FEDERAL INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2017

Federal income tax expense (benefit) from both continuing and discontinued operations is composed of the following:




Years Ended December 31,	2017			2016		2015
Current	$	1,989		$	3,239	$	37,649
Deferred	(26,719		)	5,524		(5,324		)
Total	$	(24,730	)	$	8,763	$	32,325

Income Tax Expense 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,	2017			2016			2015
Computed expected income tax expense	$	9,202		$	20,533		$	42,508
Impact of enactment of Tax Act	(21,884		)	—			—
Tax-exempt municipal bond interest income	(8,875		)	(8,330		)	(7,669		)
Nontaxable dividend income	(1,540		)	(1,317		)	(1,337		)
Valuation allowance reduction	(547		)	(547		)	(548		)
Other, net	(1,086		)	(1,576		)	(629		)
Consolidated federal income tax expense (benefit)	$	(24,730	)	$	8,763		$	32,325

Reconciliation of consolidated federal income tax expense (benefit) from:
Continuing operations	$	(29,220	)	$	8,379		$	30,050
Discontinued operations	4,490			384			2,275
Consolidated federal income tax expense (benefit)	$	(24,730	)	$	8,763		$	32,325

Components of Net Deferred Tax Liability

The significant components of our net deferred tax liability from both continuing and discontinued operations at December 31, 2017 and 2016 are as follows:




December 31,	2017			2016
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	50,839		$	70,640
All other securities	7,599			3,711
Deferred policy acquisition costs	30,404			52,031
Investments in partnerships	3,653			8,112
Prepaid pension cost	3,416			4,449
Net bond discount accretion	666			1,134
Depreciation	593			854
Revaluation of investment basis⁽¹⁾	545			1,342
Identifiable intangible assets ⁽¹⁾	1,838			3,311
Other	1,934			2,831
Gross deferred tax liability	$	101,487		$	148,415
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	17,036		$	29,174
Unearned premium adjustment	19,389			30,697
Net operating loss carryforwards	329			718
Underfunded benefit plan obligation	12,375			13,374
Post-retirement benefits other than pensions	11,942			20,221
Other-than-temporary impairment of investments	2,313			4,658
Contingent ceding commission accrual	317			2,769
Alternative minimum tax credit carryforward	6,011			1,194
Compensation expense related to stock options	3,289			4,578
Other	4,145			6,162
Gross deferred tax asset	$	77,146		$	113,545
Valuation allowance	(329		)	(718		)
Deferred tax asset	$	76,817		$	112,827
Net deferred tax liability	$	24,670		$	35,588

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