INVESTMENTS

Investments of the Company’s insurance subsidiaries are subject to the insurance laws of the state of their incorporation. These laws prescribe the kind, quality and concentration of investments that may be made by insurance companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks and real estate mortgages. The Company believes that it is in compliance with these laws.

The amortized cost and estimated fair value of securities available-for-sale as of December 31, 2013 and 2012 are as follows. All securities are classified as available-for-sale and are carried at fair value.



December 31, 2013	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Securities available-for-sale:
Fixed maturity securities:
U.S. treasury	$	9,539,657	$	191,560	$	318,720	$	9,412,497
U.S. government-sponsored agencies	156,980,739		1,355,805		11,390,825		146,945,719
Obligations of states and political subdivisions	346,554,566		15,039,209		4,542,086		357,051,689
Commercial mortgage-backed	63,184,992		5,842,361		87,776		68,939,577
Residential mortgage-backed	96,058,330		1,073,040		2,952,181		94,179,189
Other asset-backed	11,455,608		1,192,028		—		12,647,636
Corporate	325,798,433		16,541,906		3,532,633		338,807,706
Total fixed maturity securities	1,009,572,325		41,235,909		22,824,221		1,027,984,013

Equity securities:
Common stocks:
Financial services	19,272,973		9,374,101		148,745		28,498,329
Information technology	12,644,716		6,301,287		28,635		18,917,368
Healthcare	12,801,287		9,143,327		—		21,944,614
Consumer staples	9,162,313		3,848,590		221		13,010,682
Consumer discretionary	10,722,050		10,309,245		—		21,031,295
Energy	14,102,214		7,341,182		326,131		21,117,265
Industrials	11,189,958		6,075,540		1,354		17,264,144
Other	13,357,539		4,489,391		35,753		17,811,177
Non-redeemable preferred stocks	10,582,438		315,662		644,700		10,253,400
Total equity securities	113,835,488		57,198,325		1,185,539		169,848,274
Total securities available-for-sale	$	1,123,407,813	$	98,434,234	$	24,009,760	$	1,197,832,287



December 31, 2012	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Securities available-for-sale:
Fixed maturity securities:
U.S. treasury	$	4,697,762	$	287,140	$	—	$	4,984,902
U.S. government-sponsored agencies	159,548,303		3,228,302		333,975		162,442,630
Obligations of states and political subdivisions	335,188,220		35,776,373		2,479		370,962,114
Commercial mortgage-backed	69,952,036		10,412,989		15,843		80,349,182
Residential mortgage-backed	46,286,598		1,777,113		274,107		47,789,604
Other asset-backed	9,720,662		1,566,186		—		11,286,848
Corporate	295,450,358		26,774,604		245,385		321,979,577
Total fixed maturity securities	920,843,939		79,822,707		871,789		999,794,857

Equity securities:
Common stocks:
Financial services	14,496,766		3,630,544		33,922		18,093,388
Information technology	12,331,378		4,722,076		127,690		16,925,764
Healthcare	14,823,967		4,199,882		—		19,023,849
Consumer staples	12,019,892		1,593,039		3,404		13,609,527
Consumer discretionary	10,829,547		6,261,000		—		17,090,547
Energy	14,629,926		4,800,404		—		19,430,330
Industrials	7,638,633		936,183		—		8,574,816
Other	16,749,417		2,215,172		283,149		18,681,440
Non-redeemable preferred stocks	8,332,437		647,727		116,000		8,864,164
Total equity securities	111,851,963		29,006,027		564,165		140,293,825
Total securities available-for-sale	$	1,032,695,902	$	108,828,734	$	1,435,954	$	1,140,088,682

The following table sets forth the estimated fair value and gross unrealized losses associated with investment securities that were in an unrealized loss position as of December 31, 2013 and 2012, listed by length of time the securities were in an unrealized loss position.



