3. Investments

3 Months Ended

Mar. 31, 2016

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 March 31, 2016 and December 31, 2015 are summarized as follows:

	March 31, 2016
					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Fair		Net Unrealized Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
Fixed-Maturity Securities:
Political subdivisions of States,
Territories and Possessions	$	10,211,142	$	490,669	$	(2,510	)	$	(5,060	)	$	10,694,241	$	483,099
Corporate and other bonds
Industrial and miscellaneous		45,367,395		1,247,820		(210,199	)		(59,298	)		46,345,718		978,323
Residential mortgage backed
securities		16,038,820		188,141		(36,904	)		—			16,190,057		151,237
Total fixed-maturity securities		71,617,357		1,926,630		(249,613	)		(64,358	)		73,230,016		1,612,659
Equity Securities:
Preferred stocks		3,187,826		77,621		—			(30,072	)		3,235,375		47,549
Common stocks		6,313,286		542,527		(65,438	)		—			6,790,375		477,089
Total equity securities		9,501,112		620,148		(65,438	)		(30,072	)		10,025,750		524,638
Total	$	81,118,469	$	2,546,778	$	(315,051	)	$	(94,430	)	$	83,255,766	$	2,137,297

	December 31, 2015
					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Fair		Net Unrealized Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
Fixed-Maturity Securities:
Political subdivisions of States,
Territories and Possessions	$	12,139,793	$	431,194	$	(15,889	)	$	—		$	12,555,098	$	415,305
Corporate and other bonds
Industrial and miscellaneous		45,078,044		490,444		(512,427	)		(99,593	)		44,956,468		(121,576	)
Residential mortgage backed
securities		5,003,292		48,375		(61,169	)		—			4,990,498		(12,794	)
Total fixed-maturity securities		62,221,129		970,013		(589,485	)		(99,593	)		62,502,064		280,935
Equity Securities:
Preferred stocks		2,874,173		70,799		—			(29,322	)		2,915,650		41,477
Common stocks		5,877,364		514,977		(103,721	)		—			6,288,620		411,256
Total equity securities		8,751,537		585,776		(103,721	)		(29,322	)		9,204,270		452,733
Total	$	70,972,666	$	1,555,789	$	(693,206	)	$	(128,915	)	$	71,706,334	$	733,668

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, 2016 and December 31, 2015 is shown below:

	March 31, 2016				December 31, 2015
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	1,960,172	$	1,989,139	$	827,246	$	837,918
One to five years		21,829,957		22,476,966		17,146,349		17,393,571
Five to ten years		30,423,009		31,171,743		37,877,726		37,884,450
More than 10 years		1,365,399		1,402,111		1,366,516		1,395,627
Residential mortgage backed securities		16,038,820		16,190,057		5,003,292		4,990,498
Total	$	71,617,357	$	73,230,016	$	62,221,129	$	62,502,064

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, 2016 and December 31, 2015 are summarized as follows:

	March 31, 2016
					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Fair		Net Unrealized Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
U.S. Treasury securities	$	606,398	$	147,641	$	—		$	—		$	754,039	$	147,641
Political subdivisions of States,
Territories and Possessions		1,418,827		88,948		—			(66,215	)		1,441,560		22,733
Corporate and other bonds
Industrial and miscellaneous		3,115,297		152,036		(225	)		(96,077	)		3,171,031		55,734
Total	$	5,140,522	$	388,625	$	(225	)	$	(162,292	)	$	5,366,630	$	226,108

	December 31, 2015
					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Fair		Net Unrealized Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
U.S. Treasury securities	$	606,389	$	147,650	$	—		$	—		$	754,039	$	147,650
Political subdivisions of States,
Territories and Possessions		1,417,679		70,284		—			(54,189	)		1,433,774		16,095
Corporate and other bonds
Industrial and miscellaneous		3,114,804		82,265		(17,980	)		(125,807	)		3,053,282		(61,522	)
Total	$	5,138,872	$	300,199	$	(17,980	)	$	(179,996	)	$	5,241,095	$	102,223

