Travelers 2009 Annual Report Download - page 236

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
The net deferred tax asset comprises the tax effects of temporary differences related to the
following assets and liabilities:
(at December 31, in millions) 2009 2008
Deferred tax assets
Claims and claim adjustment expense reserves . . . . . . . . . . . . . . . . . . . . . . $1,116 $1,217
Unearned premium reserves ................................... 648 663
Investments ............................................... —105
Other.................................................... 693 769
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,457 2,754
Deferred tax liabilities
Deferred acquisition costs ..................................... 564 575
Investments ............................................... 1,044 —
Internally-developed software................................... 108 100
Other.................................................... 69 114
Total gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,785 789
Total deferred income taxes .................................. $ 672 $1,965
If the Company determines that any of its deferred tax assets will not result in future tax benefits,
a valuation allowance must be established for the portion of these assets that are not expected to be
realized. Based upon a review of the Company’s anticipated future taxable income, and also including
all other available evidence, both positive and negative, the Company’s management concluded that it
is more likely than not that the gross deferred tax assets will be realized.
For tax return purposes, as of December 31, 2009, the Company had net operating loss (NOL)
carryforwards on a regular tax basis and an alternative minimum tax (AMT) basis of approximately
$70 million and $36 million, respectively. These NOL carryforwards expire, if unused, in 2018. The
amount and timing of realizing the benefit of NOL carryforwards depends on future taxable income
and limitations imposed by tax laws. The benefit of the NOL carryforward has been recognized in the
consolidated financial statements.
U.S. income taxes have not been provided on $440 million of the Company’s foreign operations’
undistributed earnings as of December 31, 2009, as such earnings are intended to be permanently
reinvested in those operations. Furthermore, any taxes paid to foreign governments on these earnings
may be used as credits against the U.S. tax on any dividend distributions from such earnings.
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