Investments

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Investments

NOTE 3 – INVESTMENTS

A summary of net investment income and net realized losses is as follows:

	Year ended December 31
	2015			2014		2013
Fixed maturities	$	430,828		$	102,471	$	253,252
Short-term investments		48,536			59,267		79,745
Total investment income		479,364			161,738		332,997
Net realized losses		(7,251	)		—		—
Investment income and net realized losses	$	472,113		$	161,738	$	332,997

The amortized cost and estimated fair value of fixed maturity investments at December 31, 2015, by contractual maturity are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

		Amortized Cost		Estimated Fair Value
Due in one year or less	$	18,119,689	$	18,115,190
Due after one year through five years		64,083,038		64,046,101
Total fixed maturities	$	82,202,727	$	82,161,291

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
December 31, 2015
Available-for-sale:
Fixed maturities
Certificates of deposit	$	58,127,000	$	—	$	—		$	58,127,000
U.S. treasury securities		24,075,727		3,188		(44,624	)		24,034,291
Total fixed maturities	$	82,202,727	$	3,188	$	(44,624	)	$	82,161,291
December 31, 2014
Available-for-sale:
Fixed maturities
Certificates of deposit	$	15,089,000	$	—	$	—		$	15,089,000
U.S. treasury securities		20,064,111		14,476		(9,031	)		20,069,556
Total fixed maturities	$	35,153,111	$	14,476	$	(9,031	)	$	35,158,556

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

	Year ended December 31
	2015			2014
Gross unrealized appreciation of fixed maturities	$	3,188		$	14,476
Gross unrealized (depreciation) of fixed maturities		(44,624	)		(9,031	)
Net unrealized appreciation (depreciation) on investments		(41,436	)		5,445
Deferred federal tax (expense) benefit		14,088			(1,851	)
Net unrealized appreciation (depreciation), net of deferred income taxes	$	(27,348	)	$	3,594

The Company had three U.S. treasury securities in an unrealized loss position for a continuous period of less than twelve months and two U.S. treasury securities in an unrealized loss position for a continuous period of more than twelve months as of December 31, 2015. The Company had one U.S. treasury security in an unrealized loss position for a continuous period of less than twelve months and one U.S. treasury security in an unrealized loss position for a continuous period of more than twelve months as of December 31, 2014.

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 unrealized losses on the U.S. treasury securities in unrealized loss positions as of December 31, 2015, and December 31, 2014, were determined to be temporary.

Although the Company does not have intent to sell its fixed maturity investments, the Company may sell investment securities from time to time in response to economic and market conditions. During the year ended December 31, 2015, the Company sold 22 certificates of deposit. These securities had amortized cost of $5,478,000. The Company realized an investment loss of $7,251 on the sale. The Company did not sell any fixed maturity investments in the years ended December 31, 2014 and 2013. There were no realized investment gains or losses in the years ended December 31, 2014 and 2013.

The Company’s investment in Certificates of Deposit (CDs) included $57,527,000 and $14,489,000 of brokered CDs as of December 31, 2015, and December 31, 2014, 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 December 31, 2015 and 2014, the Company’s remaining CDs totaling $600,000 were 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. Due to nature of the Company’s business, certain bank accounts may exceed FDIC insured permissible limits.

Short-term investments have an initial maturity of one year or less and consist of the following:

	Year ended December 31
	2015		2014
U.S. treasury bills	$	9,987,804	$	69,968,988
U.S. treasury money market fund		3,357,841		1,450,451
Certificates of deposit		1,346,000		—
Bank money market accounts		947,395		838,207
Bank savings accounts		1,763		1,762
Total short-term investments	$	15,640,803	$	72,259,408