Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

Note 7. Income Taxes

Total income taxes were allocated as follows:

	2021			2020
Total tax expense on income	$	1,021		$	3,334
Tax expense on components of shareholders’ equity:
Net unrealized gains (losses) on investment securities		(1,944	)		3,865
Total tax expense (benefit)	$	(923	)	$	7,199

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

	2021			2020
Federal income tax provision	$	1,112		$	3,256
Statutory rate		21	%		21	%
Dividends-received deduction		(26	)		(12	)
Meals and entertainment		32			20
Vested stock and club dues		(28	)		36
Parking disallowance		16			16
Adjustment for prior years’ estimates to actual		(85	)		18
Income tax expense	$	1,021		$	3,334
Effective tax rate		19.3	%		21.5	%

The primary differences between the effective tax rate and the federal statutory income tax rate for 2021 resulted from the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $85 in the year ended December 31, 2021. Also contributing to differences between the effective tax rate and the federal statutory income tax rate were permanent differences related to meals and entertainment and vested stock and club dues.  Another contributing factor was the dividends-received deduction (“DRD”). 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 primary differences between the effective tax rate and the federal statutory income tax rate for 2020 resulted from permanent differences related to meals and entertainment and vested stock and club dues.  Also contributing to differences between the effective tax rate and the federal statutory income tax rate were adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $18 in the year ended December 31, 2020.

Deferred tax assets and liabilities at December 31, 2021 and 2020 were comprised of the following:

	2021			2020
Deferred tax assets:
Deferred acquisition costs	$	7,026		$	4,666
Insurance reserves		2,028			2,682
Impaired assets		780			822
Bad debts and other		280			326
Total deferred tax assets		10,114			8,496
Deferred tax liabilities:
Deferred and uncollected premiums	$	(561	)	$	(409	)
Net unrealized investment gains		(7,689	)		(9,235	)
Other		(109	)		(153	)
Total deferred tax liabilities		(8,359	)		(9,797	)
Net deferred tax asset (liability)	$	1,755		$	(1,301)

The components of income tax expense were:

	2021			2020
Current – Federal	$	2,133		$	5,584
Deferred – Federal		(1,112	)		(2,250	)
Total	$	1,021		$	3,334

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2018, 2019 and 2020 are considered open tax years that remain subject to examination by the Internal Revenue Service.