Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

(5) Income Taxes

U.S. Federal and state income tax expense (benefit) (dollars in thousands) from operations consists of the following components:

	2012			2011			2010
Current	$	(5,922	)	$	(3,295	)	$	958
Deferred		6,827			1,070			(1,663	)
Change in valuation allowance		(64	)		(1,169	)		(1,377	)
Total	$	841		$	(3,394	)	$	(2,082	)

The state income tax components aggregated $52, $97 and $52 for the years ended December 31, 2012, 2011 and 2010, respectively. There are no material deferred income taxes applicable to states.

Income tax expense for the years ended December 31, 2012, 2011 and 2010 differed from the amount computed by applying the U.S. Federal income tax rate of 34% to earnings before Federal income taxes (dollars in thousands) as a result of the following:

	2012			2011			2010
Expected income tax	$	4,743		$	2,532		$	9,664
Foreign earned income not subject to direct taxation		(4,005	)		(6,076	)		(10,060	)
Change of valuation allowance		—			—			(1,377	)
Tax exempt interest		(14	)		(12	)		(32	)
State taxes and other		117			162			(277	)
Total income tax	$	841		$	(3,394	)	$	(2,082	)

Deferred income taxes are based upon temporary differences between the financial statement and tax basis of assets and liabilities. The following deferred taxes are recorded:

	December 31, (dollars in thousands)
	2012			2011
Deferred tax assets:
Loss reserve discounting	$	6,312		$	9,322
Unearned premium reserves		6,300			4,488
Allowance for doubtful accounts		1,700			1,995
Realized capital loss carry forward		1,424			1,424
Gross deferred tax assets		15,736			17,229
Valuation allowance		—			(64	)
Gross deferred tax assets after valuation allowance		15,736			17,165
Deferred tax liabilities:
Deferred acquisition costs		7,064			3,138
Unrealized gain on securities		11,554			11,073
Depreciation		3,133			991
Other		2,752			86
Gross deferred tax liabilities		24,503			15,288
Net deferred tax assets (liabilities)	$	(8,767	)	$	1,877

The Company has not identified any uncertain tax positions.