2. INVESTMENTS

The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of the Company’s fixed maturity investments, by major security type, and equity securities as of June 30, 2016 and December 31, 2015 are as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of June 30, 2016
Fixed maturity investments:
U.S. government agency securities	$	1,470,036	$	14,882	$	—		$	1,484,918
Obligations of states and political subdivisions		5,129,329		78,197		(5,777	)		5,201,749
Corporate debt securities		2,105,062		17,433		(7,420	)		2,115,075
Total fixed maturity investments		8,704,427		110,512		(13,197	)		8,801,742
Equity securities		10,282,766		3,147,780		(118,236	)		13,312,310
Hedge fund		1,000,000		626,257		—			1,626,257
Total equity securities		11,282,766		3,774,037		(118,236	)		14,938,567
Total investments	$	19,987,193	$	3,884,549	$	(131,433	)	$	23,740,309

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of December 31, 2015
Fixed maturity investments:
U.S. government agency securities	$	1,477,979	$	5,372	$	(3,965	)	$	1,479,386
Obligations of states and political subdivisions		5,851,938		61,506		(14,888	)		5,898,556
Corporate debt securities		307,682		5,562		—			313,244
Total fixed maturity investments		7,637,599		72,440		(18,853	)		7,691,186
Equity securities		9,418,922		3,702,368		(87,838	)		13,033,452
Hedge fund		1,000,000		669,393		—			1,669,393
Total equity securities		10,418,922		4,371,761		(87,838	)		14,702,845
Total investments	$	18,056,521	$	4,444,201	$	(106,691	)	$	22,394,031

The following tables summarize the Company’s fixed maturity and equity securities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

	12 months or greater					Less than 12 months					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
As of June 30, 2016
Fixed maturity investments:
U.S. government agency securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions		1,968,693		(5,775	)		330,053		(2	)		2,298,746		(5,777	)
Corporate debt securities		—		—			474,642		(7,420	)		474,642		(7,420	)
Total fixed maturity investments		1,968,693		(5,775	)		804,695		(7,422	)		2,773,388		(13,197	)
Equity securities		188,158		(17,756	)		3,226,297		(100,480	)		3,414,455		(118,236	)
Hedge fund		—		—			—		—			—		—
Total equity securities		188,158		(17,756	)		3,226,297		(100,480	)		3,414,455		(118,236	)
Total investments	$	2,156,851	$	(23,531	)	$	4,030,992	$	(107,902	)	$	6,187,843	$	(131,433	)

	12 months or greater					Less than 12 months					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
As of December 31, 2015
Fixed maturity investments:
U.S. government agency securities	$	—	$	—		$	1,025,773	$	(3,965	)	$	1,025,773	$	(3,965	)
Obligations of states and political subdivisions		1,699,466		(11,744	)		928,206		(3,144	)		2,627,672		(14,888	)
Corporate debt securities		—		—			—		—			—		—
Total fixed maturity investments		1,699,466		(11,744	)		1,953,979		(7,109	)		3,653,445		(18,853	)
Equity securities		141,370		(26,393	)		790,698		(61,445	)		932,068		(87,838	)
Hedge fund		—		—			—		—			—		—
Total equity securities		141,370		(26,393	)		790,698		(61,445	)		932,068		(87,838	)
Total investments	$	1,840,836	$	(38,137	)	$	2,744,677	$	(68,554	)	$	4,585,513	$	(106,691	)

As of June 30, 2016 and December 31, 2015, there were 29 and 26 securities in an unrealized loss position with an estimated fair value of $6,187,843 and $4,585,513, respectively. As of June 30, 2016 and December 31, 2015, 13 and 10 of these securities had been in an unrealized loss position for 12 months or greater, respectively. As of June 30, 2016 and December 31, 2015, none of these securities were considered to be other-than-temporarily impaired. The Company has the intent to hold these securities for a sufficient period of time for the value to recover and it is not more likely than not that the Company will be required to sell these securities before their fair value recover above the adjusted cost. The unrealized losses from these securities were not as a result of credit, collateral or structural issues.

At June 30, 2016 and December 31, 2015, the Company had investments in certificates of deposit (“CD”) in the amount of $980,000 comprised of fully insured time deposits placed with Federal Deposit Insurance Corporation (“FDIC”) insured commercial banks and savings associations. The FDIC, an independent agency of the United States government, protects depositors up to an amount of $250,000 per depositor, per insured institution. FDIC insurance is backed by the full faith and credit of the United States government. The stated interest rate of an FDIC insured CD varies greatly among commercial banks and savings associations, depending on the term of the CD and the institution’s need for funding. The liquidity of “marketable” CDs is marginal, even though they are assigned an FDIC number, a CUSIP number and are held in book-entry form through the Depository Trust Company. Depending on market liquidity and conditions, the bid price for an FDIC insured CD would reflect the supply of and the demand for deposits of the particular bank or savings association, as well as prevailing interest rates, the remaining term of the deposit, specific features of the CD, and compensation of the broker arranging the sale of the CD. These time deposits have maturities ranging from one to two years and are classified as other invested assets on the Company’s consolidated balance sheet.

