Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 7. Income Taxes

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and income tax expense is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Federal income tax provision at statutory rate of 35%	$	299		$	116		$	901		$	336
Dividends received deduction		(38	)		(21	)		(82	)		(70	)
Small life insurance company deduction		(32	)		20			(237	)		-
Other permanent differences		8			25			16			33
Change in asset valuation allowance due to change in judgment relating to realizability of deferred tax assets		(164	)		-			(462	)		-
Income tax expense	$	73		$	140		$	136		$	299

The components of the income tax expense were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Current - Federal	$	22		$	(11	)	$	118		$	4
Deferred - Federal		215			151			480			295
Change in deferred tax asset valuation allowance		(164	)		-			(462	)		-
Total	$	73		$	140		$	136		$	299

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month and six month periods ended June 30, 2012 resulted from the dividends received deduction ("DRD"), the small life insurance company deduction ("SLD") and the change in deferred tax asset valuation allowance.  The current estimated DRD is adjusted as underlying factors change and can vary from the estimates based on, but not limited to, actual distributions from these investments as well as appropriate levels of taxable income.  The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income ("LICTI").  The amount of the SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3,000 and is ultimately phased out at $15,000.  The change in deferred tax asset valuation allowance was primarily due to the unanticipated utilization of certain capital loss carryforward benefits that had been previously reduced to zero through an existing valuation allowance reserve.