3. Investments

6 Months Ended

Jun. 30, 2015

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 June 30, 2015 and December 31, 2014 are summarized as follows:

	June 30, 2015
						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	$ 13,544,367	$      296,651	$       (62,414)	$                  -	$ 13,778,604	$      234,237
Corporate and other bonds
Industrial and miscellaneous	38,471,232	624,272	(191,871)	(10,736)	38,892,897	421,665
Residential mortgage backed
securities	4,192,192	30,439	(42,038)	-	4,180,593	(11,599)
Total fixed-maturity securities	56,207,791	951,362	(296,323)	(10,736)	56,852,094	644,303
Equity Securities:
Preferred stocks	3,130,221	22,047	(27,967)	(29,016)	3,095,285	(34,936)
Common stocks	5,897,987	428,808	(131,551)	(15,077)	6,180,167	282,180
Total equity securities	9,028,208	450,855	(159,518)	(44,093)	9,275,452	247,244
Total	$ 65,235,999	$   1,402,217	$     (455,841)	$       (54,829)	$ 66,127,546	$      891,547

	December 31, 2014
						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	$ 13,862,141	$      412,490	$       (23,813)	$         (6,379)	$ 14,244,439	$      382,298
Corporate and other bonds
Industrial and miscellaneous	36,221,300	803,440	(118,092)	(30,228)	36,876,420	655,120
Total fixed-maturity securities	50,083,441	1,215,930	(141,905)	(36,607)	51,120,859	1,037,418
Equity Securities:
Preferred stocks	3,172,632	19,180	(2,647)	(62,886)	3,126,280	(46,352)
Common stocks	4,448,677	444,950	-	(2,177)	4,891,449	442,772
Total equity securities	7,621,309	464,130	(2,647)	(65,063)	8,017,729	396,420
Total	$ 57,704,750	$   1,680,060	$     (144,552)	$     (101,670)	$ 59,138,588	$   1,433,838

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, 2015 and December 31, 2014 is shown below:

	June 30, 2015				December 31, 2014
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	607,496	$	625,288	$	482,833	$	487,507
One to five years		11,251,937		11,519,899		11,640,381		11,943,127
Five to ten years		35,952,360		36,298,627		32,283,921		32,865,231
More than 10 years		4,203,806		4,227,687		5,676,306		5,824,994
Residential mortgage backed securities		4,192,192		4,180,593		-		-
Total	$	56,207,791	$	56,852,094	$	50,083,441	$	51,120,859

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, 2015 and December 31, 2014 are summarized as follows:

	June 30, 2015
													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	$	606,371	$	128,547	$	-		$	-		$	734,918	$	128,547
Political subdivisions of States,
Territories and Possessions		1,415,423		34,784		-			(47,642	)		1,402,565		(12,858	)
Corporate and other bonds
Industrial and miscellaneous		3,113,758		63,724		(56,404	)		-			3,121,078		7,320
Total	$	5,135,552	$	227,055	$	(56,404	)	$	(47,642	)	$	5,258,561	$	123,009

	December 31, 2014
						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	$    606,353	$     183,200	$                  -	$                  -	$    789,553	$      183,200
Political subdivisions of States,
Territories and Possessions	1,413,303	49,981	-	(12,247)	1,451,037	37,734
Corporate and other bonds
Industrial and miscellaneous	3,109,079	98,306	(52,921)	-	3,154,464	45,385
Total	$ 5,128,735	$     331,487	$       (52,921)	$       (12,247)	$ 5,395,054	$      266,319

Held-to-maturity U.S. Treasury 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 June 30, 2015 and December 31, 2014 is shown below:

	June 30, 2015				December 31, 2014
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	-	$	-	$	-	$	-
One to five years		-		-		-		-
Five to ten years		4,034,068		4,010,908		3,522,927		3,563,401
More than 10 years		1,101,484		1,247,653		1,605,808		1,831,653
Total	$	5,135,552	$	5,258,561	$	5,128,735	$	5,395,054

