Mercury Insurance 2012 Annual Report Download - page 93
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72
9. Income Taxes
Income tax provision
The Company and its subsidiaries file a consolidated federal income tax return. The provision for income tax expense
consists of the following components:
Year Ended December 31,
2012 2011 2010
(Amounts in thousands)
Federal
Current $ 9,340 $ 31,390 $ 23,699
Deferred 6,238 20,518 9,964
$ 15,578 $ 51,908 $ 33,663
State
Current $ 2,079 $ 2,934 $ (3,225)
Deferred 742 (907)(246)
$ 2,821 $ 2,027 $ (3,471)
Total
Current $ 11,419 $ 34,324 $ 20,474
Deferred 6,980 19,611 9,718
Total $ 18,399 $ 53,935 $ 30,192
The income tax provision reflected in the consolidated statements of operations is reconciled to the federal income tax on
income before income taxes based on a statutory rate of 35% as shown in the table below:
Year Ended December 31,
2012 2011 2010
(Amounts in thousands)
Computed tax expense at 35% $ 47,359 $ 85,785 $ 63,837
Tax-exempt interest income (27,789)(31,414)(33,966)
Dividends received deduction (1,482)(1,704)(1,463)
State tax expense (benefit) 1,918 1,299 (3,580)
Other, net (1,607)(31) 5,364
Income tax expense $ 18,399 $ 53,935 $ 30,192
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of deferred tax assets is
dependent on generating sufficient taxable income of an appropriate character prior to their expiration. The Company believes it
has the ability and intent, through the use of prudent tax planning strategies and the generation of capital gains, to generate income
sufficient to avoid losing the benefits of its deferred tax assets. Significant components of the Company’s net deferred tax assets
and liabilities are as follows: