Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following for the years ended December 31:

(in thousands)
	2025		2024		2023
Federal
Current income tax expense	$	131,645	$	152,926	$	116,874
Deferred income tax expense (benefit)	19,547		4,026		(1,002)
State
Current income tax expense	76		13		3
Deferred income tax expense	—		—		—
Income tax expense	$	151,268	$	156,965	$	115,875

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rate to pre-tax income, is as follows for the years ended December 31:

(dollars in thousands)
	2025				2024				2023
	Amount		%		Amount		%		Amount		%
U.S. federal tax at statutory rate	$	149,227	21.0	%	$	159,029	21.0	%	$	118,007	21.0	%
State and local income taxes, net of federal income tax effect (1)	60		0.0		10		0.0		2		0.0
Tax credits	(1,432)		(0.2)		(2,000)		(0.3)		(1,300)		(0.2)
Nontaxable or nondeductible items	2,703		0.4		569		0.1		651		0.1
Other adjustments	710		0.1		(643)		(0.1)		(1,485)		(0.3)
Income tax provision	$	151,268	21.3	%	$	156,965	20.7	%	$	115,875	20.6	%

(1)    State taxes in Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.

Temporary differences and carry-forwards, which give rise to deferred tax assets and liabilities, are as follows as of December 31:

(in thousands)
	2025		2024
Deferred tax assets:
Other employee benefits	$	18,213	$	18,409
Allowance for management fee returned on cancelled policies	7,322		4,647
Charitable contributions	5,221		—
Deferred revenue	4,457		4,181
Current expected credit loss allowance	3,647		2,966
Unrealized losses on investments	—		3,827
Other	4,958		4,617
Total deferred tax assets	43,818		38,647
Deferred tax liabilities:
Depreciation	47,017		27,089
Pension and other postretirement benefits	13,919		12,276
Unrealized gains on investments	2,532		—
Prepaid expenses	1,506		2,013
Other	3,632		3,687
Total deferred tax liabilities	68,606		45,065
Net deferred tax liability	$	(24,788)	$	(6,418)

If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had no valuation allowance recorded at December 31, 2025 or 2024.

We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2025 and 2024. Any interest expense related to uncertain tax positions would be recognized in income tax expense.

New tax legislation, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was signed into law on July 4, 2025. The OBBBA included changes to the timing of tax deductions related to depreciation and software development expenditures in 2025. The legislation also introduced a 1% taxable income floor for charitable deductions effective January 1, 2026. The effects of the OBBBA are reflected in our income tax provisions and effective tax rate for the year ended December 31, 2025.

Federal income taxes paid were $106.5 million, $163.0 million, and $104.0 million in 2025, 2024, and 2023, respectively. Federal income tax refunds received were $2.6 million and $3.1 million in 2025 and 2024, respectively. State income taxes paid, net of state income tax refunds received, were $0.1 million in 2025.

Tax years ending December 31, 2024, 2023 and 2022 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange.  In that capacity, we provide all services and facilities necessary to conduct the Exchange's insurance business.  Indemnity and the Exchange together constitute a single insurance business.  Consequently, we are not subject to state corporate income or franchise taxes in states where the Exchange conducts its business and the states collect premium tax in lieu of corporate income or franchise tax, as a result of the Exchange's remittance of premium taxes in those states.