealized appreciation of investments | (66,681) |  |  | (38,764) |
Right-of-use asset | (19,239) |  |  | (23,416) |
Other, net | (843) |  |  | (3,680) |
Total deferred tax liabilities | (195,647) |  |  | (231,922) |
Net deferred income tax assets (liabilities) | $ | 15,722 |  |  | $ | (53,483) |
Summary of operating loss carryforwards | At December 31, 2020, the Company’s net operating loss carryforwards and tax credits were as follows:
| Year Ended December 31,
| 2020 |  | Expiration
Operating Loss Carryforwards |  |  |
United Kingdom | $ | 237,277 |  |  | No expiration
Ireland | 11,336 |  |  | No expiration
Australia | 37,995 |  |  | No expiration
Hong Kong | 21,094 |  |  | No expiration
Denmark | 23 |  |  | No expiration
United States (1) | 27,425 |  |  | 2029 - 2038
Tax Credits |  |  |
U.K. foreign tax credits | 19,160 |  |  | No expiration
U.S. refundable AMT credits | 0 |  |  | No expiration
(1) On January 30, 2014, the Company’s U.S. mortgage operations underwent an ownership change for U.S. federal income tax purposes as a result of the Company’s acquisition of the CMG Entities. As a result of this ownership change, a limitation has been imposed upon the utilization of approximately $8.3 million of the Company’s existing U.S. net operating loss carryforwards. Utilization is limited to approximately $0.6 million per year in accordance with Section 382 of the Internal Revenue Code of 1986 as amended (“the Code”).
Summary of tax credit carryforwards | At December 31, 2020, the Company’s net operating loss carryforwards and tax credits were as follows:
| Year Ended December 31,
| 2020 |  | Expiration
Operating Loss Carryforwards |  |  |
United Kingdom | $ | 237,277 |  |  | No expiration
Ireland | 11,336 |  |  | No expiration
Australia | 37,995 |  |  | No expiration
Hong Kong | 21,094 |  |  | No expiration
Denmark | 23 |  |  | No expiration
United States (1) | 27,425 |  |  | 2029 - 2038
Tax Credits |  |  |
U.K. foreign tax credits | 19,160 |  |  | No expiration
U.S. refundable AMT credits | 0 |  |  | No expiration
(1) On January 30, 2014, the Company’s U.S. mortgage operations underwent an ownership change for U.S. federal income tax purposes as a result of the Company’s acquisition of the CMG Entities. As a result of this ownership change, a limitation has been imposed upon the utilization of approximately $8.3 million of the Company’s existing U.S. net operating loss carryforwards. Utilization is limited to approximately $0.6 million per year in accordance with Section 382 of the Internal Revenue Code of 1986 as amended (“the Code”).
Reconciliation of the beginning and ending amount of unrecognized tax benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| December 31,
| 2020 |  | 2019
Balance at beginning of year | $ | 2,008 |  |  | $ | 2,008 |
Additions based on tax positions related to the current year | — |  |  | — |
Additions for tax positions of prior years | — |  |  | — |
Reductions for tax positions of prior years | — |  |  | — |
Settlements | — |  |  | — |
Balance at end of year | $ | 2,008 |  |  | $ | 2,008 |
Summary of open tax years potentially subject to examination, by jurisdiction | The following table details open tax years that are potentially subject to examination by local tax authorities, in the following major jurisdictions:
Jurisdiction |  | Tax Years
United States |  | 2015-2020
United Kingdom |  | 2019-2020
Ireland |  | 2016-2020
Canada |  | 2016-2020
Switzerland |  | 2017-2020
Denmark |  | 2016-2020
Australia |  | 2016-2020

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