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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2024
Components of Income Tax Expense (Benefit), Continuing Operations [Abstract] |
Income Taxes | Income Taxes Income tax provision The Company's income (loss) before provision for income taxes consisted of the following:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
| (Amounts in thousands)
Domestic | $ | 574,756 |  |  | $ | 99,428 |  |  | $ | (670,715) |
Foreign | 124 |  |  | — |  |  | — |
Income (loss) before provision for income taxes | $ | 574,880 |  |  | $ | 99,428 |  |  | $ | (670,715) |
The Company and its subsidiaries file a consolidated federal income tax return. The income tax expense (benefit) consisted of the following components:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
| (Amounts in thousands)
Federal |  |  |  |  |
Current | $ | 119,900 |  |  | $ | (3,840) |  |  | $ | (62,355) |
Deferred | (14,617) |  |  | 10,523 |  |  | (93,562) |
| $ | 105,283 |  |  | $ | 6,683 |  |  | $ | (155,917) |
State |  |  |  |  |
Current | $ | (138) |  |  | $ | (2,958) |  |  | $ | 784 |
Deferred | 1,776 |  |  | (633) |  |  | (2,910) |
| $ | 1,638 |  |  | $ | (3,591) |  |  | $ | (2,126) |
Foreign |  |  |  |  |
Current | $ | 6 |  |  | $ | — |  |  | $ | — |
Deferred | — |  |  | — |  |  | — |
| $ | 6 |  |  | $ | — |  |  | $ | — |
Total |  |  |  |  |
Current | $ | 119,768 |  |  | $ | (6,798) |  |  | $ | (61,571) |
Deferred | (12,841) |  |  | 9,890 |  |  | (96,472) |
Total | $ | 106,927 |  |  | $ | 3,092 |  |  | $ | (158,043) |
In computing taxable income, property and casualty insurers reduce underwriting income by losses and loss adjustment expenses incurred. The amount of the deduction for losses incurred associated with unpaid losses is discounted at the interest rates and for the loss payment patterns prescribed by the U.S. Treasury. The following table presents a reconciliation of the tax expense based on the statutory rate of 21% for 2024, 2023 and 2022 to the Company's actual tax expense in the consolidated statements of operations:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
| (Amounts in thousands)
Computed tax expense (benefit) at 21% | $ | 120,725 |  |  | $ | 20,880 |  |  | $ | (140,850) |
Tax-exempt interest income | (13,114) |  |  | (13,640) |  |  | (11,864) |
Dividends received deduction | (1,276) |  |  | (1,237) |  |  | (1,364) |
State tax expense (benefit) | 1,098 |  |  | (3,539) |  |  | (1,597) |
Nondeductible expenses | 815 |  |  | 639 |  |  | 279 |
Other, net | (1,321) |  |  | (11) |  |  | (2,647) |
Income tax expense (benefit) | $ | 106,927 |  |  | $ | 3,092 |  |  | $ | (158,043) |
Deferred Income Taxes Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Company’s assets and liabilities, and expected benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The ultimate realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. Management considers the reversal of deferred tax liabilities, projected future taxable income of an appropriate nature, and tax-planning strategies in making this assessment. The Company believes that through the use of prudent tax planning strategies and the generation of capital gains, sufficient income will be realized in order to maximize the full benefits of its deferred tax assets. The following table presents the significant components of the Company’s net deferred tax assets and liabilities:
| December 31,
| 2024 |  | 2023
| (Amounts in thousands)
Deferred tax assets: |  |  |
20% of net unearned premiums | $ | 88,940 |  |  | $ | 75,394 |
Discounting of loss reserves and salvage and subrogation recoverable for tax purposes | 30,734 |  |  | 25,340 |
Expense accruals | 19,821 |  |  | 11,262 |
Tax asset on net unrealized loss on securities carried at fair value | — |  |  | 166 |
Other deferred tax assets | 4,371 |  |  | 8,743 |
Total gross deferred tax assets | 143,866 |  |  | 120,905 |
Deferred tax liabilities: |  |  |
Deferred policy acquisition costs | (70,420) |  |  | (61,707) |
Tax liability on net unrealized gain on securities carried at fair value | (3,253) |  |  | — |
Tax depreciation in excess of book depreciation | (2,549) |  |  | (6,801) |
Undistributed earnings of insurance subsidiaries | (2,731) |  |  | (1,511) |
Tax amortization in excess of book amortization | (8,769) |  |  | (8,904) |
Other deferred tax liabilities | (10,290) |  |  | (8,969) |
Total gross deferred tax liabilities | (98,012) |  |  | (87,892) |
Net deferred tax assets | $ | 45,854 |  |  | $ | 33,013 |
The Company had federal net operating loss carryforwards of approximately $1.6 million and $19.7 million at December 31, 2024 and 2023, respectively. $1.6 million of the total federal net operating loss carryforward will begin to expire in 2029. Uncertainty in Income Taxes The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are "more-likely-than-not" sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The total amount of unrecognized tax benefits related to tax uncertainties decreased by approximately $2.3 million during the 12 months ended December 31, 2024, primarily resulting from the payment of the assessed amount related to a California Franchise Tax Board audit for tax year 2011, which has now been resolved with no outstanding issues. The Company and its subsidiaries file income tax returns with the Internal Revenue Service and the taxing authorities of various states. Tax years that remain subject to examination by major taxing jurisdictions are 2021 through 2023 for federal taxes and 2020 through 2023 for state taxes. The following table presents a reconciliation of the beginning and ending balances of unrecognized tax benefits:
| December 31,
| 2024 |  | 2023
| (Amounts in thousands)
Balance at January 1 | $ | 2,262 |  |  | $ | 4,380 |
Additions (reductions) based on tax positions related to: |  |  |
Current year | — |  |  | — |
Prior years | (2,262) |  |  | (2,118) |
Balance at December 31 | $ | — |  |  | $ | 2,262 |
The Company recognizes interest and penalties related to unrecognized tax benefits as a part of income taxes. The Company recognized an accrued net (benefit) expense related to interest and penalties of approximately $(2.1) million, $(1.2) million, and $0.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company carried an accrued interest and penalty balance of approximately $0.4 million and $2.5 million at December 31, 2024 and 2023, respectively.

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