Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Total income taxes were allocated as follows:

	2012		2011
Total tax expense on income	$	646	$	25

Tax expense on components of shareholders' equity:
Net unrealized gains on investment securities		3,688		6,681
Fair value adjustment to derivative financial instrument		257		237
Total tax expense on shareholders' equity		3,945		6,918
Total tax expense	$	4,591	$	6,943

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax expense is as follows:

	2012			2011
Federal income tax provision at statutory rate of 35%	$	1,779		$	1,160
Dividends received deduction		(175	)		(173	)
Small life insurance company deduction		(485	)		(617	)
Other		46			18
Change in asset valuation allowance due to change in judgment relating to realizability of deferred tax assets		(440	)		(412	)
Adjustment for prior years' estimates to actual		(79	)		49
Income tax expense	$	646		$	25

Deferred tax liabilities and assets at December 31, 2012 and 2011 were comprised of the following:

	2012			2011
Deferred tax liabilities:
Deferred acquisition costs	$	(4,197	)	$	(4,255	)
Deferred and uncollected premiums		(743	)		(736	)
Net unrealized investment gains		(10,588	)		(6,900	)
Other		(8	)		(18	)
Total deferred tax liabilities		(15,536	)		(11,909	)
Deferred tax assets:
Net operating loss carryforwards		1,575			1,429
Insurance reserves		4,516			4,341
Capital loss carryforwards		5,236			5,675
Impaired assets		1,406			1,443
Alternative minimum tax credit		306			510
Bad debts and other		601			903
Total deferred tax assets		13,640			14,301
Asset valuation allowance		(5,268	)		(5,708	)
Net deferred tax liability	$	(7,164	)	$	(3,316	)

The components of income tax expense were:

	2012			2011
Current - Federal	$	743		$	399
Deferred - Federal		343			38
Change in deferred tax asset valuation allowance		(440	)		(412	)
Total	$	646		$	25