FEDERAL INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Federal Income Tax Expense (Benefit)

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

Years Ended December 31,	2014		2013		2012
Current	$	15,649	$	19,146	$	6,644
Deferred	1,677		6,616		(782		)
Total	$	17,326	$	25,762	$	5,862

Income Tax Rate Reconciliation

A reconciliation of income tax expense 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,	2014			2013			2012
Computed expected income tax expense	$	26,762		$	35,666		$	16,126
Tax-exempt municipal bond interest income	(7,417		)	(7,732		)	(8,027		)
Nontaxable dividend income	(1,232		)	(1,053		)	(1,004		)
Valuation allowance reduction	(548		)	(548		)	(547		)
Acquisition related expenses	—			—			42
Other, net	(239		)	(571		)	(728		)
Federal income tax expense	$	17,326		$	25,762		$	5,862

Deferred Tax Liabilities

The significant components of our net deferred tax liability at December 31, 2014 and 2013 are as follows:

December 31,	2014			2013
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	60,952		$	55,402
All other securities	24,308			6,201
Deferred policy acquisition costs	44,271			47,809
Prepaid pension cost	2,973			2,556
Net bond discount accretion	1,925			2,069
Depreciation	2,667			2,355
Revaluation of investment basis (1)	2,611			3,595
Identifiable intangible assets (1)	3,808			4,056
Other	8,152			7,530
Gross deferred tax liability	$	151,667		$	131,573
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	35,800		$	39,041
Unearned premium adjustment	26,146			23,502
Net operating loss carryforwards	1,813			2,361
Underfunded benefit plan obligation	31,473			15,858
Postretirement benefits other than pensions	14,374			12,342
Other-than-temporary impairment of investments	5,222			5,222
Contingent ceding commission accrual	3,573			3,726
Compensation expense related to stock options	4,582			4,062
AMT credit carryforward	—			476
Other	4,738			5,429
Gross deferred tax asset	$	127,721		$	112,019
Valuation allowance	(1,813		)	(2,361		)
Deferred tax asset	$	125,908		$	109,658
Net deferred tax liability	$	25,759		$	21,915

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