Income taxes |
6 Months Ended |
|---|---|
Jun. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income taxes | 13. Income taxes The Company provides income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income and the provisions of currently enacted tax laws. Starting in 2025, a 15% corporate income tax is applied to the Company’s Bermuda operations as a result of the enactment of the Corporate Income Tax Act 2023 (the “Bermuda CIT”) on December 27, 2023. We expect that our in-scope entities will incur increased tax expense in Bermuda beginning in 2025. The Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The jurisdictions in which the Company's subsidiaries and branches are subject to tax are Belgium, Bermuda, Canada, Germany, Luxembourg, Sweden, Switzerland, the United Kingdom, and the United States. For the three and six months ended June 30, 2025, the Company recorded income tax expense of $11.6 million and $24.9 million, respectively (2024 - $14.2 million and $23.9 million, respectively) on pre-tax income of $74.9 million and $150.2 million, respectively (2024 - $129.0 million and $234.6 million, respectively). The effective tax rates for the three and six months ended June 30, 2025 were 15.5% and 16.6%, respectively. The difference between the effective tax rate on income from continuing operations and the Bermuda statutory tax rate of 15% is primarily because of income recognized in jurisdictions with higher tax rates than Bermuda, and adjustments pursuant to applicable U.S. GAAP guidance on interim period financial reporting of taxes, which are based on the annual estimated effective tax rate. In arriving at the estimated annual effective tax rate for the six months ended June 30, 2025 and 2024, the Company took into consideration all year-to-date income and expense items including the change in unrealized investment gains (losses) and realized investment gains (losses) and such items on a forecasted basis for the remainder of each year. In December 2021, the Organisation for Economic Co-Operation and Development (“OECD”) published two global anti-base erosion model rules under Pillar Two (the “GloBE Rules”), which implement a 15% global minimum tax applicable for in-scope multinational groups (“GMT”). The first GloBE Rule is the income inclusion rule (“IIR”), which imposes “top-up” tax on a parent entity in respect of the income of a subsidiary that is taxed at less than 15%. The second GloBE Rule is the “undertaxed payments” rule, which denies deductions or requires an equivalent adjustment to the extent the income of an affiliate which is taxed at less than 15%. On January 1, 2024, the GloBE Rules went into effect in the E.U., including a minimum top-up tax rate of 15% for multinational companies, with many E.U. member states enacting corollary legislation as part of their respective domestic tax laws. Consistent with accounting guidance, the Company will treat the global minimum tax as an in-period tax charge when incurred in future periods for which no deferred taxes need to be provided. No provision for top-up tax was recorded as of June 30, 2025, because, based on a country-by-country analysis, it has been determined that for each tested jurisdiction there would be no material amount of top-up tax. The One Big Beautiful Bill Act (“OBBBA”) was enacted on July 4, 2025. Based on the Company’s review and assessment of OBBBA, some of its provisions pertaining to corporate and international taxation are relevant to the Company but are not expected to have a material impact the Company’s financial statements as of December 31, 2025. However, in light of OBBBA’s potential broader implications for the US federal government’s fiscal position, the OECD Pillar Two framework above and other future tax legislation, and financial markets, the Company will continue to monitory the longer term impact of OBBBA and related legislative and geopolitical developments. Uncertain tax positions Recognition of the benefit of a given tax position is based upon whether a company determines that it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. In evaluating the more likely than not recognition threshold, the Company must presume that the tax position will be subject to examination by a taxing authority with full knowledge of all relevant information. If the recognition threshold is met, then the tax position is measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. The total reserve for unrecognized tax benefits is $0.9 million as of June 30, 2025, which did not materially change compared to December 31, 2024. If the Company determines in the future that its reserves for unrecognized tax benefits on permanent differences and interest and penalties are not needed, the reversal of $0.8 million of such reserves as of June 30, 2025 would be recorded as an income tax benefit and would impact the effective tax rate. The remaining balance is accrued interest and penalties.
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