INCOME TAXES

Temporary differences between the consolidated financial statement carrying amount and tax basis of assets and liabilities that give rise to significant portions of the deferred income tax asset (liability) at December 31, 2018 and 2017 are as follows:



	December 31,
($ in thousands)	2018			2017
Loss reserve discounting	$	8,520		$	7,507
Unearned premium reserve limitation	10,915			10,284
Other policyholders' funds payable	1,849			2,103
Other, net	1,753			2,202
Total deferred income tax asset	23,037			22,096
Net unrealized holding gains on investment securities	(13,614		)	(22,195		)
Deferred policy acquisition costs	(9,400		)	(8,634		)
Retirement benefits	(2,968		)	(3,714		)
Other, net	(1,963		)	(2,573		)
Total deferred income tax liability	(27,945		)	(37,116		)
Net deferred income tax liability	$	(4,908	)	$	(15,020	)

Based upon anticipated future taxable income and consideration of all other available evidence, management believes that it is “more likely than not” that the Company’s deferred income tax assets will be realized.

The actual income tax expense benefit for the years ended December 31, 2018, 2017 and 2016 differed from the “expected” income tax expense (benefit) for those years (computed by applying the United States federal corporate tax rate of 21 percent during 2018 and 35 percent during 2017 and 2016 to income (loss) before income tax) as follows:



	Year ended December 31,
($ in thousands)	2018			2017			2016
Computed "expected" income tax expense (benefit)	$	(3,082	)	$	13,936		$	22,123
Increases (decreases) in tax resulting from:
Deferred income tax benefit from enactment of the TCJA	—			(9,056		)	—
Incremental benefit of net operating loss carry back	(1,690		)	—			—
Tax-exempt interest income	(1,183		)	(2,715		)	(2,803		)
Dividends received deduction	(549		)	(1,291		)	(1,429		)
Proration of tax-exempt interest and dividends received deduction	433			601			635
Investment tax credits	(540		)	(672		)	(1,392		)
Other, net	(597		)	(225		)	(130		)
Total income tax expense (benefit)	$	(7,208	)	$	578		$	17,004

The TCJA was signed into law on December 22, 2017. Among other provisions, the TCJA lowered the federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. Since the change in tax rate was not effective until 2018, current tax expense in 2017 was unaffected; however, the temporary tax differences that comprised the net deferred income tax liability at the enactment date were projected to reverse at the lower 21 percent tax rate. The re-measurement of deferred income tax assets and liabilities resulted in the recognition of a $9.1 million deferred income tax benefit.

Pursuant to Staff Accounting Bulletin No. 118 issued by the Securities Exchange Commission, the Company made reasonable estimates of the effects the TCJA had on deferred income tax assets and liabilities at December 31, 2017. For items where the Company could not make a reasonable estimate, primarily loss reserve discounting, the Company used existing accounting guidance and the provisions of the tax laws that were in place prior to the enactment. Subsequently, the Company made its final determination of the effects of the TCJA when the Internal Revenue Service (IRS) issued Revenue Procedure 2019-06, which provides applicable discount factors for both the transition obligation (reserves at January 1, 2018), and reserves at December 31, 2018.

Comprehensive income tax expense (benefit) included in the consolidated financial statements for the years ended December 31, 2018, 2017 and 2016 is as follows. The deferred income tax benefit that resulted from the enactment of the TCJA in 2017 is included in the "operations" line.



	Year ended December 31,
($ in thousands)	2018			2017			2016
Income tax expense (benefit) on:
Operations	$	(7,208	)	$	578		$	17,004
Change in unrealized holding gains on investment securities available-for-sale	(2,534		)	10,205			(5,720		)
Change in funded status of retirement benefit plans:
Pension plans	(1,071		)	1,694			414
Postretirement benefit plans	(524		)	(774		)	(1,345		)
Comprehensive income tax expense (benefit)	$	(11,337	)	$	11,703		$	10,353

The Company had no provision for uncertain income tax positions at December 31, 2018 or 2017. The Company recognized no interest expense or other penalties related to U.S. federal or state income taxes during 2018, 2017 or 2016. It is the Company’s accounting policy to reflect income tax penalties as other expense, and interest as interest expense.

The Company files a U.S. federal income tax return, along with various state income tax returns. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2015.