1.Voluntary Market Rate Filing, which is a filing made by an insurer. This is the filing that Safety filed on November 19, 2007, and amended November 27, 2007.
The following tables present information by line of business for our total net reserves and the corresponding retained (i.e., direct less ceded) reserves and assumed reserves as of December 31, 2007 and December 31, 2006.
illustrates the length of time that they have been in a continuous unrealized loss position as of December 31, 2006.
Income Tax Expense. Our effective tax rates were 32.0% and 31.2% for the years ended December 31, 2006 and 2005, respectively. These effective rates were lower than the statutory rate of 35% primarily due to adjustments for tax-exempt investment income and a $1,161 tax benefit recorded as a reduction to income tax expense for the year ended December 31, 2005. This tax benefit represents a reduction in federal income tax reserves for tax years 2001 through 2003 during 2005 upon completion of an examination of the Company's federal income tax returns for the tax periods ended December 31, 2003, 2002, and 2001 by the Internal Revenue Service.
Diluted EPS also excludes common shares under restriction with a fair value on the grant date greater than the average market price of the Company's common stock during the period because their inclusion would be anti-dilutive. There were 65,760 anti-dilutive shares under restriction for the year ended December 31, 2007. There were no anti-dilutive shares under restriction for the years ended December 31, 2006 and 2005.
The Company sponsors the Safety Insurance Company 401(k) qualified defined contribution retirement plan (the "Retirement Plan"). The Retirement Plan is available to all eligible employees of the Company. An employee must be 21 years of age to be eligible to participate in the Retirement Plan, and is allowed to contribute on a pre-tax basis up to the maximum allowed under federal law. The Retirement Plan is administered by the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974. At the close of each Retirement Plan year, the Company makes a matching contribution equal to 100% of the amount each participant contributed during the plan year from their total pay, up to a maximum amount of 8% of the participant's base salary, to those participants who have contributed to the Retirement Plan and were employed on the last day of the Retirement Plan year. Compensation expense related to the Retirement Plan was $1,900, $1,661 and $1,066 for the years ended December 31, 2007, 2006 and 2005, respectively.
On March 10, 2006, the Board of Directors ("Board") of the Company approved amendments to the Incentive Plan, subject to shareholder approval, to (i) increase the number of shares of common stock available for issuance by 1,250,000 shares, (ii) remove obsolete provisions, and (iii) make other non-material changes. A total of 1,250,000 shares of common stock had previously been authorized for issuance under the Incentive Plan. The Incentive Plan, as amended, was approved by the shareholders
FAS 123R requires the disclosure of pro forma information for periods prior to adoption. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to these stock options.