Investments

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Investments

NOTE 9 – INVESTMENTS

The Company manages its own investment portfolio. A summary of total investment income is as follows:

	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011
Fixed maturities	$	464,620	$	764,840	$	1,042,101	$	1,535,237
Short-term investments		9,776		2,061		14,368		5,061
Total Investment Income	$	474,396	$	766,901	$	1,056,469	$	1,540,298

The amortized cost and estimated fair values of investments in fixed maturities by category are as follows:

				Gross		Gross			Estimated
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
June 30, 2012
Available-for-sale:
Fixed maturities
U.S. treasury securities	$	54,378,509	$	523,191	$	(4,620	)	$	54,897,080
Certificates of deposit		13,480,000		—		—			13,480,000
Total Fixed Maturities	$	67,858,509	$	523,191	$	(4,620	)	$	68,377,080

				Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
December 31, 2011
Available-for-sale:
Fixed maturities
U.S. treasury securities	$	73,432,677	$	1,453,947	$	—	$	74,886,624
Certificates of deposit		16,470,000		—		—		16,470,000
Total Fixed Maturities	$	89,902,677	$	1,453,947	$	—	$	91,356,624

A summary of the unrealized appreciation (depreciation) on investments carried at fair value and the applicable deferred federal income taxes are shown below:

		June 30			December 31
		2012			2011
Gross unrealized appreciation of fixed maturities	$	523,191		$	1,453,947
Gross unrealized (depreciation) of fixed maturities		(4,620	)		—
Net unrealized appreciation on investments		518,571			1,453,947
Deferred federal tax expense		(176,314	)		(494,343	)
Net Unrealized Appreciation, Net of Deferred Income Taxes	$	342,257		$	959,604

The Company had one U.S. treasury security in an unrealized loss position for a continuous period of less than six months as of June 30, 2012, and had no investments in an unrealized loss position as of December 31, 2011.

The Company monitors its investments closely. If an unrealized loss is determined to be other-than-temporary, it is written off as a realized loss through the Consolidated Statements of Operations. The Company’s methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors including the length of time to maturity and the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. The Company does not have the intent to sell its fixed maturity investments and it is not likely that the Company would be required to sell any of its fixed maturity investments prior to recovery of its amortized costs. There were no realized investments gains (losses) in the three and six months ended June 30, 2012 and 2011. The unrealized gains or losses from fixed maturities are reported as “accumulated other comprehensive income,” which is a separate component of stockholders’ equity, net of any deferred tax effect. The Company did not sell any fixed maturity investments in the three and six months ended June 30, 2012 and 2011.

The Company’s investment in Certificates of Deposit (CD) included $12,880,000 and $15,870,000 of brokered CD’s as of June 30, 2012 and December 31, 2011, respectively. Brokered CDs provide the safety and security of a CD combined with competitive rates and the convenience gained by one-stop shopping for rates at various institutions. This allows the Company to spread its investments across multiple institutions so that all of its CD investments are insured by the Federal Deposit Insurance Corporation (FDIC). Brokered CDs are purchased through UnionBanc Investment Services, LLC, a registered broker-dealer, investment advisor, member of FINRA/SIPC, and a subsidiary of Union Bank, N.A. Brokered CDs are a direct obligation of the issuing depository institution, are bank products of the issuing depository institution, are held in the name of Union Bank as Custodian for the benefit of the Company, and are FDIC insured within permissible limits. All the Company’s brokered CD’s are within the FDIC insured permissible limits. As of June 30, 2012 and December 31, 2011, the Company’s remaining CDs totaling $600,000 are from four different banks and represent statutory deposits that are assigned to and held by the California State Treasurer and the Insurance Commissioner of the State of Nevada. These deposits are required for writing certain lines of business in California and for admission in the state of Nevada. All the Company’s brokered and non-brokered CDs are within the FDIC insured permissible limits.

Short-term investments consist of the following:

		June 30, 2012		December 31, 2011
U.S. treasury money market fund	$	1,198,600	$	6,802,126
Short-term U.S. treasury bills		53,282,638		30,288,668
Bank money market accounts		1,760,937		1,046,813
Bank savings accounts		1,762		1,862
Total Short-Term Investments	$	56,243,937	$	38,139,469