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Investments
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
Investments

Available for Sale Securities

 

The amortized cost and fair value of investments in available for sale fixed-maturity securities, equities and short term investments as of June 30, 2011 and December 31, 2010 are summarized as follows:

 

    June 30, 2011
      Cost or     Gross     Gross Unrealized Losses         Unrealized
      Amortized     Unrealized     Less than 12     More than 12     Fair     Gains/
  Category     Cost     Gains     Months     Months     Value     (Losses)
      (unaudited)
  Fixed-Maturity Securities:                                                
                                                 
                                                 
U.S. Treasury securities and obligations of U.S. government corporations and agencies   $ 1,000,242     $ 55,719     $ —        $ —        $ 1,055,961     $ 55,719  
                                                 
                                                 
  Political subdivisions of States, Territories and Possessions     6,161,995       180,375       —          (880 )     6,341,490       179,495  
                                                 
                                                 
Corporate and other bonds Industrial and miscellaneous     11,064,735       210,008       (99,069 )     (2,332 )     11,173,342       108,607  
  Total fixed-maturity securities     18,226,972       446,102       (99,069 )     (3,212 )     18,570,793       343,821  
                                                 
  Equity Securities:                                                
  Preferred stocks     896,228       25,224       (9,397 )     —          912,055       15,827  
  Common stocks     1,845,378       222,241       (28,514 )     —          2,039,105       193,727  
  Total equity securities     2,741,606       247,465       (37,911 )     —          2,951,160       209,554  
                                                 
  Total   $ 20,968,578     $ 693,567     $ (136,980 )   $ (3,212 )   $ 21,521,953     $ 553,375  

 

    December 31, 2010    
        Cost or         Gross         Gross Unrealized Losses               Unrealized  
        Amortized         Unrealized         Less than 12         More than 12         Fair         Gains/  
  Category       Cost         Gains         Months         Months         Value         (Losses)  
                                                 
  Fixed-Maturity Securities:                                                
  U.S. Treasury securities and                                                
  obligations of U.S. government                                                
  corporations and agencies   $ 1,000,572     $ 42,085     $ —        $ —        $ 1,042,657     $ 42,085  
                                                 
  Political subdivisions of States,                                                
  Territories and Possessions     7,278,663       79,791       (86,234 )     (12,995 )     7,259,225       (19,438 )
                                                 
  Corporate and other bonds                                                
  Industrial and miscellaneous     7,997,817       176,999       (137,597 )     —          8,037,219       39,402  
  Total fixed-maturity securities     16,277,052       298,875       (223,831 )     (12,995 )     16,339,101       62,049  
                                                 
  Equity Securities:                                                
  Preferred stocks     824,569       29,934       (6,333 )     —          848,170       23,601  
  Common stocks     2,000,446       188,783       (54,364 )     —          2,134,865       134,419  
  Total equity securities     2,825,015       218,717       (60,697 )     —          2,983,035       158,020  
                                                 
  Total   $ 19,102,067     $ 517,592     $ (284,528 )   $ (12,995 )   $ 19,322,136     $ 220,069  

 

A summary of the amortized cost and fair value of the Company’s available for sale investments in fixed-maturity securities by contractual maturity as of June 30, 2011 and December 31, 2010 is shown below:

 

    June 30, 2011   December 31, 2010
    Amortized       Amortized    
  Remaining Time to Maturity   Cost   Fair Value   Cost   Fair Value
    (unaudited)    
  Less than one year   $ 302,204     $ 305,388     $ 263,098     $ 253,385  
  One to five years     6,662,009       6,915,777       6,868,952       6,997,694  
  Five to ten years     9,976,605       10,039,474       7,132,079       7,118,405  
  More than 10 years     1,286,154       1,310,154       2,012,923       1,969,617  
  Total   $ 18,226,972     $ 18,570,793     $ 16,277,052     $ 16,339,101  

 

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

 

Held to Maturity Securities


The amortized cost and fair value of investments in held to maturity fixed-maturity securities as of June 30, 2011 and December 31, 2010 are summarized as follows:

 

  June 30, 2011    
    Cost or      Gross     Gross Unrealized Losses         Unrealized 
    Amortized     Unrealized     Less than 12     More than 12     Fair     Gains/
  Category    Cost     Gains     Months     Months     Value     (Losses) 
    (unaudited)
                       
  U.S. Treasury securities   $      606,234     $          1,699     $       (11,250)     $                  -     $      596,683     $         (9,551)

 

  December 31, 2010    
    Cost or      Gross     Gross Unrealized Losses         Unrealized 
    Amortized     Unrealized     Less than 12     More than 12     Fair     Gains/
  Category    Cost     Gains     Months     Months     Value     (Losses) 
   
                       
  U.S. Treasury securities   $      605,424     $          974     $       -     $                  -     $     606,398     $         974

 

 

All held to maturity securities are held in trust pursuant to the New York State Insurance Department’s minimum funds requirement.

