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3. Investments

3 Months Ended

Mar. 31, 2013

Available for Sale Securities

The amortized cost and fair value of investments in available for sale fixed-maturity securities and equities as of March 31, 2013 and December 31, 2012 are summarized as follows:

	March 31, 2013
												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:
Political subdivisions of States,
Territories and Possessions	$	5,489,845	$	268,889	$	(20,396	)	$	-	$	5,738,338	$	248,493

Corporate and other bonds
Industrial and miscellaneous		19,012,430		1,132,479		(40,677	)		-		20,104,232		1,091,802
Total fixed-maturity securities		24,502,275		1,401,368		(61,073	)		-		25,842,570		1,340,295

Equity Securities:
Preferred stocks		2,265,510		37,289		(6,174	)		-		2,296,625		31,115
Common stocks		4,190,290		636,664		(11,224	)		-		4,815,730		625,440
Total equity securities		6,455,800		673,953		(17,398	)		-		7,112,355		656,555

Total	$	30,958,075	$	2,075,321	$	(78,471	)	$	-	$	32,954,925	$	1,996,850

	December 31, 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)

Fixed-Maturity Securities:
Political subdivisions of States,
Territories and Possessions	$	5,219,092	$	257,298	$	(1,574	)	$	-		$	5,474,816	$	255,724

Corporate and other bonds
Industrial and miscellaneous		19,628,005		1,123,392		(43,553	)		(722	)		20,707,122		1,079,117
Total fixed-maturity securities		24,847,097		1,380,690		(45,127	)		(722	)		26,181,938		1,334,841

Equity Securities:
Preferred stocks		1,475,965		19,512		(11,130	)		-			1,484,347		8,382
Common stocks		3,598,012		353,782		(145,899	)		-			3,805,895		207,883
Total equity securities		5,073,977		373,294		(157,029	)		-			5,290,242		216,265

Total	$	29,921,074	$	1,753,984	$	(202,156	)	$	(722	)	$	31,472,180	$	1,551,106

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 March 31, 2013 and December 31, 2012 is shown below:

	March 31, 2013				December 31, 2012
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
	(unaudited)
Less than one year	$	551,998	$	558,103	$	546,952	$	560,162
One to five years		8,657,117		9,197,497		9,031,248		9,569,943
Five to ten years		11,751,646		12,480,298		12,605,798		13,306,033
More than 10 years		3,541,514		3,606,672		2,663,099		2,745,800
Total	$	24,502,275	$	25,842,570	$	24,847,097	$	26,181,938

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 March 31, 2013 and December 31, 2012 are summarized as follows:

March 31, 2013

Net

Cost or

Gross

Gross Unrealized Losses

Unrealized

Amortized

Unrealized

Less than 12

More than 12

Fair

Gains/

Category

Cost

Gains

Months

Value

(Losses)

(unaudited)

U.S. Treasury securities

$

606,289

$

143,848

$

-

$

-

$

750,137

$

143,848

December 31, 2012

Net

Cost or

Gross

Gross Unrealized Losses

Unrealized

Amortized

Unrealized

Less than 12

More than 12

Fair

Gains/

Category

Cost

Gains

Months

Value

(Losses)

U.S. Treasury securities

$

606,281

$

172,745

$

-

$

-

$

779,026

$

172,745

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
	March 31,
	2013		2012
	(unaudited)
Income:
Fixed-maturity securities	$	260,035	$	234,493
Equity securities		86,455		85,929
Cash and cash equivalents		29		1,406
Other		-		2
Total		346,519		321,830
Expenses:
Investment expenses		63,232		54,313
Net investment income	$	283,287	$	267,517

Proceeds from the sale and maturity of fixed-maturity securities were $1,522,781 and $1,032,800 for the three months ended March 31, 2013 and 2012, respectively.

Proceeds from the sale of equity securities were $945,053 and $191,516 for the three months ended March 31, 2013 and 2012, respectively.

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

	Three months ended
	March 31,
	2013			2012
	(unaudited)
Fixed-maturity securities:
Gross realized gains	$	76,976		$	40,146
Gross realized losses		-			-
		76,976			40,146

Equity securities:
Gross realized gains		71,785			7,069
Gross realized losses		(43,636	)		(7,815	)
		28,149			(746	)

Net realized gains	$	105,125		$	39,400

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 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 income 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 19 securities at March 31, 2013 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 three months ended March 31, 2013 and 2012. 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 March 31, 2013 and December 31, 2012 as follows:

	March 31, 2013
	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:
Political subdivisions of
States, Territories and
Possessions	$	795,799	$	(20,396	)		3	$	-	$	-		-	$	795,799	$	(20,396	)

Corporate and other
bonds industrial and
miscellaneous		1,998,132		(40,677	)		9		-		-		-		1,998,132		(40,677	)

Total fixed-maturity
securities	$	2,793,931	$	(61,073	)		12	$	-	$	-		-	$	2,793,931	$	(61,073	)

Equity Securities:
Preferred stocks	$	898,900	$	(6,174	)		4	$	-	$	-		-	$	898,900	$	(6,174	)
Common stocks		632,850		(11,224	)		3		-		-		-		632,850		(11,224	)

Total equity securities	$	1,531,750	$	(17,398	)		7	$	-	$	-		-	$	1,531,750	$	(17,398	)

Total	$	4,325,681	$	(78,471	)		19	$	-	$	-		-	$	4,325,681	$	(78,471	)

	December 31, 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

Fixed-Maturity Securities:
Political subdivisions of
States, Territories and
Possessions	$	202,798	$	(1,574	)		1	$	-	$	-			-	$	202,798	$	(1,574	)

Corporate and other
bonds industrial and
miscellaneous		4,025,551		(43,553	)		19		128,125		(722	)		1		4,153,676		(44,275	)

Total fixed-maturity
securities	$	4,228,349	$	(45,127	)		20	$	128,125	$	(722	)		1	$	4,356,474	$	(45,849	)

Equity Securities:
Preferred stocks	$	387,925	$	(11,130	)		3	$	-	$	-			-	$	387,925	$	(11,130	)
Common stocks		1,536,860		(145,899	)		9		-		-			-		1,536,860		(145,899	)

Total equity securities	$	1,924,785	$	(157,029	)		12	$	-	$	-			-	$	1,924,785	$	(157,029	)

Total	$	6,153,134	$	(202,156	)		32	$	128,125	$	(722	)		1	$	6,281,259	$	(202,878	)

- Definition

Tabular disclosure of investment income derived from investments in debt and equity securities consisting of interest income earned from investments in debt securities and on cash and cash equivalents, dividend income from investments in equity securities, and income or expense derived from the amortization of investment related discounts or premiums, respectively. This item does not include realized or unrealized gains or losses on the sale or holding of investments in debt and equity securities required to be included in earnings for the period or for other than temporary losses related to investments in debt and equity securities which are included in realized losses in the period recognized.

+ References+ Details