Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Components of Current and Deferred Income Tax Expense (Benefit)

The components of current and deferred income tax expense (benefit) are as follows:

	Years Ended December 31,
amounts in thousands	2018			2017			2016
Current Income Tax Expense (Benefit):
Federal and Foreign	$	27,768		$	42,427		$	39,900
State and Local		934			764			638
Subtotal	$	28,702		$	43,191		$	40,538
Deferred Income Tax Expense (Benefit):
Federal and Foreign	$	(14,366	)	$	(8,879	)	$	(5,755	)
State and local		—			—			—
Subtotal	$	(14,366	)	$	(8,879	)	$	(5,755	)
Total Income Tax Expense (Benefit)	$	14,336		$	34,312		$	34,783

Reconciliation of Total Income Taxes Applicable to Pre-Tax Operating Income and Amounts Computed by Applying Federal Statutory Income Tax Rate to Pre-Tax Operating Income

A reconciliation of total income taxes applicable to pre‑tax operating income and the amounts computed by applying the federal statutory income tax rate to the pre‑tax operating income were as follows:

	Years Ended December 31,
amounts in thousands	2018					2017					2016
Computed Expected Tax Expense	$	10,201		21.0	%	$	26,182		35.0	%	$	41,128			35.0	%
Tax-Exempt Interest		(3,356	)	(6.9	%)		(5,394	)	(7.2	%)		(4,559	)		(3.9	%)
Dividends Received Deduction		(2,041	)	(4.2	%)		(4,689	)	(6.3	%)		(3,812	)		(3.2	%)
Proration of DRD and Tax-Exempt Interest		1,330		2.7	%		1,512		2.0	%		1,256			1.1	%
State and Local Income Taxes, Net of Federal Income Tax Deduction		738		1.5	%		497		0.7	%		415			0.4	%
Stock Compensation Fair Market Value		(1,711	)	(3.5	%)		(5,027	)	(6.7	%)	N/A			N/A
Change in Valuation Allowance		(774	)	(1.6	%)		1,182		1.6	%		—			—
Deferred Tax Expense due to Tax Law Changes		(506	)	(1.0	%)		17,107		22.9	%	N/A			N/A
Transition Tax		(1,314	)	(2.7	%)		2,587		3.5	%	N/A			N/A
Uncertain Tax Position - FTC IRS Audit		7,029		14.5	%		—		—			—			—
Non-Deductible Expenses		1,197		2.5	%		405		0.5	%		406			0.2	%
Return to Provision		2,326		4.8	%		(158	)	(0.2	%)		1			0.0	%
Other		1,217		2.4	%		108		0.1	%		(52	)		0.0	%
Actual Tax Expense and Rate	$	14,336		29.5	%	$	34,312		45.9	%	$	34,783			29.6	%

N/A - Not applicable

Tax Effects of Temporary Differences That Give Rise to Federal, Foreign, State and Local Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of cumulative temporary differences that give rise to federal, foreign, state and local deferred tax assets and deferred tax liabilities were as follows:

	December 31,
amounts in thousands	2018			2017
Deferred Tax Assets:
Loss Reserve Discount	$	26,468		$	20,425
Unearned Premiums		29,500			24,352
Compensation Related		9,433			8,462
Lloyd's Year of Account Deferral		12,623			9,400
State and Local		3,551			616
Net Currency Translation Adjustments		299			2,084
Net Unrealized Losses on Securities		11,553			—
Other		3,598			152
Total Gross Deferred Tax Assets	$	97,025		$	65,491
Less: Valuation Allowance		(4,367	)		(1,798	)
Total Deferred Tax Assets	$	92,658		$	63,693
Deferred Tax Liabilities:
Loss Reserve Discount - Transition Rule	$	(7,570	)	$	(5,066	)
Net Unrealized Gains on Securities		—			(8,708	)
Deferred Acquisition Costs		(25,109	)		(20,670	)
Claims Equalization Reserve		(7,913	)		—
Net Unrealized Foreign Exchange		(3,769	)		(3,782	)
Intangibles		(3,438	)		—
Other		(2,562	)		(3,196	)
Total Deferred Tax Liabilities	$	(50,361	)	$	(41,422	)
Net Deferred Income Tax Asset	$	42,297		$	22,271

Summary of Income Tax Contingencies

	December 31,
amounts in thousands	2018
Balance at January 1,	$	—
Additions for Tax Positions of Prior Years		6,350
Reductions for Tax Positions of Prior Years		—
Additions for Tax Positions of Current Year		—
Reductions for Tax Positions of Current Year		—
Settlements with Tax Authorities		—
Lapse of Statute of Limitations		—
Balance at December 31,	$	6,350
Unrecognized Tax Benefits that, if Recognized, would Impact the Effective Rate	$	6,350

Accrued Interest and Penalties on Unrecognized Tax Benefits

Our Company policy is to recognize interest and penalties related to unrecognized tax benefits as income tax expense. Gross interest was accrued and reported as follows:

	December 31,
amounts in thousands	2018
Interest Recognized on the Consolidated Statements of Operations	$	860

Interest Included in Other Liabilities on the Consolidated Balance Sheets	$	860