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

The Company's deferred income tax assets and liabilities are as follows:

 

     December 31,  
   2011     2010  
     (In thousands)  

Deferred income tax assets:

     

Discounting of net unpaid loss and loss adjustment expenses

    $ 20,576      $ 22,587   

Unearned premiums

      10,446        9,873   

Accrued expenses and other

      3,555        3,730   

Accrued policyholder dividends

      698        742   

Capital loss carryforward

      568        1,297   

Impaired securities

      94        145   

Accrued insurance-related assessments

      3,472        355   
  

 

 

    

 

 

  

Total deferred tax assets

      39,409        38,729   

Less valuation allowance

      —          (1,406 ) 
  

 

 

    

 

 

  

Net deferred income tax assets

      39,409        37,323   

Deferred income tax liabilities:

     

Deferred policy acquisition costs

      (7,667 )      (7,178 ) 

Deferred charges

      (852 )      (789 ) 

Unrealized gain on securities available-for-sale

      (1,192 )      (124 ) 

Property and equipment and other

      (52 )      (90 ) 

Salvage and subrogation

      (360 )      (305 ) 
  

 

 

    

 

 

  

Total deferred income tax liabilities

      (10,123 )      (8,486 ) 
  

 

 

    

 

 

  

Net deferred income taxes

    $ 29,286      $ 28,837   
  

 

 

    

 

 

  

 

The components of consolidated income tax expense (benefit) are as follows:

 

     Year Ended December 31,  
   2011     2010     2009  
     (In thousands)  

Current:

       

Federal

    $ 4,529      $ 11,617      $ 10,226   

State

      172        254        468   
  

 

 

    

 

 

    

 

 

  
     4,701        11,871        10,694   

Deferred:

       

Federal

      (1,555 )      (2,123 )      5,842   
  

 

 

    

 

 

    

 

 

  

Total

    $ 3,146      $ 9,748      $ 16,536   
  

 

 

    

 

 

    

 

 

  

In 2011 and 2010, the Company recorded a reduction of $1.4 million and $0.2 million, respectively, in the valuation allowance of $3.0 million established in 2008 for unrealized losses resulting from other-than-temporary impairments.

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 35% to income before income taxes as follows:

 

     Year Ended December 31,  
   2011     2010     2009  
     (In thousands)  

Income tax computed at federal statutory tax rate

    $ 9,545      $ 15,524      $ 22,434   

Tax-exempt interest, net

      (5,105 )      (5,133 )      (5,503 ) 

State income tax

      172        254        468   

Dividends received deduction

      (29 )      (6 )      (83 ) 

Valuation allowance

      (1,442 )      (869 )      (701 ) 

Other

      5        (22 )      (79 ) 
  

 

 

    

 

 

    

 

 

  
   $ 3,146      $ 9,748      $ 16,536   
  

 

 

    

 

 

    

 

 

  

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2011 and 2010.

Tax years 2008 through 2011 are subject to examination by the federal and state taxing authorities. The Company is currently undergoing an examination by the Internal Revenue Service for tax year 2009.