INVESTMENTS

The following table details the difference between cost or adjusted/amortized cost and estimated fair value, by major investment category, at June 30, 2013, and December 31, 2012:



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2013
U.S. government and agency securities	$	66,473	$	17	$	560	$	65,930
States, municipalities and political subdivisions	45,810		1,169		414		46,565
Public utilities	9,643		160		72		9,731
Other corporate securities	110,044		773		1,550		109,267
Total fixed maturities	$	231,970	$	2,119	$	2,596	$	231,493
Public utilities	656		27		2		681
Other common stocks	8,726		617		114		9,229
Nonredeemable preferred stocks	272		—		12		260
Total equity securities	$	9,654	$	644	$	128	$	10,170
Other long-term investments	300		—		—		300
Total investments	$	241,924	$	2,763	$	2,724	$	241,963

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
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
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 return of capital liquidity distributions totaling $7,000. At June 30, 2013, the cost basis of our investment approximated its fair value of $743,000. Our investment in the partnership is currently bifurcated between a note receivable of $375,000 and a capital contribution 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- and six-month periods ended June 30, 2013, and 2012:



	2013					2012
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended June 30,
Fixed maturities	$	4		$	2,127	$	156		$	4,016
Realized gains on equity securities	13			50		29			150
Total realized gains	$	17		$	2,177	$	185		$	4,166
Fixed maturities	(164		)	21,651		(141		)	9,243
Realized losses on equity securities	(2		)	28		(7		)	38
Total realized losses	$	(166	)	$	21,679	$	(148	)	$	9,281
Net realized investment gains (losses)	$	(149	)	$	23,856	$	37		$	13,447

Six Months Ended June 30,
Fixed maturities	$	28		$	14,127	$	156		$	4,274
Realized gains on equity securities	31			155		119			887
Total realized gains	$	59		$	14,282	$	275		$	5,161
Fixed maturities	(218		)	38,647		(141		)	9,243
Realized losses on equity securities	(2		)	28		(16		)	191
Total realized losses	$	(220	)	$	38,675	$	(157	)	$	9,434
Net realized investment gains (losses)	$	(161	)	$	52,957	$	118		$	14,595

We realized $(149,000) and $(161,000) of net investment losses during the three and six months ended June 30, 2013, respectively, compared to $37,000 and $118,000 of net investment gains during the three and six months ended June 30, 2012, respectively.

The table below summarizes our fixed maturities at June 30, 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.



	June 30, 2013
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	19,292	8.3	%	$	19,319	8.4	%
Due after one year through five years	122,489		52.8		122,040		52.7
Due after five years through ten years	58,574		25.3		58,112		25.1
Due after ten years	31,615		13.6		32,022		13.8
Total	$	231,970	100.0	%	$	231,493	100.0	%

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Fixed maturities	$	769		$	737		$	1,443		$	1,445
Equity securities	48			36			81			70
Cash, cash equivalents and short-term investments	10			4			20			9
Other investments	4			—			11			—
Net investment income	$	831		$	777		$	1,555		$	1,524
Investment expenses	(41		)	(23		)	(119		)	(94		)
Net investment income, less investment expenses	$	790		$	754		$	1,436		$	1,430

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, 2013
U.S. government and agency securities	32	$	560	$	46,611	—	$	—	$	—
States, municipalities and political subdivisions	24	414		28,300		—	—		—
Public utilities	4	72		4,353		—	—		—
Corporate securities	61	1,550		71,515		—	—		—
Total fixed maturities	121	$	2,596	$	150,779	—	$	—	$	—
Public utilities	5	2		221		—	—		—
All other common stocks	37	114		3,784		—	—		—
Nonredeemable preferred stocks	—	—		—		2	12		260
Total equity securities	42	$	116	$	4,005	2	$	12	$	260
Total	163	$	2,712	$	154,784	2	$	12	$	260

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 June 30, 2013, and December 31, 2012:



	Total		Level 1		Level 2
June 30, 2013
U.S. government and agency securities	$	65,930	$	—	$	65,930
States, municipalities and political subdivisions	46,565		—		46,565
Public utilities	9,731		—		9,731
Corporate securities	109,267		—		109,267
Total fixed maturities	$	231,493	$	—	$	231,493
Public utilities	681		681		—
Common stocks	9,229		9,229		—
Nonredeemable preferred stocks	260		260		—
Total equity securities	$	10,170	$	10,170	$	—
Other long-term investments	300		300		—
Total investments	$	241,963	$	10,470	$	231,493

December 31, 2012
U.S. government and agency securities	$	95,208	$	66,710	$	28,498
States, municipalities and political subdivisions	19,035		—		19,035
Public utilities	4,360		—		4,360
Corporate securities	30,294		—		30,294
Redeemable preferred stocks	260		260		—
Total fixed maturities	$	149,157	$	66,970	$	82,187
Public utilities	325		325		—
Common stocks	2,140		2,140		—
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 June 30, 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.