Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes [Abstract]

Income Taxes

Note 9. Income Taxes

Total income taxes were allocated as follows:

	2024			2023
Total tax benefit on income	$	(996	)	$	(394	)
Tax expense (benefit) on components of shareholders’ equity:
Net unrealized income (losses) on investment securities		(689	)		1,602
Total tax expense (benefit)	$	(1,685	)	$	1,208

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

	2024			2023
Federal income tax provision at the statutory rate	$	(1,105	)	$	(119	)
Statutory rate		21	%		21	%
Dividends-received deduction		(25	)		(24	)
Meals and entertainment		76			15
Vested stock and club dues		3			16
Parking disallowance		20			17
Adjustment for prior years’ estimates to actual		35			(299	)
Income tax benefit	$	(996	)	$	(394	)
Effective tax rate		18.9	%		69.7	%

The primary difference between the effective tax rate and the federal statutory income tax rate for 2024 resulted from a permanent difference related to meals and entertainment.  Also contributing to differences between the effective tax rate and the federal statutory income tax rate was 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 $35 in the year ended December 31, 2024. Another contributing factor to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to 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 difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of $299 in the year ended December 31, 2023, which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation. Also contributing to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment.

Deferred tax assets and liabilities at December 31, 2024 and 2023 were comprised of the following:

	2024			2023
Deferred tax assets:
Deferred acquisition costs	$	9,508		$	8,808
Net unrealized investment losses		4,350			3,342
Insurance reserves		3,139			2,898
Impaired assets		791			791
Bad debts and other		482			337
Net operating loss		1,940			559
Total deferred tax assets		20,210			16,735
Deferred tax liabilities:
Deferred and uncollected premiums	$	(2,092	)		(1,053	)
Total deferred tax liabilities		(2,092	)		(1,053	)
Net deferred tax asset	$	18,118		$	15,682

The components of income tax benefit were:

	2024			2023
Current – Federal	$	751		$	2,727
Deferred – Federal		(1,747	)		(3,121	)
Total	$	(996	)	$	(394	)

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2021, 2022 and 2023 are considered open tax years that remain subject to examination by the Internal Revenue Service.