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Federal Income Taxes
 12 Months Ended
Dec. 31, 2011
Federal Income Taxes [Abstract]  
Federal Income Taxes

Note 15. Federal Income Taxes

(a) A reconciliation of federal income tax on income at the corporate rate to the effective tax rate is as follows:

 

($ in thousands)

 

2011

 

2010

 

2009

Tax at statutory rate of 35%

$

2,823 

 

28,685 

 

13,715 

Tax-advantaged interest

 

(14,381)

 

(15,992)

 

(18,205)

Dividends received deduction

 

(870)

 

(357)

 

(513)

Nonqualified deferred compensation

 

7 

 

(273)

 

(721)

Other

 

(29)

 

572 

 

252 

Federal income tax (benefit) expense from continuing operations

$

(12,450)

 

12,635 

 

(5,472)

 

(b) The tax effects of the significant temporary differences that give rise to deferred tax assets and liabilities are as follows:

 

($ in thousands)

 

2011

 

2010

Deferred tax assets:

 

 

 

 

Net loss reserve discounting

$

99,768

 

98,014

Net unearned premiums

 

53,191

 

49,955

Employee benefits

 

33,100

 

27,079

Long-term incentive compensation plans

 

8,471

 

9,209

Temporary investment write-downs

 

13,251

 

9,340

Net operating loss

 

4,791

 

-

Tax credits

 

10,938

 

5,138

Other

 

7,638

 

6,109

Total deferred tax assets

 

231,148

 

204,844

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

Deferred policy acquisition costs

 

74,137

 

72,840

Unrealized gains on investment securities

 

53,996

 

30,522

Other investment-related items, net

 

4,034

 

2,080

Accelerated depreciation and amortization

 

6,295

 

6,168

Total deferred tax liabilities

 

138,462

 

111,610

Net deferred federal income tax asset

$

92,686

 

93,234

 

After considering all evidence, both positive and negative, with respect to our federal tax loss carryback availability, expected levels of pre-tax financial statement income, and federal taxable income, we believe it is more likely than not that the existing deductible temporary differences will reverse during periods in which we generate net federal taxable income or have adequate federal carryback availability. As a result, we have no valuation allowance recognized for federal deferred tax assets at December 31, 2011 and 2010. The carry forward availability of our net operating loss will begin to expire in 2027 with the remainder expiring through 2031. Our alternative minimum tax credits, which are available to offset future regular taxable income, can be carried forward for an unlimited period of time.

 

Stockholders' equity reflects tax benefits related to compensation expense deductions for share-based compensation awards of $16.6 million at December 31, 2011, $16.7 million at December 31, 2010, and $17.4 million at December 31, 2009.

 

We have analyzed our tax positions in all open tax years, which as of December 31, 2011 were 2007 through 2010. The Internal Revenue Service ("IRS") is currently conducting a limited scope examination of these open tax years. Based on our analysis, we do not have unrecognized tax expense or benefits as of December 31, 2011. In addition, we believe our tax positions will more likely than not be sustained upon examination, including related appeals or litigation. In the event we had a tax position that did not meet the more likely than not criteria, any tax, interest, and penalties incurred related to such a position would be reflected in "Total federal income tax expense (benefit)" on our Consolidated Statements of Income.