Income Taxes

12 Months Ended

Dec. 31, 2025

Income Taxes

Income Taxes

13. Income Taxes

A summary of the income tax expense in the consolidated statements of operations is shown below.

	Years Ended December 31,
	2025		2024		2023
Current Income Taxes:
Federal	$	29,049	$	18,676	$	3,614
State		310		75		276
		29,359		18,751		3,890
Deferred Income Taxes:
Federal		(1,931)		380		1,655
State		—		—		—
		(1,931)		380		1,655
Total income tax expense	$	27,428	$	19,132	$	5,545

The income tax expense attributable to the consolidated results of operations is different from the amounts determined by multiplying income before federal income taxes by the statutory federal income tax rate. The sources of the difference and the tax effects of each were as follows for the periods indicated.

	Years Ended December 31,
	2025				2024				2023
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Federal income tax expense at statutory rate	$	26,603	21.0	%	$	18,872	21.0	%	$	5,128	21.0	%
Investment income, net		(280)	(0.2)			(314)	(0.3)			(364)	(1.5)
State taxes, net		245	0.2			59	0.1			218	0.9
Nondeductible expenses		1,073	0.9			695	0.7			400	1.6
Tax related to share-based stock compensation		237	0.2			156	0.2			213	0.9
Other, net		(450)	(0.4)			(336)	(0.4)			(50)	(0.2)
Total income tax expense	$	27,428	21.7	%	$	19,132	21.3	%	$	5,545	22.7	%

The deferred income tax asset (liability) represents the tax effects of temporary differences attributable to the Company’s consolidated federal tax return group. Its components were as shown in the following table for the periods indicated.

	Years Ended December 31,
	2025		2024
Deferred tax assets:
Discounting of loss reserves	$	6,543	$	5,504
Discounting of unearned premium reserve		26,488		24,723
Net unrealized losses on investments		63		9,078
Bad debt allowance		183		207
Employee benefits		3,783		4,164
Rent incentive		342		456
Other		189		123
Total deferred tax assets before valuation allowance		37,591		44,255
Valuation allowance for deferred tax assets		—		—
Total deferred tax assets		37,591		44,255
Deferred tax liabilities:
Deferred acquisition costs		(23,476)		(22,150)
Investments		(8,143)		(8,493)
Loss reserve transition adjustment		—		(277)
Software development costs		(903)		(1,189)
Premium acquisition expenses		(559)		(363)
Depreciation		(394)		(583)
Total deferred tax liabilities		(33,475)		(33,055)
Net deferred tax assets (liability)	$	4,116	$	11,200

The Company believes that the positions taken on its income tax returns for open tax years will be sustained upon examination by the Internal Revenue Service.  Therefore, the Company has not recorded any liability for uncertain tax positions under ASC 740, Income Taxes.

During the years ended December 31, 2025 and 2024 there were no material changes to the amount of the Company’s unrecognized tax benefits or to any assumptions regarding the amount of its ASC 740 liability.

As of December 31, 2025 and 2024, the Company had no unrecognized tax benefits, and none which if recognized would affect the effective tax rate. The Company does not currently anticipate significant changes in the amount of unrecognized income tax benefits during the next twelve months.

The Company records interest and penalties associated with audits as a component of income before income taxes. Penalties are recorded in underwriting, operating and other expenses, and interest expense is recorded in interest expenses in the consolidated statements of operations. The Company had no interest and penalties related to income taxes accrued as of December 31, 2025 and 2024.

On July 4, 2025, the “One Big Beautiful Bill Act” (H.R.1) (the “Act”) was signed into law. This wide-ranging budget reconciliation legislation introduces significant changes across multiple areas of federal policy, including taxation, and social programs. The provisions of the Act do not currently have a material impact on the Company’s financial position or results of operations, nor are they expected to have a material impact in future periods.

In the Company’s opinion, adequate tax liabilities have been established for all open years. However, the amount of these tax liabilities could be revised in the near term if estimates of the Company’s ultimate liability are revised. All tax years prior to 2021 are closed.