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Investments
9 Months Ended
Sep. 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 September 30, 2011 and December 31, 2010 are summarized as follows:

 

   September 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   $      499,815    $        49,398    $                  -    $                  -    $      549,213    $        49,398
                       
 Political subdivisions of States,                       
 Territories and Possessions        6,133,143            288,099                        -                        -         6,421,242            288,099
                       
 Corporate and other bonds                              
 Industrial and miscellaneous      10,956,040            271,758           (221,751)             (24,860)       10,981,187              25,147
 Total fixed-maturity securities       17,588,998            609,255           (221,751)             (24,860)       17,951,642            362,644
                       
 Equity Securities:                       
 Preferred stocks         1,268,171              26,616             (91,915)                        -         1,202,872             (65,299)
 Common stocks         2,851,148            209,110           (119,873)                        -         2,940,385              89,237
 Total equity securities        4,119,319            235,726           (211,788)                        -         4,143,257              23,938
                       
 Total    $ 21,708,317    $      844,981    $     (433,539)    $       (24,860)    $ 22,094,899    $      386,582

 

   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 September 30, 2011 and December 31, 2010 is shown below:

 

   September 30, 2011   December 31, 2010
  Amortized       Amortized    
 Remaining Time to Maturity   Cost    Fair Value    Cost    Fair Value 
  (unaudited)    
 Less than one year    $      301,268    $      303,207    $      263,098    $      253,385
 One to five years         6,495,249         6,671,967         6,868,952         6,997,694
 Five to ten years         9,506,527         9,615,351         7,132,079         7,118,405
 More than 10 years         1,285,954         1,361,117         2,012,923         1,969,617
 Total    $ 17,588,998    $ 17,951,642    $ 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 September 30, 2011 and December 31, 2010 are summarized as follows:

 

   September 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    $      165,047    $                  -    $                  -    $      771,281    $      165,047

 

   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     Nine months ended 
   September 30,     September 30, 
   2011     2010     2011     2010 
  (unaudited)   (unaudited)
 Income                      
 Fixed-maturity securities    $      170,083    $      140,953    $      526,583    $      395,676
 Equity securities              44,089              41,176            114,387            100,702
 Cash and cash equivalents                2,552                     61                4,775                4,878
 Other                      8                     13               (3,307)                     34
 Total            216,732            182,203            642,438            501,290
 Expenses                      
 Investment expenses              44,693              27,524            132,265              65,408
 Net investment income    $      172,039    $      154,679    $      510,173    $      435,882

 

Proceeds from the sale and maturity of fixed-maturity securities were $3,034,295 and $2,616,788 for the nine months ended September 30, 2011 and 2010.

 

Proceeds from the sale of equity securities were $1,362,700 and $1,202,909 for the nine months ended September 30, 2011 and 2010, respectively.

 

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

 

   Three months ended     Nine months ended 
   September 30,     September 30, 
   2011     2010     2011     2010 
  (unaudited)   (unaudited)
 Fixed-maturity securities                
 Gross realized gains    $        51,805    $        37,601    $      139,107    $      133,598
 Gross realized losses                       -                        -               (1,983)             (18,562)
             51,805              37,601            137,124            115,036
               
 Equity securities               
 Gross realized gains             11,558              64,210            147,375            148,462
 Gross realized losses                       -             (17,757)             (60,704)             (34,695)
             11,558              46,453              86,671            113,767
               
 Cash and short term investments (1)           133,211                        -            133,211                        -
               
 Net realized gains   $      196,574    $        84,054    $      357,006    $      228,803
               

 

(1) Realized gain on cash and short term investments is a partial recovery from the FDIC of an amount previously written off in 2009 due to the failure of Waterfield Bank.

 

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 42 securities at September 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 nine months ended September 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 September 30, 2011 as follows:

 

   September 30, 2011
  Less than 12 months   12 months or more   Total
              No. of             No. of     Aggregate     
   Fair        Unrealized     Positions     Fair        Unrealized     Positions     Fair     Unrealized 
 Category    Value        Losses     Held        Value        Losses     Held     Value        Losses 
   (unaudited) 
 Fixed-Maturity Securities:                             
 U.S. Treasury securities                             
 and obligations of U.S.                               
 government corporations                             
 and agencies   $                -    $                 -              -    $             -    $                 -              -    $                -    $                 -
                               
 Political subdivisions of                             
 States, Territories and                               
 Possessions                     -                       -              -                   -                       -              -                      -                       -
                               
 Corporate and other                                                    
 bonds industrial and                               
 miscellaneous      4,131,740          (221,751)              1       375,140            (24,860)            22       4,506,880          (246,611)
                               
 Total fixed-maturity                               
 securities    $ 4,131,740       $    (221,751)              1       $ 375,140    $      (24,860)            22    $ 4,506,880    $    (246,611)
                               
 Equity Securities:                               
 Preferred stocks    $    719,322    $      (91,915)              6    $             -    $                 -              -    $    719,322    $      (91,915)
 Common stocks          947,280          (119,873)            13                   -                       -              -          947,280          (119,873)
                               
 Total equity securities   $ 1,666,602    $    (211,788)            19    $             -    $                 -              -    $ 1,666,602    $    (211,788)
                               
 Total   $ 5,798,342    $    (433,539)            20    $ 375,140    $      (24,860)            22    $ 6,173,482    $    (458,399)