Income taxes (Tables)

12 Months Ended

Dec. 31, 2018

Components of Income Tax Expense (Benefit)

Income tax expense includes the following components for the years ending December 31, 2018, 2017 and 2016:



	Year Ended December 31,
	2018			2017		2016
	(in thousands)
Current federal income tax expense	$	9,923		$	12,555	$	12,808
Deferred federal income tax expense (benefit)	(3,230		)	1,065		561
Income tax expense	$	6,693		$	13,620	$	13,369

Effective Income Tax Rate Reconciliation

The Company’s effective income tax rate on income before income taxes differs from the prevailing federal income tax rate and is summarized as follows:



	Year ended December 31,
	2018			2017			2016
	(in thousands)
Income tax expense at federal income tax rate	$	8,501		$	13,482		$	13,837
Stock options exercised	(918		)	(471		)	—
Tax-exempt investment income	(672		)	(1,064		)	(528		)
Effect of tax rate change	—			1,915			—
Other	(218		)	(242		)	60
Total	$	6,693		$	13,620		$	13,369

Deferred Tax Assets and Liabilities

The significant components of the net deferred tax asset are summarized as follows:



	December 31,
	2018			2017
	(in thousands)
Deferred tax assets:
Unpaid losses and loss adjustment expenses	$	6,854		$	7,001
Unearned premiums	4,711			3,748
Organizational costs	196			230
State operating loss carryforwards	708			645
Allowance for doubtful accounts	551			449
Unrealized losses on fixed-maturity securities	837			—
Other	753			431
Deferred tax assets before allowance	14,610			12,504
Less: valuation allowance	(780		)	(690		)
Total deferred tax assets	13,830			11,814

Deferred tax liabilities:
Unrealized gains on fixed-maturity securities	—			616
Unrealized gains on equity securities	374			1,759
Deferred policy acquisition costs, net of ceding commissions	3,108			2,473
Intangible assets	743			743
Transition adjustment for loss reserve discount	2,060			3,524
Other	369			207
Total deferred tax liabilities	6,654			9,322
Net deferred tax asset	$	7,176		$	2,492

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2017 was as follows:



	December 31, 2017
	(in thousands)
Balance at January 1, 2017	$	1,003
Deductions for tax positions taken during prior years	(1,003		)
Balance at December 31, 2017	$	—