INVESTMENTS

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



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2013
U.S. government and agency securities	$	98,621	$	28	$	1,169	$	97,480
Foreign governments	3,287		—		60		3,227
States, municipalities and political subdivisions	45,556		654		433		45,777
Public utilities	9,103		122		92		9,133
All other corporate securities	118,084		792		1,469		117,407
Total fixed maturities	274,651		1,596		3,223		273,024
Public utilities	804		23		20		807
All other common stocks	12,749		1,894		97		14,546
Nonredeemable preferred stocks	272		—		23		249
Total equity securities	13,825		1,917		140		15,602
Other long-term investments	300		—		—		300
Total investments	$	288,776	$	3,513	$	3,363	$	288,926

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

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 tables detail our realized gains (losses) by major investment category for the years ended December 31, 2013, 2012 and 2011:



	2013					2012					2011
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Fixed maturities	$	103		$	23,187	$	2,043		$	28,999	$	231		$	21,803
Equity securities	31			155		279			1,907		10			65
Total realized gains	134			23,342		2,322			30,906		241			21,868
Fixed maturities	(261		)	43,751		(141		)	9,243		(58		)	3,191
Equity securities	(2		)	28		(21		)	391		(25		)	335
Total realized losses	(263		)	43,779		(162		)	9,634		(83		)	3,526
Net realized investment gains (losses)	$	(129	)	$	67,121	$	2,160		$	40,540	$	158		$	25,394

The table below summarizes our fixed maturities at year end 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.



	December 31, 2013
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	30,268	11.0	%	$	30,283	11.1	%
Due after one year through five years	148,920		54.2	%	148,253		54.3	%
Due after five years through ten years	77,632		28.3	%	76,462		28.0	%
Due after ten years	17,831		6.5	%	18,026		6.6	%
Total	$	274,651	100.0	%	$	273,024	100.0	%

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



	Year Ended December 31,
	2013			2012			2011
Fixed maturities	$	3,512		$	2,902		$	2,628
Equity securities	280			138			142
Cash and cash equivalents	31			43			19
Other investments	48			—			34
Gross investment income	$	3,871		$	3,083		$	2,823
Investment expenses	(206		)	(142		)	(140		)
Net investment income	$	3,665		$	2,941		$	2,683

Portfolio monitoring

We have a comprehensive portfolio monitoring process to identify and evaluate each fixed income and equity security whose carrying value may be other-than-temporarily impaired.

For each fixed income security in an unrealized loss position, we determine if the loss is temporary or other-than-temporarily impaired. If our management decides to sell the security or determines that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity, contractual or regulatory purposes, then the security's decline in fair value is considered other-than-temporary and is recorded in earnings.

If we have not made the decision to sell the fixed income security and it is not more likely than not that we will be required to sell the fixed income security before recovery of its amortized cost basis, we evaluate whether we expect the security to receive cash flows sufficient to recover the entire cost or amortized cost basis of the security. We calculate the estimated recovery value by discounting the best estimate of future cash flows at the security's original or current effective rate, as appropriate, and compare this to the cost or amortized cost of the security. If we do not expect to receive cash flows sufficient to recover the entire cost or amortized cost basis of the fixed income security, the credit loss component of the impairment is recorded in earnings, with the remaining amount of the unrealized loss related to other factors recognized in other comprehensive income.

For equity securities, we consider various factors, including whether we have the intent and ability to hold the equity security for a period of time sufficient to recover its cost basis. If we lack the intent and ability to hold to recovery, or if we believe the recovery period is extended, the equity security's decline in fair value is considered other-than-temporary and is recorded in earnings.

Our portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its cost or amortized cost (for fixed income securities) or cost (for equity securities) is below established thresholds. The process also includes the monitoring of other impairment indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which we may have a concern, are evaluated for potential other-than-temporary impairment using all reasonably available information relevant to the collectability or recovery of the security. Inherent in our evaluation of other-than-temporary impairment for these fixed income and equity securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value is other-than-temporary are: (1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; (2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and (3) the length of time and extent to which the fair value has been less than amortized cost or cost.

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
December 31, 2013
U.S. government and agency securities	47	$	850	$	64,369	7	$	319	$	5,913
Foreign governments	4	60		3,227		—	—		—
States, municipalities and political subdivisions	23	433		27,106		—	—		—
Public utilities	4	92		3,830		—	—		—
All other corporate securities	49	1,469		60,348		—	—		—
Total fixed maturities	127	2,904		158,880		7	319		5,913
Public utilities	5	20		357		—	—		—
All other common stocks	15	97		1,626		—	—		—
Nonredeemable preferred stocks	1	6		125		1	17		125
Total equity securities	21	123		2,108		1	17		125
Total	148	$	3,027	$	160,988	8	$	336	$	6,038

December 31, 2012
U.S. government and agency securities	13	$	289	$	44,174	—	$	—	$	—
All other corporate securities	1	1		2,000		—	—		—
Redeemable preferred stocks	—	—		—		1	1		102
Total fixed maturities	14	290		46,174		1	1		102
Public utilities	3	6		178		—	—		—
All other common stocks	13	35		442		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 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 interest payments on a timely basis and have not suffered any credit rating reductions. 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.

During the years ended December 31, 2013, 2012 and 2011, we recorded other-than-temporary impairment charges of $0, $0, and $31,000, respectively, related to our equity positions. We have never recorded an OTTI charge on our debt-security investments.

The following table presents the fair value measurements of our financial instruments by level at December 31, 2013 and December 31, 2012:



December 31, 2013	Total		Level 1		Level 2
U.S. government and agency securities	$	97,480	$	—	$	97,480
Foreign governments	3,227		—		3,227
States, municipalities and political subdivisions	45,777		—		45,777
Public utilities	9,133		—		9,133
All other corporate securities	117,407		—		117,407
Total fixed maturities	273,024		—		273,024
Public utilities	807		807		—
All other common stocks	14,546		14,546		—
Nonredeemable preferred stocks	249		249		—
Total equity securities	15,602		15,602		—
Other long-term investments	300		300		—
Total investments	$	288,926	$	15,902	$	273,024

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
All other corporate securities	30,294		—		30,294
Redeemable preferred stocks	260		260		—
Total fixed maturities	149,157		66,970		82,187
Public utilities	326		326		—
All other common stocks	2,139		2,139		—
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

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. See Footnote 2(c) for additional information regarding fair value levels.

We do not hold any available for sale 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 year ended December 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.

Limited partnerships

On September 27, 2013, 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 $1,000,000, is currently bifurcated between a capital contribution of $500,000 and a note receivable of $500,000 that will be utilized to fund our future capital contributions. We are not required to fund any additional amounts in excess of our initial $1,000,000 commitment. As the limited partnership is still in the acquisition phase, the cost basis of our investment approximated its fair value at December 31, 2013.

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 is $750,000, which has been reduced by capital distributions received during the year ended 2013 totaling $16,000. Our investment in the partnership is currently bifurcated between capital contributions of $562,500 and a note receivable of $187,500 that will be utilized to fund our future capital contribution. We are not required to fund any additional amounts in excess of our initial investment. As the limited partnership is still in the acquisition phase, the cost basis of our investment approximated its fair value of $734,000 at December 31, 2013.

Other investments

On October 31, 2013, we entered into a participation agreement with United Capital Funding (UC Funding), that is currently being held in other assets, at cost. We invested $1,000,000 in cash with UC Funding which they utilized to factor receivables from another company. At December 31, 2013, the cost basis of our investment approximated its fair value.

On February 4, 2014, UC Funding returned $500,000 of our investment as they were unable to fully utilize our investment.