INVESTMENTS

The following table details the difference between cost or adjusted/amortized cost and estimated fair value, by major investment category, at June 30, 2012, and December 31, 2011:



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2012
U.S. government and agency securities	$	46,360	$	285	$	196	$	46,449
States, municipalities and political subdivisions	17,138		1,696		—		18,834
Corporate securities	54,445		3,139		19		57,565
Redeemable preferred stocks	430		—		1		429
Total fixed maturities	$	118,373	$	5,120	$	216	$	123,277
Common stocks	2,929		441		42		3,328
Nonredeemable preferred stocks	477		—		11		466
Total equity securities	$	3,406	$	441	$	53	$	3,794
Other long-term investments	300		—		—		300
Total investments	$	122,079	$	5,561	$	269	$	127,371

December 31, 2011
U.S. government and agency securities	$	48,011	$	219	$	111	$	48,119
States, municipalities and political subdivisions	17,159		1,207		—		18,366
Corporate securities	51,135		2,366		145		53,356
Redeemable preferred stocks	558		—		21		537
Total fixed maturities	$	116,863	$	3,792	$	277	$	120,378
Common stocks	2,807		359		43		3,123
Nonredeemable preferred stocks	477		—		19		458
Total equity securities	$	3,284	$	359	$	62	$	3,581
Other long-term investments	300		—		—		300
Total investments	$	120,447	$	4,151	$	339	$	124,259

When we sell investments, we calculate the gain or loss realized on the sale by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted/amortized cost of the security sold using the specific-identification method. The following table details our realized gains (losses) by major investment category for the three- and six-month periods ended June 30, 2012, and 2011:



	2012					2011
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended June 30,
Fixed maturities	$	156		$	4,016	$	110		$	12,046
Realized gains on equity securities	29			150		10			65
Total realized gains	$	185		$	4,166	$	120		$	12,111
Fixed maturities	(141		)	9,243		(8		)	2,990
Realized losses on equity securities	(7		)	38		—			—
Total realized losses	$	(148	)	$	9,281	$	(8	)	$	2,990
Net realized investment gains	$	37		$	13,447	$	112		$	15,101

Six Months Ended June 30,
Fixed maturities	$	156		$	4,274	$	110		$	12,046
Equity securities	119			887		10			65
Total realized gains	$	275		$	5,161	$	120		$	12,111
Fixed maturities	(141		)	9,243		(8		)	2,990
Equity securities	(16		)	191		—			96
Total realized losses	$	(157	)	$	9,434	$	(8	)	$	3,086
Net realized investment gains	$	118		$	14,595	$	112		$	15,197

We realized $37,000 and $118,000 of net investment gains during the three and six months ended June 30, 2012, compared to $112,000 of net investment gains during the three and six months ended June 30, 2011.

The table below summarizes our fixed maturities at June 30, 2012, by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of those obligations.



	June 30, 2012
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	38,295	32.3	%	$	38,181	31.0	%
Due after one year through five years	23,501		19.9		24,041		19.6
Due after five years through ten years	38,205		32.3		41,217		33.4
Due after ten years	18,372		15.5		19,838		16.0
Total	$	118,373	100.0	%	$	123,277	100.0	%

The following table summarizes our net investment income by major investment category:



	Three months ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Fixed maturities	$	737		$	608		$	1,445		$	1,102
Equity securities	36			40			70			76
Cash, cash equivalents and short-term investments	4			52			9			56
Net investment income	$	777		$	700		$	1,524		$	1,234
Investment expenses	(23		)	(32		)	(94		)	(92		)
Net investment income, less investment expenses	$	754		$	668		$	1,430		$	1,142

The following table presents an aging of our unrealized investment losses by investment class:



