Investments

3 Months Ended

Mar. 31, 2014

Notes to Financial Statements

Investments

NOTE 9 – INVESTMENTS

A summary of total investment income is as follows:

	Three Months Ended March 31
	2014		2013
Fixed maturities	$	13,089	$	98,306
Short-term investments		18,255		23,354
Total investment income	$	31,344	$	121,660

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

		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2014
Available for sale:
Fixed maturities
Certificates of deposit	$	6,649,000		—		—		$	6,649,000
U.S. treasury securities		5,096,157	$	641	$	(2,782	)		5,094,016
Total fixed maturities	$	11,745,157	$	641	$	(2,782	)	$	11,743,016

		Amortized Cost	Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2013
Available for sale:
Fixed maturities
Certificates of deposit	$	6,849,000	—		—		$	6,849,000
U.S. treasury securities		5,095,563	—	$	(8,757	)		5,086,806
Total fixed maturities	$	11,944,563	—	$	(8,757	)	$	11,935,806

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

		March 31			December 31
		2014			2013
Gross unrealized appreciation of fixed maturities	$	641			—
Gross unrealized (depreciation) of fixed maturities		(2,782	)	$	(8,757	)
Net unrealized appreciation on investments		(2,141	)		(8,757	)
Deferred federal tax expense		728			2,977
Net unrealized (depreciation),net of deferred income taxes	$	(1,413	)	$	(5,780	)

At March 31, 2014, the Company had one U.S. treasury security in an unrealized loss position for a continuous period of less than twelve months. At December 31, 2013, the Company had two U.S. treasury securities in an unrealized loss position for a continuous period of less than twelve months.

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 investment gains (losses) during the three months ended March 31, 2014 and 2013. 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 during the three months ended March 31, 2014 and 2013.

The Company’s investment in Certificates of Deposit (CDs) included $6,049,000 and $6,249,000 of brokered CDs as of March 31, 2014 and December 31, 2013, respectively. Brokered CDs provide the safety and security of a CD combined with 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 CDs are within the FDIC insured permissible limits. As of March 31, 2014 and December 31, 2013, 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 have an initial maturity of one year or less and consist of the following:

		March 31, 2014		December 31, 2013
U.S. treasury bills	$	91,982,143	$	91,979,877
U.S. treasury money market fund		716,721		214,574
Bank money market accounts		1,862,166		1,611,104
Bank savings accounts		1,762		1,762
Total short-term investments	$	94,562,792	$	93,807,317