 

Contractual maturities of all held to maturity securities are greater than ten years.

 

Investment Income

 

Major categories of the Company’s net investment income are summarized as follows:

 

      Three months ended     Six months ended  
      June 30,     June 30,  
    2011   2010   2011   2010  
    (unaudited)   (unaudited)  
  Income                                  
  Fixed-maturity securities   $ 174,363     $ 125,616     $ 356,500     $ 254,723    
  Equity securities     33,474       32,225       70,298       59,526    
  Cash and cash equivalents     236       2,967       2,223       4,817    
  Other     (3,325 )     6       (3,315 )     21    
  Total     204,748       160,814       425,706       319,087    
  Expenses                                  
  Investment expenses     44,284       11,891       87,572       37,884    
  Net investment income   $ 160,464     $ 148,923     $ 338,134     $ 281,203    

 

Proceeds from the sale and maturity of fixed-maturity securities were $2,079,869 and $1,566,632 for the six months ended June 30, 2011 and 2010.

 

Proceeds from the sale of equity securities were $1,215,296 and $604,217 for the six months ended June 30, 2011 and 2010, respectively.

 

The Company’s gross realized gains and losses on investments are summarized as follows:

 

      Three months ended     Six months ended  
      June 30,     June 30,  
    2011   2010   2011   2010  
    (unaudited)   (unaudited)  
  Fixed-maturity securities                                  
  Gross realized gains   $ 87,302     $ 95,997     $ 87,302     $ 95,997    
  Gross realized losses     (1,983 )     (18,562 )     (1,983 )     (18,562 )  
      85,319       77,435       85,319       77,435    
                                   
  Equity securities                                  
  Gross realized gains     18,484       37,854       135,817       84,252    
  Gross realized losses     (13,842 )     (5,200 )     (60,704 )     (16,938 )  
      4,642       32,654       75,113       67,314    
                                   
  Net realized gains   $ 89,961     $ 110,089     $ 160,432     $ 144,749    
                                   

 

 Impairment Review

 

The Company regularly reviews its fixed-maturity securities and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines (“OTTI”) in the fair value of investments. In evaluating potential impairment, management considers, among other criteria: (i) the current fair value compared to amortized cost or cost, as appropriate; (ii) the length of time the security’s fair value has been below amortized cost or cost; (iii) specific credit issues related to the issuer such as changes in credit rating, reduction or elimination of dividends or non-payment of scheduled interest payments; (iv) management’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in value to cost; and (v) current economic conditions.

 

OTTI losses are recorded in the condensed consolidated statement of operations and comprehensive income as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. There are 41 securities at June 30, 2011 that account for the gross unrealized loss. The Company determined that none of the unrealized losses were deemed to be OTTI for its portfolio of fixed maturity investments and equity securities for the six months ended June 30, 2011 and 2010. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to retain the investment for a period of time sufficient to allow for anticipated recovery of fair value to the Company’s cost basis.

 

The Company held securities with unrealized losses representing declines that were considered temporary at June 30, 2011 as follows:

 

    June 30, 2011
    Less than 12 months   12 months or more   Total
              No. of             No. of     Aggregate    
      Fair     Unrealized     Positions     Fair     Unrealized     Positions     Fair     Unrealized
      Value     Losses     Held     Value     Losses     Held     Value     Losses
  Category     (unaudited)
  Fixed-Maturity Securities:                            
  Political subdivisions of                            
  States, Territories and                                                                
  Possessions   $ —        $ —          —        $ 231,548     $ (880 )     1     $ 231,548     $ (880 )
                                                                 
  Corporate and other                                                                
  bonds industrial and                                                                
  miscellaneous     4,282,600       (99,069 )     22       397,668       (2,332 )     1       4,680,268       (101,401 )
                                                                 
  Total fixed-maturity                                                                
  securities   $ 4,282,600     $ (99,069 )     22     $ 629,216     $ (3,212 )     2     $ 4,911,816     $ (102,281 )
                                                                 
  Equity Securities:                                                                
  Preferred stocks   $ 316,000     $ (9,397 )     8     $ —        $ —          —        $ 316,000     $ (9,397 )
  Common stocks     488,948       (28,514 )     9       —          —          —          488,948       (28,514 )
                                                                 
  Total equity securities   $ 804,948     $ (37,911 )     17     $ —        $ —          —        $ 804,948     $ (37,911 )
                                                                 
  Total   $ 5,087,548     $ (136,980 )     39     $ 629,216     $ (3,212 )     2     $ 5,716,764     $ (140,192 )