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3. Investments
 6 Months Ended
Jun. 30, 2012
Text Block [Abstract]  
3. Investments

Available for Sale Securities

 

The amortized cost and fair value of investments in available for sale fixed-maturity securities and equities as of June 30, 2012 and December 31, 2011 are summarized as follows:

 

    June 30, 2012  
                                  Net  
    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   $ 99,930     $ 5,672     $ -     $ -     $ 105,602     $ 5,672  
                                                 
Political subdivisions of States,                                                
   Territories and Possessions     5,572,075       279,663       -       (29,967 )     5,821,771       249,696  
                                                 
 Corporate and other bonds                                                
 Industrial and miscellaneous     15,651,143       644,650       (9,850 )     (48,886 )     16,237,057       585,914  
 Total fixed-maturity securities     21,323,148       929,985       (9,850 )     (78,853 )     22,164,430       841,282  
                                                 
Equity Securities:                                                
Preferred stocks     1,339,013       58,812       -       (12,775 )     1,385,050       46,037  
Common stocks     2,816,350       442,031       (26,384 )     -       3,231,997       415,647  
Total equity securities     4,155,363       500,843       (26,384 )     (12,775 )     4,617,047       461,684  
                                                 
                                                 
Total   $ 25,478,511     $ 1,430,828     $ (36,234 )   $ (91,628 )   $ 26,781,477     $ 1,302,966  

 

    December 31, 2011  
                                  Net  
    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   $ 499,832     $ 50,356     $ -     $ -     $ 550,188     $ 50,356  
                                                 
Political subdivisions of States,                                                
   Territories and Possessions     5,868,743       301,559       -       -       6,170,302       301,559  
                                                 
Corporate and other bonds                                                
Industrial and miscellaneous     15,846,616       338,284       (228,792 )     (107,666 )     15,848,442       1,826  
Total fixed-maturity securities     22,215,191       690,199       (228,792 )     (107,666 )     22,568,932       353,741  
                                                 
Equity Securities:                                                
Preferred stocks     1,428,435       36,762       (76,969 )     (4,893 )     1,383,335       (45,100 )
Common stocks     2,429,306       274,538       (21,969 )     -       2,681,875       252,569  
Total equity securities     3,857,741       311,300       (98,938 )     (4,893 )     4,065,210       207,469  
                                                 
Total   $ 26,072,932     $ 1,001,499     $ (327,730 )   $ (112,559 )   $ 26,634,142     $ 561,210  

  

A summary of the amortized cost and fair value of the Company’s investments in available for sale fixed-maturity securities by contractual maturity as of June 30, 2012 and December 31, 2011 is shown below:

 

    June 30, 2012     December 31, 2011  
    Amortized           Amortized        
Remaining Time to Maturity   Cost     Fair Value     Cost     Fair Value  
    (unaudited)  
Less than one year   $ 1,082,670     $ 1,066,409     $ 1,063,493     $ 1,079,924  
One to five years     7,118,991       7,382,219       6,899,892       7,045,774  
Five to ten years     11,768,002       12,303,035       12,547,046       12,680,441  
More than 10 years     1,353,485       1,412,767       1,704,760       1,762,793  
Total   $ 21,323,148     $ 22,164,430     $ 22,215,191     $ 22,568,932  

 

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, 2012 and December 31, 2011 are summarized as follows:

 

    June 30, 2012  
    Cost or     Gross    

 

 Gross Unrealized Losses

          

Net

Unrealized

  
    Amortized     Unrealized     Less than 12     More than 12     Fair     Gains/  
Category   Cost     Gains     Months     Months     Value     (Losses)  
    (unaudited)  
                                     
U.S. Treasury securities   $ 606,265     $ 191,727     $ -     $ -     $ 797,992     $ 191,727  
                                                 

 

    December 31, 2011  
                                  Net  
    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   $ 606,234     $ 171,719     $ -     $ -     $ 777,953     $ 171,719  
                                                 

 

All held to maturity securities are held in trust pursuant to the New York State Department of Financial Services’ 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,  
    2012     2011     2012     2011  
    (unaudited)     (unaudited)  
Income:                        
Fixed-maturity securities   $ 226,777     $ 174,363     $ 461,270     $ 356,500  
Equity securities     62,310       33,474       148,239       70,298  
Cash and cash equivalents     (1,347 )     236       59       2,223  
Other     2       (3,325 )     4       (3,315 )
Total     287,742       204,748       609,572       425,706  
Expenses:                                
Investment expenses     57,863       44,284       112,176       87,572  
Net investment income   $ 229,879     $ 160,464     $ 497,396     $ 338,134  

 

 

 

 

Proceeds from the sale and maturity of fixed-maturity securities were $1,837,698 and $2,079,869 for the six months ended June 30, 2012 and 2011, respectively.

 

Proceeds from the sale of equity securities were $559,993 and $1,215,296 for the six months ended June 30, 2012 and 2011, respectively.

 

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

 

    Three months ended     Six months ended  
    June 30,     June 30,  
    2011     2010     2012     2011  
    (unaudited)     (unaudited)  
Fixed-maturity securities                        
Gross realized gains   $ 55,004     $ 87,302     $ 95,150     $ 87,302  
Gross realized losses     (54,404 )     (1,983 )     (54,404 )     (1,983 )
      600       85,319       40,746       85,319  
Equity securities                                
Gross realized gains     25,215       18,484       32,284       135,817  
Gross realized losses     (19,655 )     (13,842 )     (27,470 )     (60,704 )
      5,560       4,642       4,814       75,113  
                                 
Net realized gains   $ 6,160     $ 89,961     $ 45,560     $ 160,432  

 

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 investment (“OTTI”) declines 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 18 securities at June 30, 2012 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, 2012 and 2011. 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, 2012 as follows:

 

    June 30, 2012  
    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     -       -       -       773,253       (29,967 )     2       773,253       (29,967 )
                                                                 
Corporate and other                                                                
  bonds industrial and                                                                
  miscellaneous     1,022,335       (9,850 )     5       1,821,008       (48,886 )     8       2,843,343       (58,736 )
                                                                 
Total fixed-maturity  securities   $ 1,022,335     $ (9,850 )     5     $ 2,594,261     $ (78,853 )     10     $ 3,616,596     $ (88,703 )
                                                                 
Equity Securities:                                                                
Preferred stocks   $ -     $ -       -     $ 114,750     $ (12,775 )     1     $ 114,750     $ (12,775 )
Common stocks     238,502       (26,384 )     2       -       -       -       238,502       (26,384 )
                                                                 
Total equity securities   $ 238,502     $ (26,384 )     2     $ 114,750     $ (12,775 )     1     $ 353,252     $ (39,159 )
                                                                 
Total   $ 1,260,837     $ (36,234 )     7     $ 2,709,011     $ (91,628 )     11     $ 3,969,848     $ (127,862 )