Other-Than-Temporary Impairment Process

The Company assesses whether declines in the fair value of its fixed maturity investments classified as available-for-sale represent impairments that are other-than-temporary by reviewing each fixed maturity investment that is impaired and (1) determining if the Company has the intent to sell the fixed maturity investment or if it is more likely than not that the Company will be required to sell the fixed maturity investment before its anticipated recovery; and (2) assessing whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the fixed maturity investment are less than the amortized cost basis of the investment.

The Company had no planned sales of its fixed maturity investments classified as available-for-sale that were in an unrealized loss position at June 30, 2016. In assessing whether it is more likely than not that the Company will be required to sell a fixed maturity investment before its anticipated recovery, the Company considers various factors including its future cash flow requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term investments and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the six months ended June 30, 2016, the Company did not recognize any other-than-temporary impairments due to sales.

In evaluating credit losses, the Company considers a variety of factors in the assessment of a fixed maturity investment including: (1) the time period during which there has been a significant decline below cost; (2) the extent of the decline below cost and par; (3) the potential for the fixed maturity investment to recover in value; (4) an analysis of the financial condition of the issuer; (5) the rating of the issuer; and (6) failure of the issuer of the fixed maturity investment to make scheduled interest or principal payments.

Equity securities are reviewed on a regular basis to determine if they have sustained an impairment of value that is considered to be other than temporary. Several factors are considered in the assessment of an investment, which include (i) the extent of the decline below cost, and (ii) the potential for the security to recover in value.

If we conclude a security is other-than-temporarily impaired, we write down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the investment portfolio as of June 30, 2016 and December 31, 2015, relating to 7 and 11 fixed maturity securities, amounted to $13,197 and $18,853, respectively, and 22 and 15 equity securities, amounted to $118,236 and $87,838, respectively. The unrealized losses on these available for sale fixed maturity securities were not as a result of credit, collateral or structural issues. During the six months ended and three months ended June 30, 2016, the Company recorded a total other-than-temporary impairment charge of $121,116 and $15,196 on two and one equity security, respectively, as a result of the decline in fair value below cost. During the six months ended and three months ended June 30, 2015, the Company recorded a total other-than-temporary impairment charge of $238,820 and $91,177 on three and two equity securities, respectively, as a result of the decline in fair value below cost.

Fair Value of Investments

Under existing U.S. GAAP, we are required to recognize certain assets at their fair value in our consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the hierarchy based on the inputs that are significant to determining such measurement. The three levels are defined as follows:

•

Level 1

: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2

: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•

Level 3

: Inputs to the valuation methodology that are unobservable for the asset or liability.

At each measurement date, we estimate the fair value of the security using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of June 30, 2016 and December 31, 2015 and what level within the fair value hierarchy each valuation technique resides:

•

U.S. government agency securities

: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S. Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2 in the fair value hierarchy. The Company considers a liquid market to exist for these types of securities held. Broker quotes are not used for fair value pricing.

•

Obligations of state and political subdivisions

: Comprised of fixed income obligations of state and local governmental municipalities. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level 2 in the fair value hierarchy. The Company considers a liquid market to exist for these types of securities held. Broker quotes are not used for fair value pricing.

•

Corporate debt securities

: Comprised of bonds issued by corporations. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level 2 in the fair value hierarchy. The Company considers a liquid market to exist for these types of securities held. Broker quotes are not used for fair value pricing.

•

Equity securities, at fair value

: Comprised primarily of investments in the common stock of publicly traded companies in the U.S. All of the Company’s equities are classified as Level 1 in the fair value hierarchy. The Company receives prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.

•

Hedge fund

: Comprised of a hedge fund whose objective is to seek attractive long-term returns with lower volatility by investing in a range of diversified investment strategies. The fund invests in a diversified pool of hedge fund managers, generally across six different strategies: long/short equities, long/short credit, macro, multi-strategy opportunistic, event-driven, and portfolio hedge. The fair value of the hedge fund is based on the net asset value of the fund as reported by the external fund manager. The use of net asset value as an estimate of the fair value for investments in certain entities that calculate net asset value is a permitted practical expedient. Redemptions of the hedge fund occur on a quarterly basis, with required notice of 95 days. In accordance with Subtopic 820-10, the fair value of our hedge fund is not classified in the fair value hierarchy.

While we obtain pricing from independent pricing services, management is ultimately responsible for determining the fair value measurements for all securities. To ensure fair value measurement is applied consistently and in accordance with U.S. GAAP, we periodically update our understanding of the pricing methodologies used by the independent pricing services. We also undertake further analysis with respect to prices we believe may not be representative of fair value under current market conditions. Our review process includes, but is not limited to: (i) initial and ongoing evaluation of the pricing methodologies and valuation models used by outside parties to calculate fair value; (ii) quantitative analysis; (iii) a review of multiple quotes obtained in the pricing process and the range of resulting fair values for each security, if available, and (iv) randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates provided by the independent pricing sources.

