Investments

6 Months Ended

Jun. 30, 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 June 30				Six Months Ended June 30
	2016		2015		2016			2015
Fixed maturities	$	180,828	$	85,229	$	358,665		$	157,165
Short-term investments		31,622		12,706		65,876			28,178
Total investment income		212,450		97,935		424,541			185,343
Net realized losses		—		—		(1,278	)		—
Total investment income and net realized losses	$	212,450	$	97,935	$	423,263		$	185,343

 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
June 30, 2016
Available for sale:
Fixed maturities
Certificates of deposit	$	62,275,000	$	—	$	—	$	62,275,000
U.S. treasury securities		24,084,294		62,364		—		24,146,658
Total fixed maturities	$	86,359,294	$	62,364	$	—	$	86,421,658

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 carried at fair value and the applicable deferred federal income taxes are shown below:

	June 30			December 31
	2016			2015
Gross unrealized gains of fixed maturities	$	62,364		$	3,188
Gross unrealized (losses) of fixed maturities		—			(44,624	)
Net unrealized gains (losses) on investments		62,364			(41,436	)
Deferred federal tax (expense) benefit		(21,204	)		14,088
Net unrealized gains (losses), net of deferred income taxes	$	41,160		$	(27,348	)

At December 31, 2015, the Company had three fixed maturity investments with gross unrealized losses of $38,509 for a continuous period of less than 12 months and two fixed maturity investments with gross unrealized losses 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 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. The Company sold three certificates of deposit during the six months ended June 30, 2016. These securities had an 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 and there were no realized investment gains or losses during the three months ended June 30, 2016, nor during the three and six months ended June 30, 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 $61,675,000 and $57,527,000 of brokered certificates of deposit as of June 30, 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 certificates of deposit 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 MUFG 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 by UnionBank Global Custody Services for the benefit of the Company, and are FDIC insured within permissible limits. As of June 30, 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:

		June 30		December 31
		2016		2015
U.S. treasury bills	$	—	$	9,987,804
U.S. treasury money market fund		5,063,582		3,357,841
Certificates of deposit		948,000		1,346,000
Bank money market accounts		945,496		947,395
Bank savings accounts		1,763		1,763
Total short-term investments	$	6,958,841	$	15,640,803