Income Taxes

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Income Taxes [Abstract]

Income Taxes [Text Block]

(8) Income Taxes

At December 31, 2011 and 2010, we had current income taxes payableof $5.9million and $22.5 million included in accounts payable and accrued liabilities in the consolidated balance sheet.

The following table summarizes the differences between our effective tax rate for financial statement purposes and the Federal statutory rate.

	2011			2010			2009
Statutory tax rate		35.0	%		35.0	%		35.0	%
Federal tax at statutory rate	$	124,252		$	171,439		$	181,493
Nontaxable municipal bond interest and dividend received
deduction		(29,021)			(26,968)			(24,109)
State income taxes, net of federal tax benefit		3,050			2,397			4,107
Foreign income taxes		25,410			32,008			32,319
Foreign tax credit		(25,410)			(32,008)			(32,310)
Uncertain tax positions (net of federal tax benefit (expense) on state
positions: $212 in 2011, $(52) in 2010 and $(88) in 2009)		38			(1,532)			(1,704)
Other, net		1,444			(605)			4,887
Income tax expense	$	99,763		$	144,731		$	164,683
Effective tax rate		28.1	%		29.5	%		31.8	%

The components of income tax expense were as follows:

		2011		2010		2009
Federal current		$	47,993	$	113,837	$	125,126
Federal deferred			21,075		(3,218)		5,704
	Total federal		69,068		110,619		130,830
State current			2,203		1,797		3,001
State deferred			2,489		1,891		2,511
	Total state		4,692		3,688		5,512
Foreign current			28,543		31,691		27,996
Foreign deferred			(2,790)		317		2,137
	Total foreign		25,753		32,008		30,133
Uncertain tax positions			250		(1,584)		(1,792)
	Income tax expense	$	99,763	$	144,731	$	164,683

The net deferred tax liability is included in accounts payable and accrued liabilitiesin our consolidated balance sheets. The composition of deferred tax assets and liabilities at December 31, 2011 and 2010 was as follows:

		2011		2010
Excess of financial statement unearned premium over tax		$	26,217	$	22,897
Discounting of loss reserves, net of salvage and subrogation			62,402		61,738
Excess of financial statement accrued expenses over tax			17,373		22,635
Allowance for bad debts, not deductible for tax			6,216		5,721
Stock-based compensation expense in excess of deduction for tax			9,712		12,339
Financial statement loss for Lloyd's syndicates in excess of deduction for tax			7,571		0
Federal tax net operating loss carryforwards			4,451		3,859
State tax net operating loss carryforwards, net of federal tax benefit			2,179		2,205
Federal benefit of state uncertain tax positions			424		211
Valuation allowance			(7,607)		(7,767)
	Total deferred tax assets		128,938		123,838
Unrealized gain on increase in value of securities			120,854		48,656
Deferred policy acquisition costs, net of ceding commissions, deductible for tax			29,271		21,244
Amortizable goodwill for tax			84,110		72,252
Book basis in net assets of foreign subsidiaries in excess of tax			10,903		8,295
Property and equipment depreciation and other items			11,856		11,322
	Total deferred tax liabilities		256,994		161,769
	Net deferred tax liability	$	(128,056)	$	(37,931)

Changes in the valuation allowance account applicable to deferred tax assets relate primarily to net operating losses and other tax attributes for acquired businesses. Changes in the valuation allowance were as follows:

		2011		2010		2009
Balance at beginning of year		$	7,767	$	6,119	$	4,698
Net operating loss carryforwards			(120)		1,676		1,472
Other			(40)		(28)		(51)
	Balance at December 31	$	7,607	$	7,767	$	6,119

At December 31, 2011, we had Federal, state and foreign tax net operating loss carryforwards of approximately $12.7million, $48.5million and $4.6million, respectively, which will expire in varying amounts through 2031. Future use of certain carryforwards is subject to statutory limitations due to prior changes of ownership. We have recorded valuation allowances of $2.7million and $2.0million against our state and foreign loss carryforwards, respectively. Based on our history of taxable income in our domestic insurance and other operations, we believe it is more likely than not that the deferred tax assets related to net operating loss carryforwards, excluding amounts covered by valuation allowances, will be realized.

At December 31, 2011 and 2010, we had recorded tax liabilities for unrecognized gross tax benefits related to uncertain tax positions of $2.5million and $2.3million, respectively.If the uncertain tax benefits as of year-end 2011had been recognized in 2011, the total amount of such benefits would have reduced our2011 income tax expense and our effective tax rate. At December 31, 2011, it is reasonably possible that liabilities for unrecognized tax benefits could decrease $1.5million (including $0.3million in interest and penalties) in the next twelve months, due to the expiration of statutes of limitation.

The changes in our liability for unrecognized gross tax benefits were as follows:

		2011		2010		2009
Balance at beginning of year		$	2,274	$	3,821	$	5,002
Gross increases
Tax position of current year			160		289		670
Tax position of prior years			763		259		664
Gross decreases
Statute expirations			(595)		(1,244)		(1,630)
Settlements			0		0		(766)
Tax positions of prior years			(80)		(851)		(119)
	Balance at December 31	$	2,522	$	2,274	$	3,821

We report any potential net interest income and expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively. We recognized minimal interest income or expense and no penalties in 2011, 2010 and 2009. At December 31, 2011, we had no accrual for penalties and $0.4million for interest payable.

We file income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. Federal, state and local, or foreign income tax examinations by tax authorities for years before 2007.The IRS examination of our 2007– 2009 federal income tax returns was completed recently. Our New York income tax returns for 2007 – 2009 and our Massachusettsincome tax returns for 2009 –2010 are currently under audit. While we cannot predict the outcome of these audits, we do not anticipate the results of these state tax audits to have a material effect on our consolidated financial position, results of operations or cash flows.

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