Income Taxes

Income tax expense consists of:



(Dollars in thousands)	Current Expense		Deferred Expense (Benefit)			Total
December 31, 2011:
Domestic	$	60,420	$	38,781		$	99,201
Foreign	22,011		2,338			24,349
Total expense	$	82,431	$	41,119		$	123,550
December 31, 2010:
Domestic	$	79,143	$	66,287		$	145,430
Foreign	10,584		(2,275		)	8,309
Total expense	$	89,727	$	64,012		$	153,739
December 31, 2009:
Domestic	$	116,777	$	(56,325	)	$	60,452
Foreign	9,140		3,558			12,698
Total expense (benefit)	$	125,917	$	(52,767	)	$	73,150

Income before income taxes from domestic operations was $469 million, $574 million and $343 million for the years ended December 31, 2011, 2010 and 2009, respectively. Income before income taxes from foreign operations was $49 million, $29 million and $39 million for the years ended December 31, 2011, 2010 and 2009, respectively.

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of 35% to pre-tax income are as follows:



(Dollars in thousands)	2011			2010			2009
Computed “expected” tax expense	$	181,399		$	211,157		$	133,781
Tax-exempt investment income	(57,246		)	(62,628		)	(64,886		)
Change in valuation allowance	(2,328		)	102			(887		)
Impact of lower foreign tax rates	(3,413		)	(253		)	(551		)
State and local taxes	2,355			2,298			1,175
Other, net	2,783			3,063			4,518
Total expense	$	123,550		$	153,739		$	73,150

At December 31, 2011 and 2010, the tax effects of differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:



(Dollars in thousands)	2011			2010
Deferred tax asset:
Loss reserve discounting	$	119,725		$	152,189
Unearned premiums	118,837			106,162
Other-than-temporary impairments	68,559			69,057
Restricted stock units	43,207			39,514
Other	82,734			26,813
Gross deferred tax asset	433,062			393,735
Less valuation allowance	—			(2,328		)
Deferred tax asset	433,062			391,407
Deferred tax liability:
Amortization of intangibles	12,186			11,780
Deferred policy acquisition costs	136,349			124,141
Unrealized investment gains	223,024			169,106
Other	93,126			20,888
Deferred tax liability	464,685			325,915
Net deferred tax asset (liability)	$	(31,623	)	$	65,492

The Company had current tax receivables of $9,670,000 and $23,605,000 at December 31, 2011 and 2010, respectively. At December 31, 2011, the Company had foreign net operating loss carryforwards of $420,000, which expire beginning in 2014. The Company had provided a valuation allowance against the unutilized foreign tax credits which were fully utilized in the 2010 federal tax return. The reduction in the valuation relates primarily to the full utilization of the foreign tax credit carryforward. At December 31, 2011, the Company had no deferred tax assets for which a valuation allowance is required. The statute of limitations has closed for the Company’s tax returns through December 31, 2004. The 2005 calendar year statute of limitations remains open as a result of the carry back of capital losses from the 2008 tax year, and the 2006 calendar year statue of limitations remains open as a result of the carry back of capital losses from the 2008 and 2009 tax years.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.