Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies [Text Block]

2. Summary of Significant Accounting Policies

a.  Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company has used significant estimates in determining unpaid loss and loss adjustment expenses, including losses that have occurred but were not reported to us by the financial reporting date; the amount and recoverability of reinsurance recoverable balances; goodwill and other intangibles; retrospective premiums; earned but unbilled premiums; deferred policy acquisition costs; income taxes; and the valuation and other-than-temporary impairments of investment securities.

b. Earnings Per Share

There was no difference between basic and diluted weighted average shares outstanding used in calculating earnings per share for the three month and six month periods ended June 30, 2011 and 2010 since the effect of including shares issuable upon the exercise of outstanding stock options and the vesting of non-vested restricted stock was anti-dilutive for all periods presented. Therefore, such shares have been excluded from the calculation of diluted weighted average shares outstanding. The approximate numbers of such shares excluded were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(in thousands)
Weighted average shares issuable upon exercise of outstanding stock options and vesting of nonvested restricted stock		553		843		653		874

c. Stockholder Dividends

On May 10, 2011, the Company’s Board of Directors declared a quarterly dividend of $0.05 per common share. The dividend was paid on July15, 2011 to stockholders of record on July 1, 2011. Any future determination to pay cash dividends on the Company’s common stock will be at the discretion of its Board of Directors and will be dependent on the Company’s earnings; financial condition; operating results; capital requirements; any contractual, regulatory or other restrictions on the payment of dividends by the Company’s subsidiaries; and other factors that the Company’s Board of Directors deems relevant.

d.  Comprehensive Loss

The following table summarizes the Company’s comprehensive loss for the three month and six month periods ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in thousands)
Net loss	$	(15,812	)	$	(15,530	)	$	(15,564	)	$	(7,943	)
Reclassification adjustment for net realized gains recorded into income		(109	)		(3,851	)		(407	)		(10,383	)
Tax benefit related to reclassification adjustment gains		38			1,348			145			3,633
Increase in net unrealized gains on investment securities available for sale		10,905			12,262			9,586			13,780
Tax expense related to unrealized gains		(3,892	)		(4,291	)		(3,422	)		(4,822	)
Total comprehensive loss	$	(8,870	)	$	(10,062	)	$	(9,662	)	$	(5,735	)

e.  Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, to provide largely identical guidance about fair value measurement and disclosure requirements. The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under International Financial Reporting Standards (“IFRS”) or U.S. GAAP. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2011. Early adoption is not permitted. The adoption of ASU 2011-04 is not expected to have a material effect on the Company’s consolidated financial condition and results of operations.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to increase the prominence of other comprehensive income in the financial statements. An entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2011. However, early adoption is permitted. The amendments in this ASU should be applied retrospectively. The adoption of ASU 2011-05 is not expected to have a material effect on the Company’s consolidated financial condition and results of operations.

f. Other Significant Accounting Policies

For a more complete discussion of the Company’s significant accounting policies, please see Note 2 to the Company’s consolidated financial statements as of and for the year ended December 31, 2010 in Part II, Item 8 of the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2011.