Travelers 2013 Annual Report Download - page 237

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. INCOME TAXES (Continued)
The net deferred tax asset (liability) comprises the tax effects of temporary differences related to
the following assets and liabilities:
(at December 31, in millions) 2013 2012
Deferred tax assets
Claims and claim adjustment expense reserves ................ $ 825 $ 888
Unearned premium reserves ............................. 693 689
Other ............................................. 621 741
Total gross deferred tax assets .......................... 2,139 2,318
Deferred tax liabilities
Deferred acquisition costs .............................. 554 590
Investments ......................................... 931 1,800
Internally developed software ............................ 138 134
Other ............................................. 213 132
Total gross deferred tax liabilities ....................... 1,836 2,656
Total deferred tax asset (liability) ....................... $ 303 $ (338)
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, 2013, the Company had net operating loss (NOL)
carryforwards in the United States, Canada and United Kingdom. The amount and timing of realizing
the benefits of NOL carryforwards depend on future taxable income and limitations imposed by tax
laws. The benefits of the NOL carryforwards have been recognized in the consolidated financial
statements and are included in net deferred tax assets. The NOL amounts by jurisdiction and year of
expiration are as follows:
(in millions) Amount Year of expiration
United States .................................. $ 26 2018
Canada ...................................... 100 2028 - 2033
United Kingdom ............................... 123 None
U.S. income taxes have not been recognized on $714 million of the Company’s foreign operations’
undistributed earnings as of December 31, 2013, 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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