There have been no material changes to our valuation techniques from what was used as of December 31, 2015. Since the fair value of a security is an estimate of what a willing buyer would pay for such security if we sold it, we cannot know the ultimate value of our securities until they are sold. We believe the valuation techniques utilized provide us with a reasonable estimate of the price that would be received if we were to sell our assets or transfer our liabilities in an orderly market transaction between participants at the measurement date. The following tables show the fair value of the Company’s investments in accordance with ASC 820 as of June 30, 2016 and December 31, 2015:

					Fair value measurement using:
		Carrying amount		Total fair value	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
June 30, 2016
U.S. government agency securities	$	1,484,918	$	1,484,918	$	—	$	1,484,918	$	—
Obligations of state and political subdivisions		5,201,749		5,201,749				5,201,749
Corporate debt securities		2,115,075		2,115,075				2,115,075
Total fixed maturity investments		8,801,742		8,801,742
Equity securities (excluding the hedge fund)		13,312,310		13,312,310		13,312,310
Total equity securities (excluding the hedge fund)		13,312,310		13,312,310
Hedge fund measured at net asset value (a)		1,626,257		1,626,257
Total investments	$	23,740,309	$	23,740,309	$	13,312,310	$	8,801,742	$	—

					Fair value measurement using:
		Carrying amount		Total fair value	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2015
U.S. government agency securities	$	1,479,386	$	1,479,386	$	—	$	1,479,386	$	—
Obligations of state and political subdivisions		5,898,556		5,898,556				5,898,556
Corporate debt securities		313,244		313,244				313,244
Total fixed maturity investments		7,691,186		7,691,186
Equity securities (excluding the hedge fund)		13,033,452		13,033,452		13,033,452
Total equity securities (excluding the hedge fund)		13,033,452		13,033,452
Hedge fund measured at net asset value (a)		1,669,393		1,669,393
Total investments	$	22,394,031	$	22,394,031	$	13,033,452	$	7,691,186	$	—

(a)

In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position

There were no transfers between Levels 1 and 2 during the six months ended June 30, 2016 and the year ended December 31, 2015.

The cost or amortized cost and estimated fair value of fixed maturity investments as of June 30, 2016 and December 31, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.

	Amortized Cost		Estimated Fair Value
As of June 30, 2016
Due in one year or less	$	1,938,374	$	1,939,368
Due after one year through five years		6,113,550		6,219,033
Due after five years through ten years		482,063		474,641
Due after ten years		170,440		168,700

Total	$	8,704,427	$	8,801,742

	Amortized Cost		Estimated Fair Value
As of December 31, 2015
Due in one year or less	$	1,686,728	$	1,688,395
Due after one year through five years		5,550,706		5,600,089
Due after five years through ten years		226,799		231,638
Due after ten years		173,366		171,064

Total	$	7,637,599	$	7,691,186

Information on sales and maturities of investments during the six months ended June 30, 2016 and 2015 are as follows:

	June 30, 2016			June 30, 2015
Total proceeds on sales of available-for-sale securities	$	2,543,936		$	1,816,794
Proceeds from redemptions of fixed maturity investments		—			—
Total proceeds from maturities of fixed maturity investments		705,000			410,000
Gross gains on sales		882,442			699,941
Gross losses on sales		(1,212	)		(3,925	)
Impairment losses		(121,116	)		(238,820	)

Information on sales and maturities of investments during the three months ended June 30, 2016 and 2015 are as follows:

	June 30, 2016			June 30, 2015
Total proceeds on sales of available-for-sale securities	$	1,941,245		$	600,453
Proceeds from redemptions of fixed maturity investments		—			—
Total proceeds from maturities of fixed maturity investments		325,000			410,000
Gross gains on sales		532,057			38,632
Gross losses on sales		—			(3,925	)
Impairment losses		(15,196	)		(91,177	)

Major categories of net investment income during the six months ended June 30, 2016 and 2015 are summarized as follows:

	June 30, 2016			June 30, 2015
Interest earned:
Fixed maturity investments	$	92,029		$	88,041
Short term investments and cash and cash equivalents		1,904			908
Dividends earned		118,782			109,414
Investment expenses		(66,598	)		(67,886	)
Net investment income	$	146,117		$	130,477

Major categories of net investment income during the three months ended June 30, 2016 and 2015 are summarized as follows:

	June 30, 2016			June 30, 2015
Interest earned:
Fixed maturity investments	$	46,409		$	43,489
Short term investments and cash and cash equivalents		1,026			448
Dividends earned		66,758			68,192
Investment expenses		(32,755	)		(34,314	)
Net investment income	$	81,438		$	77,815