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Federal Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Federal Income Taxes | Federal Income Taxes (a) On December 22, 2017, the Tax Cuts and Jobs Act of 2017 ("Tax Reform") was signed into law, which among other implications, reduced our statutory corporate tax rate from 35% to 21% beginning with our 2018 tax year. We revalued our deferred tax inventory at December 31, 2017 to reflect this reduction, which resulted in a $20.2 million charge to income as illustrated in the rate table below. As of December 31, 2017, our accounting for the impact of Tax Reform on our deferred tax assets and liabilities was complete with the exception of amounts related to loss reserve discounting. Prior to Tax Reform, we had elected to use our own loss reserve payment patterns for determining the factors to be used for calculating our discounted loss reserves for federal income tax purposes. Under Tax Reform, this election was eliminated and we are now required to utilize discount factors based on industry experience and a corporate bond yield curve, which the IRS had not finalized as of December 31, 2017. Considering this, at December 31, 2017, we calculated a pre-tax decrease to our discounted loss reserves of $35 million by utilizing the industry experience approach under the tax law that existed prior to Tax Reform. This increased the deferred tax asset related to loss reserves by $7.5 million. A Tax Reform transition rule allows this change in accounting method to be amortized into expense over an eight-year period beginning in 2018. As a result, we established an offsetting deferred tax liability of $7.5 million as of December 31, 2017. In the fourth quarter of 2018, the IRS published the loss reserve discount factors to be used for calculating the beginning and ending 2018 discounted loss reserves under the industry experience approach. Based on these factors, we calculated a pre-tax decrease to our discounted loss reserves of $125 million, which resulted in a deferred tax asset of $26.3 million, an increase from the $7.5 million estimate described above. The $26.3 million adjustment is being taken into income over eight years, beginning with 2018, at approximately $3.3 million per year. (b) A reconciliation of federal income tax on income at the corporate rate to the effective tax rate is as follows:
($ in thousands) |  | 2018 |  | 2017 |  | 2016
Tax at statutory rate (21% in 2018 and 35% in 2017 and 2016) |  | $ | 44,461 |  |  | 91,689 |  |  | 76,984 |
Tax-advantaged interest |  | (5,518 | ) |  | (11,510 | ) |  | (12,126 | )
Dividends received deduction |  | (647 | ) |  | (1,961 | ) |  | (1,114 | )
Executive compensation |  | 2,279 |  |  | — |  |  | 121 |
Stock-based compensation |  | (3,093 | ) |  | (4,281 | ) |  | — |
Tax Reform deferred tax write off |  | — |  |  | 20,205 |  |  | — |
Other 1 |  | (4,700 | ) |  | (1,000 | ) |  | (2,405 | )
Federal income tax expense from continuing operations |  | $ | 32,782 |  |  | 93,142 |  |  | 61,460 |
1 2018 includes approximately $3.8 million of capital loss carry back items to prior tax years at the previous 35% statutory tax rate. In addition to the impact of Tax Reform discussed above, our statutory tax rate reconciliation for 2018 and 2017 benefited from accounting literature implemented in 2017 that requires the tax effects of share-based compensation to be recognized in the income tax provision. Prior to 2017, these amounts were recorded in additional paid-in capital. (c) The tax effects of the significant temporary differences that gave rise to deferred tax assets and liabilities were as follows:
($ in thousands) |  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Net loss reserve discounting |  | $ | 43,285 |  |  | 38,771 |
Net unearned premiums |  | 53,556 |  |  | 50,267 |
Employee benefits |  | 8,862 |  |  | 8,606 |
Long-term incentive compensation plans |  | 9,095 |  |  | 12,221 |
Temporary investment write-downs |  | 1,155 |  |  | 1,044 |
Net operating loss |  | — |  |  | 54 |
Other |  | 5,744 |  |  | 5,784 |
Total deferred tax assets |  | 121,697 |  |  | 116,747 |
Deferred tax liabilities: |  |  |  |  |  |
Deferred policy acquisition costs |  | 53,049 |  |  | 47,484 |
Unrealized gains on investment securities |  | 502 |  |  | 26,183 |
Other investment-related items, net |  | 4,904 |  |  | 2,500 |
Accelerated depreciation and amortization |  | 9,702 |  |  | 8,590 |
Total deferred tax liabilities |  | 68,157 |  |  | 84,757 |
Net deferred federal income tax asset |  | $ | 53,540 |  |  | 31,990 |
Net deferred income tax assets increased by $21.6 million in 2018, driven by an $18.6 million decrease in gross deferred tax liabilities as rising interest rates have reduced unrealized gains on our fixed income securities portfolio. 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 had no valuation allowance recognized for federal deferred tax assets at December 31, 2018 or 2017. We have analyzed our tax positions in all open tax years, which as of December 31, 2018 were 2015 through 2017, and 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" on our Consolidated Statements of Income. We are not currently under a federal income tax audit for any tax year.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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