FEDERAL INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2019

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




Years Ended December 31,	2019			2018			2017
Current	$	(7,843	)	$	18,493		$	1,989
Deferred	9,902			(21,791		)	(26,719		)
Total	$	2,059		$	(3,298	)	$	(24,730	)

Income Tax Expense Reconciliation

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent in 2019 and 2018 and 35.0 percent in 2017 to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:




Years Ended December 31,	2019			2018			2017
Computed expected income tax expense	$	3,544		$	5,114		$	9,202
Impact of enactment of Tax Act	—			—			(21,884		)
Tax-exempt municipal bond interest income	(3,961		)	(4,235		)	(8,875		)
Nontaxable dividend income	(594		)	(591		)	(1,540		)
Valuation allowance reduction	—			(329		)	(547		)
Compensation	1,638			(497		)	(695		)
Reinsurance	998			—			—
Other, net	434			(2,760		)	(391		)
Consolidated federal income tax expense (benefit)	$	2,059		$	(3,298	)	$	(24,730	)

Reconciliation of consolidated federal income tax expense (benefit) from:
Continuing operations	$	2,059		$	(11,405	)	$	(29,220	)
Gain on sale of discontinued operations				7,544			—
Discontinued operations	—			563			4,490
Consolidated federal income tax expense (benefit)	$	2,059		$	(3,298	)	$	(24,730	)

Components of Net Deferred Tax Liability

The significant components of our net deferred tax liability at December 31, 2019 and 2018 are as follows:




December 31,	2019		2018
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	48,652	$	38,430
All other securities	12,568		(2,478		)
Deferred policy acquisition costs	19,801		19,487
Investments in partnerships	2,156		2,510
Prepaid pension cost	4,441		4,158
Net bond discount accretion	357		296
Depreciation	1,908		1,063
Revaluation of investment basis⁽¹⁾	377		419
Identifiable intangible assets ⁽¹⁾	1,540		1,689
Other	1,416		1,639
Gross deferred tax liability	$	93,216	$	67,213
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	20,845	$	19,800
Unearned premium adjustment	20,816		20,406
Net operating loss carryforwards	1,708		—
Underfunded benefit plan obligation	9,072		5,622
Post-retirement benefits other than pensions	10,785		12,035
Other-than-temporary impairment of investments	2,094		2,094
Contingent ceding commission accrual	—		14
Compensation expense related to stock options	2,394		3,506
Other	4,916		4,648
Deferred tax asset	$	72,630	$	68,125
Net deferred tax liability (asset)	$	20,586	$	(912	)

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