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,
	2015	2014	2015	2014
Income:
Fixed-maturity securities	$      565,337	$      406,137	$   1,076,292	$      749,055
Equity securities	130,136	141,705	252,705	256,218
Cash and cash equivalents	121	2,821	215	23,440
Other	-	594	-	594
Total	695,594	551,257	1,329,212	1,029,307
Expenses:
Investment expenses	69,622	99,342	128,584	198,604
Net investment income	$      625,972	$      451,915	$   1,200,628	$      830,703

Proceeds from the sale and maturity of fixed-maturity securities were $1,135,673 and $3,463,499 for the six months ended June 30, 2015 and 2014, respectively.

Proceeds from the sale of equity securities were $839,408 and $3,417,605 for the six months ended June 30, 2015 and 2014, respectively.

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

	Three months ended		Six months ended
	June 30,		June 30,
	2015	2014	2015	2014
Fixed-maturity securities:
Gross realized gains	$                 -	$        68,223	$                  -	$      157,479
Gross realized losses	(18,717)	(1,894)	(86,211)	(28,293)
	(18,717)	66,329	(86,211)	129,186
Equity securities:
Gross realized gains	36,421	81,192	36,421	217,251
Gross realized losses	(15,441)	(12,919)	(15,441)	(23,487)
	20,980	68,273	20,980	193,764
Net realized gains (losses)	$          2,263	$      134,602	$       (65,231)	$      322,950

Impairment Review

Impairment of investment securities results in a charge to operations when a market decline to 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, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss.  When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in other comprehensive income.  The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.  For held-to-maturity debt securities, the amount of OTTI recorded in other comprehensive income for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of timing of future estimated cash flows of the security.

OTTI losses are recorded in the condensed 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 June 30, 2015, there were 70 securities that accounted 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 securities and equity securities for the six months ended June 30, 2015 and 2014. 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 June 30, 2015 and December 31, 2014 as follows:

	June 30, 2015
	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	$   3,175,851	$      (62,414)	10	$                -	$                 -	1	$   3,175,851	$      (62,414)
Corporate and other
bonds industrial and
miscellaneous	13,574,476	(191,871)	27	479,415	(10,736)	1	14,053,891	(202,607)
Residential mortgage
backed securities	2,609,538	(42,038)	11	-	-	-	2,609,538	(42,038)
Total fixed-maturity
securities	$ 19,359,865	$    (296,323)	48	$    479,415	$      (10,736)	2	$ 19,839,280	$    (307,059)
Equity Securities:
Preferred stocks	$      844,035	$      (27,967)	3	$    673,075	$      (29,016)	3	$   1,517,110	$      (56,983)
Common stocks	2,159,808	(131,551)	13	254,100	(15,077)	1	2,413,908	(146,628)
Total equity securities	$   3,003,843	$    (159,518)	16	$    927,175	$      (44,093)	4	$   3,931,018	$    (203,611)
Total	$ 22,363,708	$    (455,841)	64	$ 1,406,590	$      (54,829)	6	$ 23,770,298	$    (510,670)

	December 31, 2014
	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	$    3,013,648	$      (23,813)	9	$    126,658	$        (6,379)	1	$   3,140,306	$     (30,192)
Corporate and other
bonds industrial and
miscellaneous	6,325,579	(118,092)	15	714,640	(30,228)	2	7,040,219	(148,320)
Total fixed-maturity
securities	$    9,339,227	$    (141,905)	24	$    841,298	$      (36,607)	3	$ 10,180,525	$   (178,512)
Equity Securities:
Preferred stocks	$       656,325	$        (2,647)	1	$ 1,448,376	$      (62,886)	6	$   2,104,701	$     (65,533)
Common stocks	-	-	-	267,000	(2,177)	1	267,000	(2,177)
Total equity securities	$       656,325	$        (2,647)	1	$ 1,715,376	$      (65,063)	7	$   2,371,701	$     (67,710)
Total	$    9,995,552	$    (144,552)	25	$ 2,556,674	$    (101,670)	10	$ 12,552,226	$   (246,222)