Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

The Company’s deferred income tax assets and liabilities are as follows:

	December 31,
	2012			2011
				(As Adjusted)
	(In thousands)
Deferred income tax assets:
Discounting of net unpaid loss and loss adjustment expenses	$	21,878		$	20,576
Unearned premiums		12,043			10,446
Accrued expenses and other		3,870			3,555
Accrued policyholder dividends		916			698
Capital loss carryforward		—			568
Impaired securities		94			94
Accrued insurance-related assessments		3,564			3,472
AMT tax credit		64			—
Total deferred tax assets		42,429			39,409
Deferred income tax liabilities:
Deferred policy acquisition costs		(7,499	)		(6,905	)
Deferred charges		(666	)		(852	)
Unrealized gain on securities available-for-sale		(1,604	)		(1,192	)
Property and equipment and other		(356	)		(52	)
Salvage and subrogation		(442	)		(360	)
Guaranty fund related items		(2,341	)		—
Total deferred income tax liabilities		(12,908	)		(9,361	)
Net deferred income taxes	$	29,521		$	30,048

The components of consolidated income tax expense (benefit) are as follows:

	Year Ended December 31,
	2012		2011			2010
			(As Adjusted)			(As Adjusted)
	(In thousands)
Current:
Federal	$	7,372	$	4,529		$	11,617
State		302		172			254
		7,674		4,701			11,871
Deferred:
Federal		116		(1,525	)		(2,169	)
Total	$	7,790	$	3,176		$	9,702

In 2012, the Company made no adjustment to the valuation allowance. In 2011, the Company recorded a reduction of $1.4 million in the valuation allowance of $3.0 million established in 2008 for unrealized losses resulting from other-than-temporary impairments.

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 35% to income before income taxes as follows:

	Year Ended December 31,
	2012			2011			2010
				(As Adjusted)			(As Adjusted)
	(In thousands)
Income tax computed at federal statutory tax rate	$	13,000		$	9,575		$	15,478
Tax-exempt interest, net		(5,333	)		(5,105	)		(5,133	)
State income tax		302			172			254
Dividends received deduction		(79	)		(29	)		(6	)
Valuation allowance		—			(1,442	)		(869	)
Other		(100	)		5			(22	)
	$	7,790		$	3,176		$	9,702

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2012 and 2011.

Tax years 2008 through 2011 are subject to examination by the federal and state taxing authorities. The Company is currently undergoing an examination by the Internal Revenue Service for tax year 2009.