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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8 - Income Taxes As the result of the Tax Cuts and Jobs Act (Tax Act) enacted December 2017, the Company had recorded provisional amounts for the taxes associated with its partnership investments and the changes in discounting unpaid loss reserves based on information available at December 31, 2017. As a result of the guidance issued in 2018, the Company has determined there is no change in its estimates related to partnership investments. Updated estimates of the transition liability related to loss reserve discounting were less than the provisional amounts by approximately $1.1 million. Updated estimates of the transition liability related to life insurance reserves decreased the liability by approximately $6.8 million. The adjustments to the Company’s provisional amounts for the year ended December 31, 2018 did not impact the effective tax rate. As of December 31, 2018, there are no provisional amounts related to the impact of the Tax Act that remain in the Company’s Consolidated Financial Statements. The income tax assets and liabilities included in Other assets and Other liabilities, respectively, in the Consolidated Balance Sheets were as follows:
($ in thousands) |  | December 31,
|  | 2018 |  | 2017
Income tax (asset) liability |  |  |  |  |  |
Current |  | $ | (20,793 | ) |  | $ | (16,266 | )
Deferred |  | 103,686 |  |  | 157,775 |
Deferred tax assets and liabilities are recognized for all future tax consequences attributable to "temporary differences" between the financial statement carrying value of existing assets and liabilities and their respective tax bases. There are no deferred tax liabilities that have not been recognized. The "temporary differences" that gave rise to the deferred tax balances were as follows:
($ in thousands) |  | December 31,
|  | 2018 |  | 2017
Deferred tax assets |  |  |  |  |  |
Unearned premium reserve reduction |  | $ | 12,112 |  |  | $ | 11,472 |
Compensation accruals |  | 6,866 |  |  | 8,359 |
Impaired securities |  | 1,295 |  |  | 2,240 |
Other comprehensive income - net funded status of benefit plans |  | 3,254 |  |  | 3,526 |
Discounting of unpaid claims and claim expense tax reserves |  | 2,772 |  |  | 3,889 |
Postretirement benefits other than pensions |  | 302 |  |  | 321 |
Charitable contributions carryforwards |  | 89 |  |  | 62 |
Net operating loss carryforwards |  | 10,969 |  |  | 148 |
Total gross deferred tax assets |  | 37,659 |  |  | 30,017 |
Deferred tax liabilities |  |  |  |  |  |
Other comprehensive income - net unrealized gains on securities |  | 32,897 |  |  | 95,583 |
Deferred policy acquisition costs |  | 60,330 |  |  | 52,438 |
Life insurance future policy benefit reserve |  | 9,304 |  |  | 102 |
Life insurance future policy benefit reserve (transitional rule) |  | 14,910 |  |  | 23,869 |
Discounting of unpaid claims and claim expense tax reserves (transitional rule) |  | 1,203 |  |  | 2,513 |
Investment related adjustments |  | 17,531 |  |  | 8,661 |
Intangibles |  | 2,557 |  |  | 2,557 |
Other, net |  | 2,613 |  |  | 2,069 |
Total gross deferred tax liabilities |  | 141,345 |  |  | 187,792 |
Net deferred tax liability |  | $ | 103,686 |  |  | $ | 157,775 |
The Company evaluated sources and character of income, including historical earnings, loss carryback potential, taxable income from future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income from prudent and feasible tax planning strategies. Although realization of deferred tax assets is not assured, the Company believes it is more likely than not that gross deferred tax assets will be fully realized and that a valuation allowance with respect to the realization of the total gross deferred tax assets was not necessary as of December 31, 2018 and 2017. At December 31, 2018, the Company had available the following carryforwards or credits.
($ in thousands) |  | Pretax Amount |  | Expiration Years
Operating loss carryforwards |  | $ | 52,232 |  |  | 2037 - 2038
Charitable contributions carryforwards |  | 424 |  |  | 2021 - 2023
The components of the provision for income tax expense were as follows:
($ in thousands) |  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Current |  | $ | 4,152 |  |  | $ | 3,813 |  |  | $ | 26,359 |
Deferred |  | (2,958 | ) |  | (84,585 | ) |  | 4,108 |
Total income tax expense (benefit) |  | $ | 1,194 |  |  | $ | (80,772 | ) |  | $ | 30,467 |
Income tax expense for the following periods differed from the expected tax computed by applying the federal corporate tax rate of 21% for 2018 and 35% for 2017 and 2016 to income before income taxes as follows:
($ in thousands) |  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Expected federal tax on income |  | $ | 4,103 |  |  | $ | 31,041 |  |  | $ | 39,981 |
Add (deduct) tax effects of: |  |  |  |  |  |
Tax-exempt interest |  | (3,726 | ) |  | (5,335 | ) |  | (5,789 | )
Dividend received deduction |  | (412 | ) |  | (4,810 | ) |  | (5,751 | )
Tax Act DTL re-measurement |  | — |  |  | (98,988 | ) |  | — |
Employee share-based compensation |  | (1,134 | ) |  | (3,258 | ) |  | 127 |
Compensation deduction limitation |  | 1,754 |  |  | 326 |  |  | — |
Prior year adjustments |  | 300 |  |  | (293 | ) |  | 91 |
Other, net |  | 309 |  |  | 545 |  |  | 1,808 |
Income tax expense (benefit) provided on income |  | $ | 1,194 |  |  | $ | (80,772 | ) |  | $ | 30,467 |
The Company's federal income tax returns for years prior to 2014 are no longer subject to examination by the Internal Revenue Service (IRS). The Company recognizes tax benefits from tax return positions only if it is more likely than not the position will be sustainable, upon examination, on its technical merits and any relevant administrative practices or precedents. As a result, the Company applies a more likely than not recognition threshold for all tax uncertainties. The Company records liabilities for uncertain tax filing positions where it is more likely than not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based upon changes in facts or law. The Company has no unrecorded liabilities from uncertain tax filing positions. HMEC and its subsidiaries file a consolidated federal income tax return. The federal income tax sharing agreements between HMEC and its subsidiaries, as approved by the Board, provide that tax on income is charged to each subsidiary as if it were filing a separate tax return with the limitation that each subsidiary will receive the benefit of any losses or tax credits to the extent utilized in the consolidated tax return. Intercompany balances are settled quarterly with a final settlement after filing the consolidated federal income tax return with the IRS. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:
($ in thousands) |  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Balance as of the beginning of the year |  | $ | 1,790 |  |  | $ | 1,594 |  |  | $ | 1,039 |
Increases related to prior year tax positions |  | — |  |  | 101 |  |  | 348 |
Decreases related to prior year tax positions |  | (152 | ) |  | — |  |  | — |
Increases related to current year tax positions |  | 96 |  |  | 422 |  |  | 283 |
Settlements |  | — |  |  | — |  |  | — |
Lapse of statute |  | — |  |  | (327 | ) |  | (76 | )
Balance as of the end of the year |  | $ | 1,734 |  |  | $ | 1,790 |  |  | $ | 1,594 |
The Company's effective tax rate would be affected to the extent there were unrecognized tax benefits that could be recognized. There are no positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly change within the next 12 months. The Company classifies all tax related interest and penalties as income tax expense. Interest and penalties were both immaterial in each of the years ended December 31, 2018, 2017 and 2016.

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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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