FEDERAL INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Federal Income Tax Expense (Benefit)

Federal income tax expense (benefit) is composed of the following:

Years Ended December 31,	2013		2012			2011
Current	$	19,146	$	6,644		$	(3,517	)
Deferred	6,616		(782		)	(9,209		)
Total	$	25,762	$	5,862		$	(12,726	)

Income Tax Rate Reconciliation

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 35.0 percent to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:

Years Ended December 31,	2013			2012			2011
Computed expected income tax expense (benefit)	$	35,666		$	16,126		$	(4,451	)
Tax-exempt municipal bond interest income	(7,732		)	(8,027		)	(7,908		)
Nontaxable dividend income	(1,053		)	(1,004		)	(859		)
Valuation allowance reduction	(548		)	(547		)	—
Acquisition related expenses	—			42			860
Other, net	(571		)	(728		)	(368		)
Federal income tax expense (benefit)	$	25,762		$	5,862		$	(12,726	)

Deferred Tax Liabilities

The significant components of our net deferred tax liability at December 31, 2013 and 2012, are as follows:

December 31,	2013			2012
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	55,402		$	38,582
All other securities	6,201			52,563
Deferred policy acquisition costs	47,809			32,086
Prepaid pension cost	2,556			2,271
Net bond discount accretion	2,069			3,896
Depreciation	2,355			579
Revaluation of investment basis (1)	3,595			4,345
Identifiable intangible assets (1)	4,056			6,615
Other	7,530			4,414
Gross deferred tax liability	$	131,573		$	145,351
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	39,041		$	40,992
Unearned premium adjustment	23,502			21,578
Net operating loss carryforwards	2,361			3,481
Underfunded benefit plan obligation	15,858			26,335
Postretirement benefits other than pensions	12,342			10,240
Other-than-temporary impairment of investments	5,222			5,715
Contingent ceding commission accrual	3,726			4,822
Compensation expense related to stock options	4,062			3,928
AMT credit carryforward	476			7,713
Other	5,429			3,828
Gross deferred tax asset	$	112,019		$	128,632
Valuation allowance	(2,361		)	(2,909		)
Deferred tax asset	$	109,658		$	125,723
Net deferred tax liability	$	21,915		$	19,628

(1) Related to our acquisition of Mercer Insurance Group.