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 March 31, 2016 and December 31, 2015 is shown below:

	March 31, 2016				December 31, 2015
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	—	$	—	$	—	$	—
One to five years		500,000		506,790		500,000		496,245
Five to ten years		4,034,124		4,105,801		4,032,483		3,990,811
More than 10 years		606,398		754,039		606,389		754,039
Total	$	5,140,522	$	5,366,630	$	5,138,872	$	5,241,095

Investment Income

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

	Three months ended
	March 31,
	2016		2015
Income:
Fixed-maturity securities	$	664,476	$	510,955
Equity securities		175,951		122,569
Cash and cash equivalents		6,446		94
Total		846,873		633,618
Expenses:
Investment expenses		33,816		58,962
Net investment income	$	813,057	$	574,656

Proceeds from the sale and maturity of fixed-maturity securities were $6,401,092 and $716,892 for the three months ended March 31, 2016 and 2015, respectively.

Proceeds from the sale of equity securities were $1,161,501 and $-0- for the three months ended March 31, 2016 and 2015, respectively.

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

	Three months ended
	March 31,
	2016			2015
Fixed-maturity securities:
Gross realized gains	$	106,417		$	—
Gross realized losses		(105,543	)		(67,494	)
		874			(67,494	)
Equity securities:
Gross realized gains		82,688			—
Gross realized losses		(3,126	)		—
		79,562			—
Net realized gains (losses)	$	80,436		$	(67,494	)

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, 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 March 31, 2016 and December 31, 2015, there were 32 and 57 securities, respectively, 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 investments and equity securities for the three months ended March 31, 2016 and 2015. 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 March 31, 2016 and December 31, 2015 as follows:

	March 31, 2016
	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	$	334,827	$	(2,510	)		1	$	339,627	$	(5,060	)		1	$	674,454	$	(7,570	)
Corporate and other bonds industrial and miscellaneous		5,269,173		(210,199	)		13		687,228		(59,298	)		2		5,956,401		(269,497	)
Residential mortgage backed securities		1,614,256		(36,904	)		10		—		—			—		1,614,256		(36,904	)
Total fixed-maturity securities	$	7,218,256	$	(249,613	)		24	$	1,026,855	$	(64,358	)		3	$	8,245,111	$	(313,971	)
Equity Securities:
Preferred stocks	$	—	$	—			—	$	701,250	$	(30,072	)		1	$	701,250	$	(30,072	)
Common stocks		1,502,700		(65,438	)		4		—		—			—		1,502,700		(65,438	)
Total equity securities	$	1,502,700	$	(65,438	)		4	$	701,250	$	(30,072	)		1	$	2,203,950	$	(95,510	)
Total	$	8,720,956	$	(315,051	)		28	$	1,728,105	$	(94,430	)		4	$	10,449,061	$	(409,481	)

	December 31, 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	$	1,432,005	$	(15,889	)		4	$	—	$	—			—	$	1,432,005	$	(15,889	)
Corporate and other bonds industrial and miscellaneous		18,424,609		(512,427	)		32		636,093		(99,593	)		2		19,060,702		(612,020	)
Residential mortgage backed securities		2,413,980		(61,169	)		12		—		—			—		2,413,980		(61,169	)
Total fixed-maturity securities	$	22,270,594	$	(589,485	)		48	$	636,093	$	(99,593	)		2	$	22,906,687	$	(689,078	)
Equity Securities:
Preferred stocks	$	—	$	—			—	$	702,000	$	(29,322	)		1	$	702,000	$	(29,322	)
Common stocks		2,538,900		(103,721	)		6		—		—			—		2,538,900		(103,721	)
Total equity securities	$	2,538,900	$	(103,721	)		6	$	702,000	$	(29,322	)		1	$	3,240,900	$	(133,043	)
Total	$	24,809,494	$	(693,206	)		54	$	1,338,093	$	(128,915	)		3	$	26,147,587	$	(822,121	)