Valuation of deferred tax assets - Deferred taxes are recognized using the asset and liability method of accounting. Under this method the future tax consequences attributable to temporary differences in the tax basis of assets, liabilities and items recognized directly in equity and the financial reporting basis of such items are recognized in the financial statements by recording deferred tax assets ("DTAs") or deferred tax liabilities ("DTLs").
Year ended December 31, 2016 compared to year ended December 31, 2015:
In-force premium was $224.6 million and $210.6 million as of December 31, 2016 and December 31, 2015, respectively. The Company's gross unearned premium reserve was $113.2 million and $108.2 million as of December 31, 2016 and December 31, 2015, respectively. The increase in gross unearned premium reserves and in-force premium since December 31, 2015 primarily resulted from growth in the states of California, Nevada, New Jersey, New York and Washington offset by a reduction in business in the state of Michigan.
Atlas recorded other income for the year ended December 31, 2015 of $356,000 compared to other income of $2,000 for the year ended December 31, 2014. The increase in other income was mostly fee income generated by our premium finance companies.
As part of our on-going analysis of deferred tax assets, management has assessed both positive and negative evidence according to guidance provided by the FASB. Based on this guidance we have determined that it is more likely than not that the Company will be able to fully utilize its DTAs as a result of the significant positive evidence and the lack of negative evidence. As such we have evaluated our valuation allowance and determined that all DTAs net of DTLs are available to offset income in all future periods and no valuation allowance is needed. This conclusion is based upon management’s evaluation of the new information it has analyzed and not from management’s new evaluation or new interpretation of information that was available in a previous financial reporting period. Accordingly, the Company recorded a reversal of its deferred tax asset valuation allowance of $9.4 million for the year ended December 31, 2014 commensurate with this conclusion.
The Loan Agreement also provides for the issuance of letters of credit in an amount up to $2.0 million outstanding at any time. In addition, there is a non-utilization fee for each of the $30.0 million line of credit and $5.0 million revolving line of credit equal to 0.50% per annum of an amount equal to $30.0 million and $5.0 million, respectively, less the daily average of the aggregate principal amount outstanding under such credit lines (plus, in the case of the $30.0 million line of credit, the aggregate amount of the letter of credit obligations outstanding).
Level 1 - Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
The Company had no fair value investments classified as Level 3 as of December 31, 2016 and December 31, 2015. There were no transfers in or out of Level 2 or Level 3 during the years ended December 31, 2016 and 2015.
Atlas did not declare or pay any dividends to its common shareholders during the years ended December 31, 2016 and 2015.