Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Reconciliation of Provision for Income Taxes Based on Income (Loss) Before Federal Income Taxes, Computed using Federal Statutory Rate Versus Reported Provision for Income Taxes

The following is a reconciliation of the provision for income taxes based on income (loss) before federal income taxes, computed using the federal statutory rate versus the reported provision for income taxes for the years ended December 31, 2017, 2016, and 2015:

	December 31,
	2017			2016			2015
Provisions for income taxes computed
at Federal statutory rate (35%)	$	35,626		$	(7,498	)	$	3,129
Increase (decrease) in income taxes resulting from:
Dividend received deduction		(8,047	)		(7,567	)		(6,622	)
Tax credits		(222	)		(458	)		(302	)
Valuation allowance on deferred tax assets		(65,529	)		21,810			(1,497	)
Change in Federal Tax Rate		41,028			-			-
Provision to return adjustment		(439	)		(727	)		498
State taxes (benefits)		712			211			(287	)
Unrecognized tax benefits		4			987			363
Audit adjustment		-			(8,225	)		-
Other		(749	)		462			-
Income tax provision	$	2,384		$	(1,005	)	$	(4,718	)

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes. Deferred income tax assets and liabilities are measured at the statutory rate of 21% as of December 31, 2017 and 35% as of December 31, 2016 and were as follows:

	December 31,
	2017			2016
Deferred tax assets
Tax DAC	$	1,205		$	14,992
Net operating and capital loss carryforward		116,117			228,864
Intangible assets		14,786			29,824
Transitional reserve amount		8,849			-
Policyholder reserves		17,189			29,546
Tax credits		19,511			13,992
Other		1,999			1,714
Total deferred tax assets	$	179,656		$	318,932
Valuation allowance		(78,697	)		(154,440	)
Net deferred tax assets	$	100,959		$	164,492

Deferred tax liabilities
VOBA	$	51,553		$	95,150
Policyholder reserves		8,050			20,106
Transitional reserve amount		3,988			-
Investments		39,158			48,660
Other		36			-
Total deferred tax liabilities	$	102,785		$	163,916
Total net deferred tax asset (liability)	$	(1,826	)	$	576

Income Tax Expense (Benefit)

As we complete the collection, preparation and analysis of data relevant to the TCJA, and interpret any additional guidance issued by the IRS, U.S. Department of the Treasury, or other standard-setting organizations, we may make adjustments to these provisional amounts.

As a result of the TCJA, the Company’s tax reserve deductible temporary difference decreased by an estimated ($4,860). This change results in an offsetting $4,860 deductible temporary difference that will be amortized into taxable income evenly over the next eight years. As noted, this transitional change amount was based on provisional estimate at December 31, 2017. Actual results may differ from the estimates and will be adjusted in future periods when the actuarial models and systems are updated for the policyholder tax reserve changes required by the TCJA.

The income tax expense (benefit) consists of the following for the years ended December 31, 2017, 2016, and 2015:

	December 31,
	2017			2016			2015
Current federal income tax expense (benefit)	$	-		$	(179	)	$	-
Current state income tax expense (benefit)		(17	)		(144	)		9
Deferred federal income tax expense (benefit)		1,290			(1,150	)		(4,275	)
Deferred state income tax expense (benefit)		1,111			468			(452	)
Total income tax expense (benefit)	$	2,384		$	(1,005	)	$	(4,718	)

Income Tax Receivable (Payable)

The income tax asset (liability) consists of the following at December 31, 2017 and 2016:

	December 31,
	2017			2016
Current federal income tax asset (liability)	$	-		$	-
Current state income tax asset (liability)	$	(108	)	$	1
Deferred federal income tax asset (liability)		(1,759	)		-
Deferred state income tax asset (liability)		(67	)		575
Net income tax asset (liability)	$	(1,934	)	$	576

Components of Change in Unrecognized Tax Benefits

The components of the change in the unrecognized tax benefits were as follows at December 31, 2017 and 2016:

	December 31,
	2017			2016
Balance at beginning of period	$	4,391		$	3,404
Additions for tax positions of prior years		4			987
Change in federal tax rate		(1,758	)		-
Balance at end of period	$	2,637		$	4,391