Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of Deferred Tax Assets and Liabilities

The tax effect of significant differences representing deferred tax assets and liabilities are as follows (dollars in thousands):



	June 30, 2013			December 31, 2012
	(UNAUDITED)
General expenses	$	1,293		$	1,211
Unearned premiums	1,915			1,751
Claims liabilities	440			243
Litigation settlement	3,570			3,570
AMT credit	246			246
NOL carryforward	2,873			2,711
Other-than-temporary impairments on securities owned	164			164
Unrealized loss on interest rate swaps	335			518
Deferred tax assets	10,836			10,414

Trading securities	—			(1		)
Depreciation	(77		)	(94		)
Deferred policy acquisition costs	(3,074		)	(3,093		)
Unrealized gains on securities available-for-sale	(1,220		)	(2,229		)
Deferred tax liabilities	(4,371		)	(5,417		)

Net deferred tax asset	$	6,465		$	4,997

Changes in Temporary Differences in Federal Income Tax

The appropriate income tax effects of changes in temporary differences are as follows (dollars in thousands):



	Six months ended June 30,
	2013			2012
	(UNAUDITED)
Deferred policy acquisition costs	$	(19	)	$	49
Other-than-temporary impairments	—			27
Trading securities	(1		)	—
Unearned premiums	(164		)	(113		)
General expenses	(82		)	(61		)
Depreciation	(17		)	(24		)
Claim liabilities	(197		)	22
Litigation settlement	—			(3,995		)
NOL carryforward	(162		)	(230		)

Deferred income tax benefit	$	(642	)	$	(4,325	)

Schedule of Effective Income Tax Rate Reconciliation

Total income tax (benefit) expense varies from amounts computed by applying current federal income tax rates to income or loss before income taxes. The reasons for these differences and the approximate tax effects are as follows:



	Six months ended June 30,
	2013		2012
Federal income tax rate applied to pre-tax income/loss	34.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(48.2	)%	0.8	%
Company owned life insurance	37.7	%	0.5	%
Small life deduction	(197.3	)%	2.1	%
Life reserve tax adjustment	(147.4	)%	—	%
Other, net	6.2	%	0.6	%

Effective federal income tax rate	(315.0	)%	38.0	%