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Income Taxes
9 Months Ended
Sep. 30, 2011
Income Taxes [Abstract] 
Income Taxes

9. Income Taxes

Deferred income taxes represent the temporary differences between the GAAP and tax basis of the Company’s assets and liabilities. The tax effects of temporary differences are as follows for the periods presented (in thousands):

 

                 
    As of September 30,     As of December 31,  
    2011     2010  

Deferred income tax assets:

                

Unearned premiums

   $ 9,600     $ 8,274  

Advanced premiums

     1,620       1,460  

Unpaid losses

     2,379       2,194  

Regulatory assessments

     —         182  

Executive compensation

     1,211       1,312  

Stock option expense

     3,836       3,467  

Accrued wages

     906       357  

Allowance for uncollectible receivables

     60       43  

Additional tax basis of securities

     1,106       172  

Recognition of OTTI

     —         307  

Market value losses on trading securities

     8,422       —    
   

 

 

    

 

 

  

Total deferred income tax assets

     29,140       17,768  
   

 

 

    

 

 

  

Deferred income tax liabilities:

                

Deferred policy acquisition costs, net

     (5,020 )      (3,644 ) 

Market value gains on trading securities

     —         (676 ) 
   

 

 

    

 

 

  

Total deferred income tax liabilities

     (5,020 )      (4,320 ) 
   

 

 

    

 

 

  

Net deferred income tax asset

   $ 24,120     $ 13,448  
   

 

 

    

 

 

  

Tax years that remain open for purposes of examination of the Company’s income tax liability due to tax authorities, include the years ended December 31, 2010, 2009 and 2008.

The following table reconciles the statutory federal income tax rate to the Company’s effective tax rate:

 

                                 
    Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
    2011     2010     2011     2010  

Statutory federal income tax rate

     35.0 %      35.0 %      35.0 %      35.0 % 

Increases resulting from:

                                

Disallowed meals & entertainment

     1.3 %      0.1 %      0.1 %      0.3 % 

Disallowed compensation

     25.4 %      0.4 %      2.0 %      0.5 % 

True-up to prior year tax returns

     -43.2 %      —         -1.3 %      —    

State income tax, net of federal tax benefit (1)

     3.6 %      3.6 %      3.6 %      3.6 % 

Other, net

     -0.5 %      -0.5 %      0.6 %      -0.6 % 
   

 

 

    

 

 

    

 

 

    

 

 

  

Effective tax rate

     21.6 %      38.6 %      40.0 %      38.8 % 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Included in income tax is State of Florida income tax at a statutory tax rate of 5.5%.