	Less Than Twelve Months					Twelve Months or More
	Number of Securities*	Gross Unrealized Losses		Fair Value		Number of Securities*	Gross Unrealized Losses		Fair Value
June 30, 2012
U.S. government and agency securities	5	$	196	$	11,351	—	$	—	$	—
Corporate securities	2	19		3,027		—	—		—
Redeemable preferred stocks	1	—		204		1	1		102
Total fixed maturities	8	$	215	$	14,582	1	$	1	$	102
Common stocks	9	42		379		—	—		—
Nonredeemable preferred stocks	—	—		—		3	11		465
Total equity securities	9	$	42	$	379	3	$	11	$	465
Total	17	$	257	$	14,961	4	$	12	$	567

December 31, 2011
U.S. government and agency securities	2	$	90	$	16,915	1	$	21	$	1,627
Corporate securities	3	145		3,924		—	—		—
Redeemable preferred stocks	—	—		—		4	21		537
Total fixed maturities	5	$	235	$	20,839	5	$	42	$	2,164
Common stocks	12	40		740		1	3		9
Nonredeemable preferred stocks	—	—		—		3	19		458
Total equity securities	12	$	40	$	740	4	$	22	$	467
Total	17	$	275	$	21,579	9	$	64	$	2,631

* This amount represents the actual number of discrete securities, not the number of shares of those securities. The number is not presented in thousands.

During our quarterly evaluations of our securities for impairment, we determined that none of our investments in debt and equity securities that reflected an unrealized loss position were other-than-temporarily impaired. The issuers of our debt securities continue to make principal and interest payments on a timely basis. We do not intend to sell nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. All the issuers of the equity securities we own had near-term prospects that indicated we could recover our cost basis, and we also have the ability and the intent to hold these securities until their value equals or exceeds their cost.

The following table presents the fair value measurements of our financial instruments by level at June 30, 2012, and December 31, 2011:



June 30, 2012	Total		Level 1		Level 2
U.S. government and agency securities	$	46,449	$	31,702	$	14,747
States, municipalities and political subdivisions	18,834		—		18,834
Corporate securities	57,565		—		57,565
Redeemable preferred stocks	429		429		—
Total fixed maturities	$	123,277	$	32,131	$	91,146
Common stocks	3,328		3,328		—
Nonredeemable preferred stocks	466		466		—
Total equity securities	$	3,794	$	3,794	$	—
Other long-term investments	300		300		—
Total investments	$	127,371	$	36,225	$	91,146

December 31, 2011
U.S. government and agency securities	$	48,119	$	24,176	$	23,943
States, municipalities and political subdivisions	18,366		—		18,366
Corporate securities	53,356		—		53,356
Redeemable preferred stocks	537		537		—
Total fixed maturities	$	120,378	$	24,713	$	95,665
Common stocks	3,123		3,123		—
Nonredeemable preferred stocks	458		458		—
Total equity securities	$	3,581	$	3,581	$	—
Other long-term investments	300		300		—
Total investments	$	124,259	$	28,594	$	95,665

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. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.

Level 2: Assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets;

(b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities. We do not hold any securities whose fair value is determined using significant and unobservable inputs.

We are responsible for the determination of fair value and the supporting assumptions and methodologies. We gain assurance on the overall reasonableness and consistent application of valuation methodologies and inputs and compliance with accounting standards through the execution of various processes and controls designed to provide assurance that our assets and liabilities are appropriately valued. For fair values received from third parties, our processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded

We do not hold any investments that require unobservable inputs to determine their fair value. At the end of each quarter, we determine whether we need to transfer the fair values of any securities between levels of the fair value hierarchy and, if so, we report the transfer as of the end of the quarter. We made no such transfers during the three and six months ended June 30, 2012.

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from Synovus Trust Company, NA, which uses a third-party valuation service. The valuation service calculates prices for our investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, then adds final spreads to the U.S. Treasury curve at 3 p.m. (ET) as of quarter end. Since the inputs the valuation service uses in their calculations are not quoted prices in active markets, but are observable inputs, they represent Level 2 inputs.