Income Tax Matters (Tables)

6 Months Ended

Jun. 30, 2023

Income Tax Matters

Schedule of deferred tax assets and liabilities

Significant components of the Company’s deferred tax assets and liabilities as of June 30, 2023 and December 31, 2022 are as follows:

(In thousands)	June 30, 2023		December 31, 2022
Deferred tax assets:
Loss carryforwards	$	4,519	$	2,672
Capitalized costs		55		79
Stock option granted		1,193		1,066
Policy acquisition costs		8,205		6,489
General business credits		6		6
Derivative option allowance		310		-
Sec 163(j) limitation		171		171
Benefit reserves		10,478		12,010
Impairments		535		403
Unrealized losses on investments		15,267		13,624
Other		1,928		1,928
Total deferred tax assets		42,667		38,448
Less valuation allowance		(40,729)		(35,305)
Total deferred tax assets, net of valuation allowance		1,938		3,143
Deferred tax liabilities:
Intangible assets		147		147
Derivative option allowance		-		2,150
Bond Discount		1,912		936
Property and equipment		(121)		(90)
Total deferred tax liabilities		1,938		3,143
Net deferred tax assets	$	-	$	-

Schedule of effective tax rate reconciliation

There was income tax expense of $3 million and $2.1 million for the three months ended June 30, 2023 and 2022. and $5.9 million and $2.6 million of tax expense for the six months ended June 30, 2023 and 2022. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following:

	Three months ended June 30,				Six months ended June 30,
(In thousands)	2023		2022		2023		2022
Computed expected income tax benefit (expense)	$	428	$	(409)	$	(2,357)	$	(1,508)
Reduction (increase) in income taxes resulting from:
Interest maintenance reserve and reinsurance		(18)		61		51		(18)
Nondeductible expenses		(3)		(3)		(6)		(5)
Change in valuation allowance		(3,593)		2,480		(3,781)		(1,052)
Deferred tax adjustment		-		(4)		-		(14)
AETR adjustment		76		-		76		-
Prior year true-up		141		-		141		-
Subtotal of (increases) decreases		(3,397)		2,534		(3,519)		(1,089)
Tax (benefit) expense	$	(2,969)	$	2,125	$	(5,876)	$	(2,597)