December 31, 2013	Less than twelve months				Twelve months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed maturity securities:
U.S. treasury	$	4,506,640	$	318,720	$	—	$	—	$	4,506,640	$	318,720
U.S. government-sponsored agencies	93,855,585		8,119,934		24,053,560		3,270,891		117,909,145		11,390,825
Obligations of states and political subdivisions	74,522,866		4,335,400		3,008,580		206,686		77,531,446		4,542,086
Commercial mortgage-backed	10,550,634		87,776		—		—		10,550,634		87,776
Residential mortgage-backed	44,243,259		2,481,862		4,599,942		470,319		48,843,201		2,952,181
Corporate	81,291,981		2,704,297		10,547,054		828,336		91,839,035		3,532,633
Total, fixed maturity securities	308,970,965		18,047,989		42,209,136		4,776,232		351,180,101		22,824,221
Equity securities:
Common stocks:
Financial services	2,801,525		148,745		—		—		2,801,525		148,745
Information technology	609,630		28,635		—		—		609,630		28,635
Consumer staples	29,648		221		—		—		29,648		221
Energy	1,450,037		326,131		—		—		1,450,037		326,131
Industrials	625,124		1,354		—		—		625,124		1,354
Other	1,498,700		35,753		—		—		1,498,700		35,753
Non-redeemable preferred stocks	2,121,300		128,700		1,484,000		516,000		3,605,300		644,700
Total, equity securities	9,135,964		669,539		1,484,000		516,000		10,619,964		1,185,539
Total temporarily impaired securities	$	318,106,929	$	18,717,528	$	43,693,136	$	5,292,232	$	361,800,065	$	24,009,760



December 31, 2012	Less than twelve months				Twelve months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed maturity securities:
U.S. government-sponsored agencies	$	33,950,271	$	333,975	$	—	$	—	$	33,950,271	$	333,975
Obligations of states and political subdivisions	3,234,180		2,479		—		—		3,234,180		2,479
Commercial mortgage-backed	3,773,043		15,843		—		—		3,773,043		15,843
Residential mortgage-backed	5,303,741		274,107		—		—		5,303,741		274,107
Corporate	17,567,579		245,385		—		—		17,567,579		245,385
Total, fixed maturity securities	63,828,814		871,789		—		—		63,828,814		871,789
Equity securities:
Common stocks:
Financial services	881,580		33,922		—		—		881,580		33,922
Information technology	1,435,122		127,690		—		—		1,435,122		127,690
Consumer staples	90,080		3,404		—		—		90,080		3,404
Other	2,403,683		283,149		—		—		2,403,683		283,149
Non-redeemable preferred stocks	—		—		1,884,000		116,000		1,884,000		116,000
Total, equity securities	4,810,465		448,165		1,884,000		116,000		6,694,465		564,165
Total temporarily impaired securities	$	68,639,279	$	1,319,954	$	1,884,000	$	116,000	$	70,523,279	$	1,435,954

Unrealized losses on fixed maturity securities increased in nearly every asset class at December 31, 2013 due to the rise in interest rates during 2013. Most of these securities are considered investment grade by credit rating agencies. Because management does not intend to sell these securities, does not believe it will be required to sell these securities before recovery, and believes it will collect the amounts due on these securities, it was determined that these securities were not “other-than-temporarily” impaired at December 31, 2013.

No particular sector or individual security accounted for a material amount of unrealized losses on commons stocks at December 31, 2013. The Company believes the unrealized losses on common stocks are primarily due to general fluctuations in the equity markets. Because the Company has the ability and intent to hold these securities for a reasonable amount of time to allow for recovery, it was determined that these securities were not “other-than-temporarily” impaired at December 31, 2013.

All of the Company’s preferred stock holdings are perpetual preferred stocks. The Company evaluates perpetual preferred stocks with unrealized losses for “other-than-temporary” impairment similar to fixed maturity securities since they have debt-like characteristics such as periodic cash flows in the form of dividends and call features, are rated by rating agencies and are priced like other long-term callable fixed maturity securities. There was no evidence of any credit deterioration in the issuers of the preferred stocks and the Company does not intend to sell these securities before recovery, nor does it believe it will be required to sell these securities before recovery; therefore, it was determined that these securities were not “other-than-temporarily” impaired at December 31, 2013.

