5. Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2014

Notes to Financial Statements

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 securities and fixed income securities available-for-sale:  Fair value disclosures for these 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-term nature of these instruments.

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

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, and accordingly the real estate is a Level 3 asset under the fair value hierarchy.

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

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

	September 30, 2014		December 31, 2013
	Carrying Value	Fair Value	Carrying Value	Fair Value
Fixed-maturity securities held-to-maturity	$ 5,125,285	$ 5,334,056	$ 2,399,482	$ 2,425,261
Cash and cash equivalents	5,028,005	5,028,005	19,922,506	19,922,506
Premiums receivable	9,324,796	9,324,796	7,590,074	7,590,074
Receivables - reinsurance contracts	1,750,989	1,750,989	974,989	974,989
Reinsurance receivables	35,324,074	35,324,074	37,560,825	37,560,825
Real estate, net of accumulated depreciation	1,775,839	1,816,122	1,777,942	1,816,122
Reinsurance balances payable	2,057,549	2,057,549	2,566,729	2,566,729