Under current Bermuda law, our Bermuda domiciled companies are not required to pay any taxes in Bermuda on income or capital gains. We have received an assurance from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, we will be exempt from taxation in Bermuda until March 2035. Our primary Bermuda subsidiary has an operating branch in Singapore, which is subject to the relevant taxes in that jurisdiction. The branch is not under examination in this tax jurisdiction, but remains subject to examination for tax years 2012 through 2015.

Our U.S. subsidiaries are subject to federal, state and local corporate income taxes and other taxes applicable to U.S. corporations. The provision for federal income taxes has been determined under the principles of the consolidated tax provisions of the U.S. Internal Revenue Code and Regulations. Should the U.S. subsidiaries pay a dividend outside the U.S. group, withholding taxes will apply. Our U.S. subsidiaries are not under examination but remain subject to examination in the U.S. for tax years 2012 through 2015.

In Canada, our U.S. reinsurance company operates through a branch and our U.S. service company has an unlimited liability company subsidiary based in Canada. These Canadian operations are subject to the relevant taxes in that jurisdiction and generally remain subject to examination for tax years 2011 through 2015.

We also have subsidiaries in Ireland, the United Kingdom (U.K.), Australia and Brazil. These subsidiaries and their branches, are not under examination, but generally remain subject to examination in all applicable jurisdictions for tax years 2011 through 2015.

The following table provides an analysis of our income tax expense and net tax assets:




Year ended December 31,	2015			2014			2013

Current income tax expense
United States	$	4,927		$	8,411		$	12,466
Europe	144			16,582			9,039
Other	5			1			—
Deferred income tax expense (benefit)
United States	(267		)	1,313			(13,976		)
Europe	(1,781		)	(399		)	(526		)
Other	—			—			(1		)
Total income tax expense	$	3,028		$	25,908		$	7,002

Net current tax receivables (payables)	$	(69	)	$	(11,203	)	$	5,689
Net deferred tax assets	104,762			89,405			80,258

Net tax assets	$	104,693		$	78,202		$	85,947

Deferred income taxes reflect the tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The significant components of our deferred tax assets and liabilities were as follows:




At December 31,	2015			2014

Deferred tax assets:
Discounting of loss reserves	$	50,928		$	59,852
Unearned premiums	40,861			39,661
Net unrealized losses on investments	2,161			—
Operating and capital loss carryforwards	36,080			26,016
Accruals not currently deductible	58,042			44,082
Other investment adjustments and impairments	917			4,001
Tax credits	12,961			15,412
Other deferred tax assets	2,261			1,324
Deferred tax assets before valuation allowance	204,211			190,348
Valuation allowance	(40,331		)	(34,094		)
Deferred tax assets net of valuation allowance	163,880			156,254

Deferred tax liabilities:
Deferred acquisition costs	(41,170		)	(37,712		)
Net unrealized gains on investments	—			(12,792		)
Amortization of intangible assets and goodwill	(11,972		)	(10,778		)
Accrued market discounts	—			(707		)
Equalization reserves	(4,493		)	(3,554		)
Other deferred tax liabilities	(1,483		)	(1,306		)
Deferred tax liabilities	(59,118		)	(66,849		)
Net deferred tax assets	$	104,762		$	89,405

Below is a summary of our total operating and capital loss carryforwards and tax credits:




At December 31,	2015		2014

Operating and Capital Loss Carryforwards⁽¹⁾
Singapore (branch) operating loss carryforward	$	102,430	$	109,871
Australia (branch) operating loss carryforward	121,575		68,357
Australia capital loss carryforward	4,207		4,207
United Kingdom operating loss carryforward	22,002		7,833
Switzerland (branch) operating loss carryforward	378		—
Ireland operating loss carryforward	3,258		—
Ireland capital loss carryforward	716		540

Tax Credits⁽¹⁾
Ireland foreign tax credit	6,073		7,647
United States alternative minimum tax credit	$	6,888	$	7,765


(1)	All operating and capital loss carryforwards and tax credits can be carried forward indefinitely.

The following table provides an analysis of the movement in our valuation allowance:




At December 31,	2015			2014

Income tax expense:
Valuation allowance - beginning of year	$	34,865		$	27,070
Operating loss carryforwards	6,809			3,044
Capital loss carryforwards	—			1,262
Foreign tax credit	(1,573		)	3,194
Australian CTA and accruals and other foreign rate differentials	1,001			1,052
Change in investment-related items	(771		)	(757		)
Valuation allowance - end of year	40,331			34,865

Accumulated other comprehensive income:
Valuation allowance - beginning of year	(771		)	(1,528		)
Change in investment-related items	771			757
Valuation allowance - end of year	—			(771		)

Total valuation allowance - end of year	$	40,331		$	34,094

At December 31, 2015 and 2014, we established a full valuation allowance on: (1) operating and capital loss carryforwards relating to operations in Australia and Singapore; (2) unutilized foreign tax credits available in Ireland and (3) certain other deferred tax assets related to branch operations.

Although realization is not assured, management believes it is more likely than not that the tax benefit of the recorded net deferred tax assets will be realized. Other than the items discussed above, the remaining gross deferred tax assets relate substantially to our U.S. operations. In evaluating our ability to recover these tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including historical results, operating loss carryback potential and scheduled reversals of deferred tax liabilities. Our U.S. operations have produced significant taxable income in prior periods and have deferred tax liabilities that will reverse in future periods such that we believe sufficient ordinary taxable income is available to utilize all remaining ordinary deferred tax assets. In 2015 and 2014, there were sufficient net unrealized gains or capital loss carryback potential to offset remaining impairments, therefore a valuation allowance on such impairments in the U.S., was not considered necessary.

There were no unrecognized tax benefits at December 31, 2015 and 2014.

The following table presents the distribution of income before income taxes between domestic and foreign jurisdictions as well as a reconciliation of the actual income tax rate to the amount computed by applying the effective tax rate of 0% under Bermuda law to income before income taxes:




Year ended December 31,	2015			2014			2013

Income before income taxes
Bermuda (domestic)	$	652,235		$	690,517		$	625,490
Foreign	(7,576		)	139,955			108,977
Total income before income taxes	$	644,659		$	830,472		$	734,467

Reconciliation of effective tax rate (% of income before income taxes)
Expected tax rate	0.0		%	0.0		%	0.0		%
Foreign taxes at local expected rates:
United States	0.8		%	1.8		%	2.1		%
Europe	(0.2		)%	1.5		%	1.0		%
Other	(0.3		)%	—		%	0.3		%
Valuation allowance	1.2		%	1.1		%	(0.7		)%
Net tax exempt income	(0.1		)%	(0.7		)%	(1.3		)%
Other	(0.9		)%	(0.6		)%	(0.4		)%
Actual tax rate	0.5		%	3.1		%	1.0		%