3. Investments

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

3. Investments

Available-for-Sale Securities

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

	December 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)
Fixed-Maturity Securities:
Political subdivisions of States,
Territories and Possessions	$	7,000,222	$	162,616	$	(49,491	)	$	(45,140	)	$	7,068,207	$	67,985
Corporate and other bonds
Industrial and miscellaneous		21,079,680		569,139		(179,810	)		(101,194	)		21,367,815		288,135
Total fixed-maturity securities		28,079,902		731,755		(229,301	)		(146,334	)		28,436,022		356,120
Equity Securities:
Preferred stocks		2,899,301		2,503		(251,525	)		(62,551	)		2,587,728		(311,573	)
Common stocks		3,791,037		470,606		(38,785	)		(13,913	)		4,208,945		417,908
Total equity securities		6,690,338		473,109		(290,310	)		(76,464	)		6,796,673		106,335
Total	$	34,770,240	$	1,204,864	$	(519,611	)	$	(222,798	)	$	35,232,695	$	462,455

	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 December 31, 2013 and 2012 is shown below:

	December 31, 2013				December 31, 2012
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	758,281	$	768,954	$	546,952	$	560,162
One to five years		9,025,386		9,466,973		9,031,248		9,569,943
Five to ten years		14,070,003		14,114,271		12,605,798		13,306,033
More than 10 years		4,226,232		4,085,824		2,663,099		2,745,800
Total	$	28,079,902	$	28,436,022	$	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 December 31, 2013 and 2012 are summarized as follows:

	December 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)
U.S. Treasury securities	$	606,138	$	46,915	$	-		$	-	$	653,053	$	46,915
Political subdivisions of States,
Territories and Possessions		208,697		-		(25,359	)		-		183,338		(25,359	)
Corporate and other bonds
Industrial and miscellaneous		1,584,647		4,223		-			-		1,588,870		4,223
Total	$	2,399,482	$	51,138	$	(25,359	)	$	-	$	2,425,261	$	25,779

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)

U.S. Treasury securities

$

606,281

$

172,745

$

-

$

-

$

779,026

$

172,745

U.S. Treasury securities included in held-to-maturity securities are held in trust pursuant to the New York State Department of Financial Services’ minimum funds requirement.

A summary of the amortized cost and fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of December 31, 2013 and 2012 is shown below:

	December 31, 2013				December 31, 2012
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	-	$	-	$	-	$	-
One to five years		-		-		-		-
Five to ten years		1,793,344		1,772,208		-		-
More than 10 years		606,138		653,053		606,281		779,026
Total	$	2,399,482	$	2,425,261	$	606,281	$	779,026

Investment Income

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

	Years ended
	December 31,
	2013		2012
Income:
Fixed-maturity securities	$	1,018,857	$	951,895
Equity securities		390,818		268,034
Cash and cash equivalents		41		134
Other		16,507		23,857
Total		1,426,223		1,243,920
Expenses:
Investment expenses		256,172		228,764
Net investment income	$	1,170,051	$	1,015,156

Proceeds from the sale and maturity of fixed-maturity securities were $5,850,770 and $4,322,120 for the years ended December 31, 2013 and 2012, respectively.

Proceeds from the sale of equity securities were $4,868,193 and $1,726,345 for the years ended December 31, 2013 and 2012, respectively.

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

	Year ended
	December 31,
	2013			2012
Fixed-maturity securities
Gross realized gains	$	237,886		$	233,299
Gross realized losses		(73,910	)		(52,933	)
		163,976			180,366
Equity securities
Gross realized gains		551,912			137,271
Gross realized losses		(140,096	)		(29,569	)
		411,816			107,702
Net realized gains	$	575,792		$	288,068

Impairment Review

Impairment of investment securities results in a charge to operations when a market decline below cost is deemed to be other-than-temporary. 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 result in a permanent reduction of the cost basis of the underlying investment.

OTTI losses are recorded in the consolidated statements 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. At December 31, 2013, there were 52 securities 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 years ended December 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 an 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 December 31, 2013 and 2012 as follows:

	December 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
Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-
Political subdivisions of
States, Territories and
Possessions		2,015,437		(49,491	)		6		415,866		(45,140	)		2		2,431,303		(94,631	)
Corporate and other
bonds industrial and
miscellaneous		6,447,605		(179,810	)		24		1,430,377		(101,194	)		5		7,877,982		(281,004	)
Total fixed-maturity
securities	$	8,463,042	$	(229,301	)		30	$	1,846,243	$	(146,334	)		7	$	10,309,285	$	(375,635	)
Equity Securities:
Preferred stocks	$	1,835,958	$	(251,525	)		8	$	444,100	$	(62,551	)		2	$	2,280,058	$	(314,076	)
Common stocks		879,525		(38,785	)		4		145,625		(13,913	)		1		1,025,150		(52,698	)
Total equity securities	$	2,715,483	$	(290,310	)		12	$	589,725	$	(76,464	)		3	$	3,305,208	$	(366,774	)
Total	$	11,178,525	$	(519,611	)		42	$	2,435,968	$	(222,798	)		10	$	13,614,493	$	(742,409	)

	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	)