Investments

9 Months Ended

Sep. 30, 2014

Notes to Financial Statements

Investments

NOTE 9 – INVESTMENTS

A summary of total investment income is as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2014		2013		2014		2013
Fixed maturities	$	19,796	$	51,006	$	46,428	$	239,167
Short-term investments		12,561		17,616		47,370		62,562
Total investment income	$	32,357	$	68,622	$	93,798	$	301,729

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

		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
Available for sale:
Fixed maturities:
Certificates of deposit	$	13,542,000	$	—	$	—		$	13,542,000
U.S. treasury securities		15,078,947		6,632		(2,876	)		15,082,703
Total fixed maturities	$	28,620,947	$	6,632	$	(2,876	)	$	28,624,703

		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:

		September 30			December 31
		2014			2013
Gross unrealized appreciation of fixed maturities	$	6,632			—
Gross unrealized (depreciation) of fixed maturities		(2,876	)	$	(8,757	)
Net unrealized appreciation (depreciation) on investments		3,756			(8,757	)
Deferred federal tax benefit (expense)		(1,278	)		2,977
Net unrealized appreciation (depreciation), net of deferred  income taxes	$	2,478		$	(5,780	)

At September 30, 2014, the Company had one U.S. treasury security in an unrealized loss position for a continuous period of less than three months and one U.S. treasury security in an unrealized loss position for a continuous period of more 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. The unrealized losses as of September 30, 2014, and December 31, 2013, were determined to be temporary and there were no realized investment gains or losses during the three or nine months ended September 30, 2014 and 2013. The unrealized gains or losses from fixed maturities are reported as “Accumulated other comprehensive income (loss),” 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 and nine months ended September 30, 2014 and 2013.

The Company’s investment in Certificates of Deposit (CDs) (excluding statutory deposits) included $12,942,000 and $6,249,000 of brokered CDs as of September 30, 2014, and December 31, 2013, respectively. Brokered CDs are designed to 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. As of September 30, 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 statutory 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:

		September 30, 2014		December 31, 2013
U.S. treasury bills	$	76,986,519	$	91,979,877
U.S. treasury money market fund		682,889		214,574
Bank money market accounts		1,128,088		1,611,104
Bank savings accounts		1,762		1,762
Total short-term investments	$	78,799,258	$	93,807,317