Travelers 2015 Annual Report Download - page 226

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. 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) 2015 2014
Deferred tax assets
Claims and claim adjustment expense reserves ................ $ 691 $ 768
Unearned premium reserves ............................. 731 709
Compensation-related liabilities .......................... 326 345
Other ............................................. 320 346
Total gross deferred tax assets .......................... 2,068 2,168
Deferred tax liabilities
Deferred acquisition costs .............................. 580 565
Investments ......................................... 867 1,267
Internally developed software ............................ 134 130
Other ............................................. 191 173
Total gross deferred tax liabilities ....................... 1,772 2,135
Net deferred tax asset ................................ $ 296 $33
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, 2015, the Company had net operating loss (NOL)
carryforwards in the United States, Brazil and the 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:
Year of
(in millions) Amount expiration
United States ...................................... $ 4 2018
Brazil ............................................ 1 None
United Kingdom .................................... 200 None
U.S. income taxes have not been recognized on $383 million of the Company’s foreign operations’
undistributed earnings as of December 31, 2015, 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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