5. Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

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5. Fair Value of Financial Instruments

GAAP requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The Company uses the following methods and assumptions in estimating its fair value disclosures for financial instruments:

Equity and fixed income investments:  Fair value disclosures for investments are included in “Note 3 - Investments.”

Cash and cash equivalents: The carrying values of cash and cash equivalents approximate their fair values because of the short maturity of these instruments.

Premiums receivable, reinsurance receivables:  The carrying values reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values due to the short term nature of the assets.

Notes receivable: The carrying amount of notes receivable related to the sale of businesses approximates fair value because of the recently negotiated interest rates based on term of the loan, risk and guaranty.

Real Estate: The fair value of the land and building included in property and equipment, which is used in the Company’s operations, approximates the carrying value. The fair value was based on an appraisal prepared using the sales comparison approach.

Reinsurance balances payable:  The carrying value reported in the consolidated balance sheets for these financial instruments approximates fair value.

Notes payable (including related parties): The Company estimates that the carrying amount of notes payable approximates fair value because of the recently negotiated interest rates based on term of the loan, risk and guaranty.

The estimated fair values of the Company’s financial instruments are as follows:

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(unaudited)
Fixed-maturity investments held to maturity	$	606,273	$	792,101	$	606,234	$	777,953
Cash and cash equivalents		2,447,849		2,447,849		173,126		173,126
Premiums receivable		6,854,026		6,854,026		5,779,085		5,779,085
Receivables - reinsurance contracts		2,668,123		2,668,123		1,734,535		1,734,535
Reinsurance receivables		28,047,484		28,047,484		23,880,814		23,880,814
Notes receivable-sale of business		331,207		331,207		393,511		393,511
Real estate, net of accumulated depreciation		1,446,196		1,510,000		1,477,639		1,510,000
Reinsurance balances payable		3,164,848		3,164,848		2,761,828		2,761,828
Notes payable (including related parties)		1,097,000		1,097,000		1,047,000		1,047,000