Income Taxes

9 Months Ended

Sep. 30, 2013

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 (benefit) is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Federal income tax provision at statutory rate of 35%	$	941		$	335		$	3,417		$	1,236
Dividends received deduction		(41	)		(45	)		(119	)		(127	)
Small life insurance company deduction		(107	)		(375	)		(185	)		(612	)
Other permanent differences		9			12			27			28
Change in asset valuation allowance due to change in judgment relating to realizability of deferred tax assets		(799	)		24			(2,945	)		(438	)
Adjustment for prior years’ estimates to actual		6			(79	)		6			(79	)
Income tax expense (benefit)	$	9		$	(128	)	$	201		$	8

The components of income tax expense (benefit) were:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Current - Federal	$	76		$	213		$	173		$	331
Deferred - Federal		732			(365	)		2,973			115
Change in deferred tax asset valuation allowance		(799	)		24			(2,945	)		(438	)
Total	$	9		$	(128	)	$	201		$	8

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month and nine month periods ended September 30, 2013 and 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 estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s 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 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 due to the unanticipated utilization of certain capital loss carryforward benefits that had been previously reduced to zero through an existing valuation allowance reserve.  The provision-to-filed return adjustments are generally updated at the completion of the third quarter of each fiscal year and were $6 and $79 in the three month and nine month periods ended September 30, 2013 and 2012, respectively.