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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | 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 2013 through 2016. 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 2013 through 2016. 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 2012 through 2016. We also have subsidiaries in Ireland, the 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 2012 through 2016. The following table provides an analysis of our income tax expense and net tax assets:
| Year ended December 31, | 2016 |  | 2015 |  | 2014 |
| Current income tax expense |  |  |  |  |  |
| U.S. | $ | 606 |  |  | $ | 4,927 |  |  | $ | 8,411 |  |
| Europe | 7,451 |  |  | 144 |  |  | 16,582 |  |
| Other | — |  |  | 5 |  |  | 1 |  |
| Deferred income tax expense (benefit) |  |  |  |  |  |
| U.S. | (1,829 | ) |  | (267 | ) |  | 1,313 |  |
| Europe | 112 |  |  | (1,781 | ) |  | (399 | ) |
| Other | — |  |  | — |  |  | — |  |
| Total income tax expense | $ | 6,340 |  |  | $ | 3,028 |  |  | $ | 25,908 |  |
| Net current tax receivables (payables) | $ | 3,540 |  |  | $ | (69 | ) |  | $ | (11,203 | ) |
| Net deferred tax assets | 103,313 |  |  | 104,762 |  |  | 89,405 |  |
| Net tax assets | $ | 106,853 |  |  | $ | 104,693 |  |  | $ | 78,202 |  |
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, | 2016 |  | 2015 |
| Deferred tax assets: |  |  |  |
| Discounting of loss reserves | $ | 47,258 |  |  | $ | 50,928 |  |
| Unearned premiums | 41,797 |  |  | 40,861 |  |
| Net unrealized losses on investments | — |  |  | 2,161 |  |
| Operating and capital loss carryforwards | 43,687 |  |  | 36,080 |  |
| Accruals not currently deductible | 59,098 |  |  | 58,042 |  |
| Other investment adjustments and impairments | 84 |  |  | 917 |  |
| Tax credits | 10,139 |  |  | 12,961 |  |
| Other deferred tax assets | 3,684 |  |  | 2,261 |  |
| Deferred tax assets before valuation allowance | 205,747 |  |  | 204,211 |  |
| Valuation allowance | (41,100 | ) |  | (40,331 | ) |
| Deferred tax assets net of valuation allowance | 164,647 |  |  | 163,880 |  |
| Deferred tax liabilities: |  |  |  |
| Deferred acquisition costs | (45,788 | ) |  | (41,170 | ) |
| Net unrealized gains on investments | (1,168 | ) |  | — |  |
| Amortization of intangible assets and goodwill | (13,096 | ) |  | (11,972 | ) |
| Equalization reserves | — |  |  | (4,493 | ) |
| Other deferred tax liabilities | (1,282 | ) |  | (1,483 | ) |
| Deferred tax liabilities | (61,334 | ) |  | (59,118 | ) |
| Net deferred tax assets | $ | 103,313 |  |  | $ | 104,762 |  |
As a result of certain realization requirements of ASC 718 "Compensation - Stock Compensation", the table of deferred tax assets and liabilities does not include certain deferred tax assets as of December 31, 2016, that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. Equity will be increased by $2 million if and when such deferred tax assets are ultimately realized. Below is a summary of our total operating and capital loss carryforwards and tax credits:
| At December 31, | 2016 |  | 2015 |
| Operating and Capital Loss Carryforwards(1) |  |  |  |
| Singapore (branch) operating loss carryforward | $ | 83,532 |  |  | $ | 102,430 |  |
| Australia (branch) operating loss carryforward | 147,193 |  |  | 121,575 |  |
| Australia capital loss carryforward | 4,207 |  |  | 4,207 |  |
| United Kingdom operating loss carryforward | 19,306 |  |  | 22,002 |  |
| Switzerland (branch) operating loss carryforward | — |  |  | 378 |  |
| Ireland operating loss carryforward | — |  |  | 3,258 |  |
| Ireland capital loss carryforward | 716 |  |  | 716 |  |
| U.S. operating loss carryforward | 14,221 |  |  | — |  |
| Tax Credits(1) |  |  |  |
| Ireland foreign tax credit | $ | 3,298 |  |  | $ | 6,073 |  |
| U.S. alternative minimum tax credit | 6,840 |  |  | 6,888 |  |
(1) | All operating and capital loss carryforwards and tax credits can be carried forward indefinitely with the exception of the U.S. net operating loss which will expire in 2036.
The following table provides an analysis of the movement in our valuation allowance:
| At December 31, | 2016 |  | 2015 |
| Income tax expense: |  |  |  |
| Valuation allowance - beginning of year | $ | 40,331 |  |  | $ | 34,865 |  |
| Operating loss carryforwards | 3,857 |  |  | 6,809 |  |
| Foreign tax credit | (2,775 | ) |  | (1,573 | ) |
| Australian CTA and accruals and other foreign rate differentials | (313 | ) |  | 1,001 |  |
| Change in investment-related items | — |  |  | (771 | ) |
| Valuation allowance - end of year | $ | 41,100 |  |  | $ | 40,331 |  |
At December 31, 2016 and 2015, 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 2016 and 2015, 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, 2016 and 2015. 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, | 2016 |  | 2015 |  | 2014 |
| Income before income taxes |  |  |  |  |  |
| Bermuda (domestic) | $ | 469,306 |  |  | $ | 652,235 |  |  | $ | 690,517 |  |
| Foreign | 50,402 |  |  | (7,576 | ) |  | 139,955 |  |
| Total income before income taxes | $ | 519,708 |  |  | $ | 644,659 |  |  | $ | 830,472 |  |
| 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: |  |  |  |  |  |
| U.S. | (0.6 | )% |  | 0.8 | % |  | 1.8 | % |
| Europe | 1.5 | % |  | (0.2 | )% |  | 1.5 | % |
| Other | — | % |  | (0.3 | )% |  | — | % |
| Valuation allowance | 0.2 | % |  | 1.2 | % |  | 1.1 | % |
| Net tax exempt income | (0.2 | )% |  | (0.1 | )% |  | (0.7 | )% |
| Other | 0.3 | % |  | (0.9 | )% |  | (0.6 | )% |
| Actual tax rate | 1.2 | % |  | 0.5 | % |  | 3.1 | % |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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