The amortized cost and estimated fair value of fixed maturity securities at December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.



	Amortized cost		Estimated fair value
Securities available-for-sale:
Due in one year or less	$	4,081,655	$	4,129,740
Due after one year through five years	208,280,054		220,054,211
Due after five years through ten years	144,873,434		148,508,936
Due after ten years	493,093,860		492,172,360
Mortgage-backed securities	159,243,322		163,118,766
Totals	$	1,009,572,325	$	1,027,984,013

A summary of realized investment gains and (losses) is as follows:



	Year ended December 31,
	2013			2012			2011
Fixed maturity securities held-to-maturity:
Gross realized investment gains	$	—		$	—		$	47,077

Fixed maturity securities available-for-sale:
Gross realized investment gains	1,225,954			795,199			1,236,302
Gross realized investment losses	(725,062		)	(9,777		)	(572,071		)
"Other-than-temporary" impairments	—			—			(221,956		)

Equity securities available-for-sale:
Gross realized investment gains	9,457,892			9,983,532			18,604,135
Gross realized investment losses	(898,592		)	(2,566,303		)	(4,052,016		)
"Other-than-temporary" impairments	(63,647		)	(185,623		)	(5,738,178		)
Totals	$	8,996,545		$	8,017,028		$	9,303,293

Gains and losses realized on the disposition of investments are included in net income. The cost of investments sold is determined on the specific identification method using the highest cost basis first. During the fourth quarter of 2011, the Company sold all of its held-to-maturity securities, which consisted solely of small balances remaining on Government National Mortgage Association (GNMA) securities. These securities were ultimately purchased by GNMA, who repackaged them into a single security and resold them through a broker to the Company on the same day. The transaction was conducted to improve administrative efficiency, increase liquidity and reduce custodial costs. The amounts reported as “other-than-temporary” impairments do not include any individually significant items.

The following table is a roll forward of the cumulative credit losses on fixed maturity securities that have been recognized in earnings from “other-than-temporary” impairments. Note that this table only includes the credit loss component of “other-than-temporary” impairments, and does not include the non-credit loss component of impairments (which is recognized through “other comprehensive income”) or impairments that are recognized through earnings in their entirety (not subject to bifurcation between credit and non-credit components). During the second quarter of 2011, management determined that it would sell certain residential mortgage-backed securities that were in an unrealized loss position, resulting in the recognition of the non-credit loss component of the impairments through earnings.



	Year ended December 31,
	2013		2012		2011
Balance at beginning of year	$	—	$	—	$	207,854
Reduction for credit loss associated with previously recognized "other-than-temporary" impairment due to management's intent to sell the security	—		—		(207,854		)
Balance at end of year	$	—	$	—	$	—

A summary of net investment income is as follows:



	Year ended December 31,
	2013			2012			2011
Interest on fixed maturity securities	$	40,062,086		$	41,699,293		$	44,874,829
Dividends on equity securities	4,619,367			3,851,932			2,361,929
Interest on short-term investments	27,083			128,769			56,581
Return on long-term investments	21,866			11,584			27,472
Total investment income	44,730,402			45,691,578			47,320,811
Security litigation income	219,199			58,711			86,948
Investment expenses	(1,927,426		)	(1,605,215		)	(1,296,834		)
Net investment income	$	43,022,175		$	44,145,074		$	46,110,925

A summary of net changes in unrealized holding gains (losses) on securities available-for-sale is as follows:



	Year ended December 31,
	2013			2012		2011
Fixed maturity securities	$	(60,539,230	)	$	20,686,958	$	26,309,716
Deferred income tax expense (benefit)	(21,188,730		)	7,240,435		9,208,402
Total fixed maturity securities	(39,350,500		)	13,446,523		17,101,314

Equity securities	27,570,924			8,007,940		(4,984,021		)
Deferred income tax expense (benefit)	9,649,822			2,802,780		(1,744,407		)
Total equity securities	17,921,102			5,205,160		(3,239,614		)
Total available-for-sale securities	$	(21,429,398	)	$	18,651,683	$	13,861,700