Income taxes (Tables)

12 Months Ended

Dec. 31, 2019

Components of Income Tax Expense (Benefit)

Income tax expense includes the following components for the years ending December 31, 2019, 2018 and 2017:



	Year Ended December 31,
	2019			2018			2017
	(in thousands)
Current federal income tax expense	$	12,860		$	9,923		$	12,555
Deferred federal income tax (benefit) expense	(125		)	(3,230		)	1,065
Income tax expense	$	12,735		$	6,693		$	13,620

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,
	2019			2018			2017
	(in thousands)
Income tax expense at federal income tax rate	$	15,971		$	8,501		$	13,482
Stock options exercised	(2,411		)	(918		)	(471		)
Tax-exempt investment income	(577		)	(672		)	(1,064		)
Effect of tax rate change	—			—			1,915
Other	(248		)	(218		)	(242		)
Total	$	12,735		$	6,693		$	13,620

Deferred Tax Assets and Liabilities

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



	December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Unpaid losses and loss adjustment expenses	$	8,199		$	6,854
Unearned premiums	7,193			4,711
Organizational costs	162			196
Stock compensation	765			557
State operating loss carryforwards	1,497			708
Allowance for doubtful accounts	570			551
Unrealized losses on fixed-maturity securities	—			837
Other	256			196
Deferred tax assets before allowance	18,642			14,610
Less: valuation allowance	(1,592		)	(780		)
Total deferred tax assets	17,050			13,830

Deferred tax liabilities:
Unrealized gains on fixed-maturity securities	3,090			—
Unrealized gains on equity securities	2,995			374
Deferred policy acquisition costs, net of ceding commissions	4,949			3,108
Intangible assets	743			743
Transition adjustment for loss reserve discount	1,537			2,060
Other	362			369
Total deferred tax liabilities	13,676			6,654
Net deferred tax asset	$	3,374		$	7,176