XML 74 R17.htm IDEA: XBRL DOCUMENT
v2.4.0.6

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | 10. Income Taxes Income tax provision The Company and its subsidiaries file a consolidated federal income tax return. The provision for income tax expense consists of the following components:
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (Amounts in thousands) |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 31,390 |  |  | $ | 23,699 |  |  | $ | 31,676 |
Deferred |  |  | 20,518 |  |  |  | 9,964 |  |  |  | 131,839 |
|  | $ | 51,908 |  |  | $ | 33,663 |  |  | $ | 163,515 |
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 2,934 |  |  | $ | (3,225 | ) |  | $ | 1,793 |
Deferred |  |  | (907 | ) |  |  | (246 | ) |  |  | 3,161 |
|  | $ | 2,027 |  |  | $ | (3,471 | ) |  | $ | 4,954 |
Total |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 34,324 |  |  | $ | 20,474 |  |  | $ | 33,469 |
Deferred |  |  | 19,611 |  |  |  | 9,718 |  |  |  | 135,000 |
Total |  | $ | 53,935 |  |  | $ | 30,192 |  |  | $ | 168,469 |
The income tax provision reflected in the consolidated statements of operations is reconciled to the federal income tax on income before income taxes based on a statutory rate of 35% as shown in the table below:
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (Amounts in thousands) |
Computed tax expense at 35% |  | $ | 85,785 |  |  | $ | 63,837 |  |  | $ | 200,039 |
Tax-exempt interest income |  |  | (31,414 | ) |  |  | (33,966 | ) |  |  | (34,210 | )
Dividends received deduction |  |  | (1,704 | ) |  |  | (1,463 | ) |  |  | (1,689 | )
State tax expense (benefit) |  |  | 1,299 |  |  |  | (3,580 | ) |  |  | 3,688 |
Other, net |  |  | (31 | ) |  |  | 5,364 |  |  |  | 641 |
Income tax expense |  | $ | 53,935 |  |  | $ | 30,192 |  |  | $ | 168,469 |
Deferred Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of deferred tax assets is dependent on generating sufficient taxable income of an appropriate nature prior to their expiration. The Company believes it has the ability and intent, through the use of prudent tax planning strategies and the generation of capital gains, to generate income sufficient to avoid losing the benefits of its deferred tax assets. Significant components of the Company's net deferred tax assets and liabilities are as follows:
|  | December 31, |
|  | 2011 |  |  | 2010 |
|  | (Amounts in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
20% of net unearned premium |  | $ | 61,039 |  |  | $ | 60,473 |
Capital loss carryforward |  |  | 7,108 |  |  |  | 14,718 |
Discounting of loss reserves and salvage and subrogation recoverable for tax purposes |  |  | 15,034 |  |  |  | 15,843 |
Write-down of impaired investments |  |  | 4,638 |  |  |  | 5,389 |
Tax credit carryforward |  |  | 20,060 |  |  |  | 16,679 |
Expense accruals |  |  | 11,632 |  |  |  | 14,467 |
Other deferred tax assets |  |  | 3,568 |  |  |  | 4,337 |
Total gross deferred tax assets |  |  | 123,079 |  |  |  | 131,906 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Deferred acquisition costs |  |  | (60,000 | ) |  |  | (59,702 | )
Tax liability on net unrealized gain on securities carried at fair value |  |  | (31,997 | ) |  |  | (18,808 | )
Tax depreciation in excess of book depreciation |  |  | (15,164 | ) |  |  | (16,839 | )
Undistributed earnings of insurance subsidiaries |  |  | (3,962 | ) |  |  | (4,447 | )
Accounting method transition adjustments |  |  | 0 |  |  |  | (112 | )
Tax amortization in excess of book amortization |  |  | (442 | ) |  |  | (24 | )
Other deferred tax liabilities |  |  | (5,003 | ) |  |  | (5,475 | )
Total gross deferred tax liabilities |  |  | (116,568 | ) |  |  | (105,407 | )
Net deferred tax assets |  | $ | 6,511 |  |  | $ | 26,499 |
The Company has a capital loss carryforward of $20.3 million which, if unused, will begin expiring in 2014. Uncertainty in Income Taxes The Company recognizes tax benefits related to positions taken, or expected to be taken, on a tax return once a "more-likely-than-not" threshold has been met. For a tax position that meets the recognition threshold, the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement is recognized in the financial statements. There was a $0.7 million increase to the total amount of unrecognized tax benefits related to tax uncertainties during 2011. The increase was the result of tax positions taken based on management's best judgment given the facts, circumstances, and information available at the reporting date. The Company does not expect any further changes in such unrecognized tax benefits to have a significant impact on its consolidated financial statements within the next 12 months. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. Tax years that remain subject to examination by major taxing jurisdictions are 2005 through 2010 for federal taxes and 2003 through 2010 for California state taxes. Tax years 2005 through 2009 are currently under examination by the Internal Revenue Service. The Company has been examined by the FTB for tax years 2003 through 2009. While the FTB has formally withdrawn the Notices of Proposed Assessment and closed its audit for tax years 2001 and 2002, it has issued Notices of Proposed Assessments to the Company for tax years 2003 through 2006. The Company has filed protests with the FTB in response to these assessments. In 2011, the FTB commenced its examination of tax years 2007 through 2009. Management believes that the resolution of these examinations and assessments will not have a material impact on the consolidated financial statements. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
|  | 2011 |  |  | 2010 |
|  | (Amounts in thousands) |
Balance at January 1 |  | $ | 3,823 |  |  | $ | 6,666 |
Additions based on tax positions related to the current year |  |  | 1,011 |  |  |  | 387 |
Reductions for tax positions of prior years |  |  | (267 | ) |  |  | (3,230 | )
Balance at December 31 |  | $ | 4,567 |  |  | $ | 3,823 |
As presented above, the balances of unrecognized tax benefits were $4.6 million and $3.8 million at December 31, 2011 and 2010, respectively. Of these totals, $3.6 million and $3.0 million represent unrecognized tax benefits, net of federal tax benefit and accrued interest expense which, if recognized, would impact the Company's effective tax rate. Management does not expect the Company's total amount of unrecognized tax benefits to materially increase within the next twelve months related to its ongoing California state tax apportionment factor issues. The Company recognizes interest and penalties related to unrecognized tax benefits as a part of income taxes. During the years ended December 31, 2011, 2010, and 2009, the Company recognized net interest and penalty expense or (benefit), excluding refunds, of $106,000, ($872,000), and $266,000, respectively. The Company carried an accrued interest and penalty balance of $834,000 and $728,000 at December 31, 2011 and 2010, respectively.

X
- Details
Name: | us-gaap_ComponentsOfIncomeTaxExpenseBenefitContinuingOperationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration