Investments

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Investments

NOTE 9 – INVESTMENTS

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

	Three Months Ended March 31
	2016			2015
Fixed maturities	$	177,837		$	71,936
Short-term investments		34,254			15,472
Total investment income		212,091			87,408
Net realized losses		(1,278	)		—
Investment income and net realized losses	$	210,813		$	87,408

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
March 31, 2016
Available-for-sale:
Fixed maturities
Certificates of deposit	$	57,281,000	$	—	$	—		$	57,281,000
U.S. treasury securities		24,080,011		56,215		(4,814	)		24,131,412
Total fixed maturities	$	81,361,011	$	56,215	$	(4,814	)	$	81,412,412

		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

A summary of the unrealized gains (losses) on investments in fixed maturities carried at fair value and the applicable deferred federal income taxes are shown below:

	March 31			December 31
	2016			2015
Gross unrealized gains on fixed maturities	$	56,215		$	3,188
Gross unrealized (losses) on fixed maturities		(4,814	)		(44,624	)
Net unrealized gains (losses) on fixed maturities		51,401			(41,436	)
Deferred federal tax (expense) benefit		(17,476	)		14,088
Net unrealized gains (losses), net of deferred income taxes	$	33,925		$	(27,348	)

At March 31, 2016, the Company had two fixed maturity investments with a combined unrealized loss of $4,667 for a continuous period of less than 12 months and one fixed maturity investment with an unrealized loss of $147 for a continuous period of more than 12 months. At December 31, 2015, the Company had three fixed maturity investments with a combined unrealized loss of $38,509 for a continuous period of less than 12 months and two fixed maturity investments with a combined unrealized loss of $6,115 for a continuous period of more than 12 months.

The Company closely monitors its investments. 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 as of March 31, 2016, and December 31, 2015, were determined to be temporary.

Although the Company does not intend to sell its fixed maturity investments prior to maturity, the Company may sell investment securities from time to time in response to cash flow requirements, economic and/or market conditions. During the three months ended March 31, 2016, the Company sold three certificates of deposit. These securities had amortized cost of $746,000. The Company realized an investment loss of $1,278 on the sale. The Company did not sell any fixed maturity investments during the three months ended March 31, 2015. There were no realized investment gains or losses during the three months ended March 31, 2015. 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’s investment in certificates of deposit included $56,681,000 and $57,527,000 of brokered certificates of deposit as of March 31, 2016, and December 31, 2015, respectively. Brokered certificates of deposit provide the safety and security of a certificate of deposit 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 certificate of deposit investments are insured by the Federal Deposit Insurance Corporation (“FDIC”). Brokered certificates of deposit 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 certificates of deposit 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 certificates of deposit are within the FDIC insured permissible limits. As of March 31, 2016, and December 31, 2015, the Company’s remaining certificates of deposit totaling $600,000 are from four different banks and represent statutory deposits that are assigned to and are 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 certificates of deposit 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		December 31
		2016		2015
U.S. treasury bills	$	4,994,799	$	9,987,804
U.S. treasury money market fund		4,720,402		3,357,841
Certificates of deposit		450,000		1,346,000
Bank money market accounts		1,122,427		947,395
Bank savings accounts		1,763		1,763
Total short-term investments	$	11,289,391	$	15,640,803