INVESTMENTS

The following table details the difference between cost or adjusted/amortized cost and estimated fair value, by major investment category, at March 31, 2013, and December 31, 2012:



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2013
U.S. government and agency securities	$	88,356	$	188	$	259	$	88,285
States, municipalities and political subdivisions	23,021		2,125		22		25,124
Public utilities	5,132		233		—		5,365
All other corporate securities	68,438		1,974		147		70,265
Redeemable preferred stocks	226		2		—		228
Total fixed maturities	$	185,173	$	4,522	$	428	$	189,267
Public utilities	316		46		—		362
All other common stocks	2,869		515		11		3,373
Nonredeemable preferred stocks	272		—		8		264
Total equity securities	$	3,457	$	561	$	19	$	3,999
Other long-term investments	300		—		—		300
Total investments	$	188,930	$	5,083	$	447	$	193,566

December 31, 2012
U.S. government and agency securities	$	95,296	$	201	$	289	$	95,208
States, municipalities and political subdivisions	17,117		1,918		—		19,035
Public utilities	4,135		225		—		4,360
All other corporate securities	28,282		2,013		1		30,294
Redeemable preferred stocks	259		2		1		260
Total fixed maturities	$	145,089	$	4,359	$	291	$	149,157
Public utilities	316		16		6		326
All other common stocks	1,949		228		38		2,139
Nonredeemable preferred stocks	272		—		14		258
Total equity securities	$	2,537	$	244	$	58	$	2,723
Other long-term investments	300		—		—		300
Total investments	$	147,926	$	4,603	$	349	$	152,180

On September 25, 2012, we acquired an investment in a limited partnership, recorded in other assets, that is currently being accounted for at cost. Our total investment in the partnership of $750,000, has been reduced by two liquidity distributions of $7,000. At March 31, 2013, the cost basis of our investment approximated its fair value of $743,000. Our investment in the partnership is currently bifurcated between a capital contribution of $375,000 and a note receivable of $368,000 that will be utilized to fund our future required contributions. We are not required to fund any additional amounts in excess of our initial $750,000 investment.

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-month periods ended March 31, 2013, and 2012:



	2013					2012
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended March 31,
Fixed maturities	$	24		$	12,000	$	—		$	—
Realized gains on equity securities	18			105		90			737
Total realized gains	$	42		$	12,105	$	90		$	737
Fixed maturities	(54		)	16,996		—			—
Realized losses on equity securities	—			—		(9		)	153
Total realized losses	$	(54	)	$	16,996	$	(9	)	$	153
Net realized investment gains (losses)	$	(12	)	$	29,101	$	81		$	890

We realized $(12,000) of net investment losses during the three months ended March 31, 2013, compared to $81,000 of net investment gains during the three months ended March 31, 2012.

The table below summarizes our fixed maturities at March 31, 2013, 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.



	March 31, 2013
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	37,583	20.3	%	$	37,450	19.8	%
Due after one year through five years	82,382		44.5		82,919		43.8
Due after five years through ten years	33,534		18.1		35,533		18.8
Due after ten years	31,674		17.1		33,365		17.6
Total	$	185,173	100.0	%	$	189,267	100.0	%

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



	Three Months Ended March 31,
	2013			2012
Fixed maturities	$	674		$	679
Equity securities	33			34
Cash, cash equivalents and short-term investments	10			23
Other investments	7			11
Net investment income	$	724		$	747
Investment expenses	(78		)	(71		)
Net investment income, less investment expenses	$	646		$	676

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
March 31, 2013
U.S. government and agency securities	16	$	259	$	37,774	—	$	—	$	—
States, municipalities and political subdivisions	5	22		4,892		—	—		—
Corporate securities	29	147		33,842		—	—		—
Redeemable preferred stocks	—	—		—		1	—		102
Total fixed maturities	50	$	428	$	76,508	1	$	—	$	102
All other common stocks	3	8		145		2	3		211
Nonredeemable preferred stocks	—	—		—		2	8		264
Total equity securities	3	$	8	$	145	4	$	11	$	475
Total	53	$	436	$	76,653	5	$	11	$	577

December 31, 2012
U.S. government and agency securities	13	$	289	$	44,174	—	$	—	$	—
Corporate securities	1	1		2,000		—	—		—
Redeemable preferred stocks	—	—		—		1	1		102
Total fixed maturities	14	$	290	$	46,174	1	$	1	$	102
Common stocks	16	41		620		1	3		53
Nonredeemable preferred stocks	—	—		—		2	14		258
Total equity securities	16	$	41	$	620	3	$	17	$	311
Total	30	$	331	$	46,794	4	$	18	$	413

* This amount represents the actual number of discrete securities, not the number of shares of those securities. The numbers are 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 of our financial instruments measured on a recurring basis by level at March 31, 2013, and December 31, 2012:



	Total		Level 1		Level 2
March 31, 2013
U.S. government and agency securities	$	88,285	$	24,651	$	63,634
States, municipalities and political subdivisions	25,124		—		25,124
Public utilities	5,365		—		5,365
Corporate securities	70,265		—		70,265
Redeemable preferred stocks	228		228		—
Total fixed maturities	$	189,267	$	24,879	$	164,388
Public utilities	362		362		—
Common stocks	3,373		3,373		—
Nonredeemable preferred stocks	264		264		—
Total equity securities	$	3,999	$	3,999	$	—
Other long-term investments	300		300		—
Total investments	$	193,566	$	29,178	$	164,388

December 31, 2012
U.S. government and agency securities	$	95,208	$	66,710	$	28,498
States, municipalities and political subdivisions	19,035		—		19,035
Corporate securities	34,654		—		34,654
Redeemable preferred stocks	260		260		—
Total fixed maturities	$	149,157	$	66,970	$	82,187
Common stocks	2,465		2,465		—
Nonredeemable preferred stocks	258		258		—
Total equity securities	$	2,723	$	2,723	$	—
Other long-term investments	300		300		—
Total investments	$	152,180	$	69,993	$	82,187

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 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 months ended March 31, 2013.

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.