LONG-TERM DEBT

Our long-term debt at December 31, 2012, and 2011, consisted of a note payable to the Florida State Board of Administration. As of December 31, 2012, and 2011, we owed $15,882,000 and $17,059,000, respectively, on the note and the interest rate was 1.66% and 1.99%, respectively.

At December 31, 2012, the annual maturities of our long-term debt are as follows:



	Amount
2013	$	1,176
2014	1,176
2015	1,176
2016	1,176
2017	1,176
Thereafter	10,002
Total debt	$	15,882

We executed the 20-year, $20,000,000 note payable to the SBA under its Insurance Capital Build-Up Incentive Program, effective October 1, 2006. The stated rate for the SBA note is a rate equivalent to the 10-year U.S. Treasury Bond rate. We made quarterly interest-only payments for the first three years, then, as of October 1, 2009, we began making quarterly principal and interest payments.

The $15,882,000 note payable to Florida's State Board of Administration (SBA note) requires our insurance affiliate to maintain surplus as regards policyholders at or above a calculated level, which was $36,844,000 at December 31, 2012. We monitor our insurance affiliate's surplus as regards policyholders each quarter and, for various reasons, we occasionally provide additional capital to our insurance affiliate. We contributed $15,000,000 of capital during 2012; however, we did not contribute any capital to our insurance affiliate in 2011. We currently do not foresee a need for any material contributions of capital to our insurance affiliate; however, any future contributions of capital will depend on circumstances at the time.

Our SBA note requires that we maintain a 2:1 ratio of net written premium to surplus, or net writing ratio, (the SBA note agreement defines surplus for the purpose of calculating the required ratios as the $20,000,000 of capital contributed to our insurance affiliate under the agreement plus the outstanding balance of the note) or a 6:1 ratio of gross written premium to surplus, or gross writing ratio, to avoid additional interest penalties. At December 31, 2012, our net written premium to surplus ratio was 2.70:1, which is well above the 2:1 required ratio. Our gross written premium to surplus ratio was 6.4:1, which meets the required gross ratio of 6:1. Should we fail to exceed either a net writing ratio of 1.5:1 or a gross writing ratio of 4.5:1, our interest rate will increase by 450 basis points above the 10-year Constant Maturity Treasury rate which was 1.78% at the end of December. Any other writing ratio deficiencies result in an interest rate penalty of 25 basis points above the stated rate of the note, which is 1.66% at December 31, 2012. Our SBA note further provides that the SBA may, among other things, declare its loan immediately due and payable for all defaults existing under the SBA note; however, any payment is subject to approval by the insurance regulatory authority. At December 31, 2012, we were in compliance with the covenants of the SBA note.

At December 31, 2012, and during the three and twelve months then ended, we complied with all covenants as specified in the SBA note. During the first quarter of 2011, we paid $11,000 of additional interest for violating the writing ratio covenant during the fourth quarter of 2010.