Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 19 -- Income Taxes

A summary of income tax expense (benefit) is as follows:

	Years Ended December 31,
	2023			2022			2021
Current:
Federal	$	23,997		$	(3,853	)	$	2,332
State		5,431			(275	)		415
Foreign		67			194			102
Total current taxes		29,495			(3,934	)		2,849
Deferred:
Federal		(738	)		(7,828	)		489
State		(365	)		(2,023	)		653
Foreign		1			(30	)		—
Total deferred taxes		(1,102	)		(9,881	)		1,142
Income tax expense (benefit)	$	28,393		$	(13,815	)	$	3,991

The reasons for the differences between the statutory federal income tax rate and the effective tax rate are summarized as follows:

	Years Ended December 31,
	2023						2022						2021
	Amount			%			Amount			%			Amount			%
Income taxes at statutory rate	$	24,706			21.0		$	(14,368	)		21.0		$	2,359			21.0
Increase (decrease) in income taxes    resulting from:
State income taxes, net of federal    tax benefits		4,951			4.2			(2,812	)		4.1			402			3.6
Effects of tax rate changes		(155	)		(0.1	)		—			—			437			3.9
Stock-based compensation		(49	)		—			(431	)		0.6			(298	)		(2.7	)
Non-deductible executive compensation		1,035			0.9			1,252			(1.8	)		1,008			9.0
Change in valuation allowance		(2,549	)		(2.2	)		2,549			(3.7	)		—			—
Other		454			0.3			(5	)		—			83			0.7
Income tax expense (benefit)	$	28,393			24.1		$	(13,815	)		20.2		$	3,991			35.5

The Company has no uncertain tax positions or unrecognized tax benefits that, if recognized, would impact the effective income tax rates for the years ended December 31, 2023, 2022, and 2021. The tax returns filed for the years ending December 31, 2022, 2021, and 2020 remain subject to examination by the Company’s major taxing jurisdictions. The Company elected to classify interest and penalties, if any, arising from uncertain tax positions as income tax expense as permitted by current accounting standards. For the year ended December 31, 2023, the Company recognized approximately $150 of interest expense on underpayments related to income tax liabilities and classified that interest as income tax expense. There were no material amounts of interest or penalties for the years ended December 31, 2022 and 2021.

For the year ended December 31, 2023, the Company recorded $28,393 of income tax expense resulting in an effective tax rate of 24.1%. For the years ended December 31, 2022 and 2021, the Company recorded income tax benefit of $13,815 and income tax expense of $3,991, respectively, resulting in effective tax rates of 20.2% and 35.5%, respectively. The increase in the effective tax rate in 2023 as compared with 2022 was primarily attributable to the reversal of the valuation allowance established as of December 31, 2022.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s net deferred income tax assets (liabilities) are as follows:

	December 31,
	2023			2022
Deferred tax assets:
Unearned premiums	$	19,378		$	12,588
Losses and loss adjustment expenses		3,331			3,013
Stock-based compensation		1,878			1,570
Unearned revenue		1,089			426
Net unrealized investment losses		732			428
Basis difference related to convertible senior notes		516			300
Accrued expenses		175			163
Credit losses		156			244
Organizational costs		116			128
Bad debt reserve		16			44
Net operating loss carryforwards		—			13,883
Other		17			85
Total deferred tax assets		27,404			32,872
Valuation allowance		—			(2,549	)
Total deferred tax assets, net of valuation allowance		27,404			30,323
Deferred tax liabilities:
Gain on involuntary conversion		(11,460	)		(12,500	)
Deferred policy acquisition costs		(11,272	)		(12,156	)
Basis difference related to partnership investments		(2,249	)		(2,942	)
Prepaid expenses		(573	)		(703	)
Intangible assets		(541	)		(1,878	)
Property and equipment		(271	)		(1,515	)
Other		(526	)		(333	)
Total deferred tax liabilities		(26,892	)		(32,027	)
Net deferred tax assets (liabilities)	$	512		$	(1,704	)

The Company has zero federal net operating loss carryforwards available as of December 31, 2023. The Company has zero state net operating loss carryforwards available as of December 31, 2023.

A valuation allowance must be established for deferred tax assets when it is more likely than not that the deferred tax assets will not be realized based on available evidence both positive and negative, including recent operating results, available tax planning strategies, and projected future taxable income. As of December 31, 2023, management concluded, based on the evaluation of the positive and negative evidence, that is more likely than not that the deferred tax assets will be realized and therefore no valuation allowance on the Company’s deferred tax assets is required. As of December 31, 2022, a $2,549 valuation allowance was established as management concluded it was more likely than not that the deferred tax assets would not be realized based on an evaluation of the positive and negative evidence.