Note 4 - Investments

6 Months Ended

Jun. 30, 2013

Investments Disclosure [Abstract]

Investments Disclosure [Text Block]

NOTE 4 – Investments

Investments in available-for-sale securities are summarized as follows:

June 30, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturity securities:
U.S. government obligations	$	44,762,626	$	1,819,980	$	170,755	$	46,411,851
States and political subdivisions		44,136,638		4,561,033		26,490		48,671,181
Corporate		218,305,810		14,632,120		1,972,296		230,965,634
Foreign		52,865,866		2,728,644		1,418,940		54,175,570
Asset-backed securities		4,084,560		185,903		-		4,270,463
Mortgage-backed securities (MBS):
Commercial MBS		5,601,126		235,998		29		5,837,095
Residential MBS		26,955,071		1,932,553		-		28,887,624
Corporate redeemable preferred stock		691,665		-		35,008		656,657
Total fixed maturity securities		397,403,362		26,096,231		3,623,518		419,876,075
Equity securities:
U.S. agencies		687,000		-		-		687,000
Mutual funds		318,283		14,928		-		333,211
Corporate common stock		4,091,091		277,068		406,356		3,961,803
Corporate nonredeemable preferred stock		155,268		-		7,908		147,360
Total equity securities		5,251,642		291,996		414,264		5,129,374
Total	$	402,655,004	$	26,388,227	$	4,037,782	$	425,005,449

December 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturity securities:
U.S. government obligations	$	47,634,952	$	4,263,920	$	-	$	51,898,872
States and political subdivisions		46,323,487		7,522,997		-		53,846,484
Corporate		207,553,209		23,818,640		93,765		231,278,084
Foreign		50,000,420		4,748,130		11,680		54,736,870
Asset-backed securities		4,460,090		289,373		529		4,748,934
Mortgage-backed securities (MBS):
Commercial MBS		6,429,641		407,386		-		6,837,027
Residential MBS		31,968,578		3,008,564		-		34,977,142
Total fixed maturity securities		394,370,377		44,059,010		105,974		438,323,413
Equity securities:
U.S. agencies		681,300		-		-		681,300
Mutual funds		318,283		3,054		-		321,337
Corporate common stock		117,468		266,532		-		384,000
Total equity securities		1,117,051		269,586		-		1,386,637
Total	$	395,487,428	$	44,328,596	$	105,974	$	439,710,050

The following table summarizes, for all securities in an unrealized loss position as of the balance sheet dates, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position.

	June 30, 2013						December 31, 2012
	Estimated Fair Value		Gross Unrealized Loss		Number of Securities		Estimated Fair Value		Gross Unrealized Loss		Number of Securities
Fixed Maturities:
Less than 12 months:
U.S. government obligations	$	7,640,078	$	170,755		1	$	-	$	-		-
States and political subdivisions		973,510		26,490		1		-		-		-
Corporate		46,062,210		1,972,296		35		4,648,363		88,805		5
Foreign		27,273,662		1,418,940		16		988,320		11,680		1
Commerical MBS		43,035		29		1		-		-		-
Corporate redeemable preferred stock		656,657		35,008		12		-		-		-
Greater than 12 months:
Corporate		-		-		-		243,040		4,960		1
Asset-backed securities		-		-		-		59,097		529		1
Total fixed maturities		82,649,152		3,623,518		66		5,938,820		105,974		8
Equities:
Less than 12 months:
Corporate common stock		3,372,065		406,356		31		-		-		-
Corporate nonredeemable preferred stock		147,360		7,908		2		-		-		-
Total equities		3,519,425		414,264		33		-		-		-
Total	$	86,168,577	$	4,037,782		99	$	5,938,820	$	105,974		8

As of June 30, 2013, all of the above fixed maturity securities individually had a fair value to cost ratio equal to or greater than 83% and the equity securities had a fair value to cost ratio equal to or exceeding 67%. As of December 31, 2012, all of the above fixed maturity securities had a fair value to cost ratio equal to or greater than 96% and the equity securities noted above had a fair value to cost ratio equal to or exceeding 100%.

The Company’s decision to record an impairment loss is primarily based on whether the security’s fair value is likely to remain significantly below its book value in light of all the factors considered. Factors that are considered include the length of time the security’s fair value has been below its carrying amount, the severity of the decline in value, the credit worthiness of the issuer, and the coupon and/or dividend payment history of the issuer. The Company also assesses whether it intends to sell or whether it is more likely than not that it may be required to sell the security prior to its recovery in value. For any fixed maturity securities that are other-than-temporarily impaired, the Company determines the portion of the other-than-temporary impairment that is credit-related and the portion that is related to other factors. The credit-related portion is the difference between the expected future cash flows and the amortized cost basis of the fixed maturity security, and that difference is charged to earnings. The non-credit-related portion representing the remaining difference to fair value is recognized in other comprehensive income (loss). Only in the case of a credit-related impairment where management has the intent to sell the security, or it is more likely than not that it will be required to sell the security before recovery of its cost basis, is a fixed maturity security adjusted to fair value and the resulting losses recognized in realized gains (losses) in the consolidated statements of income. Any other-than-temporary impairments on equity securities are recorded in the consolidated statements of income in the periods incurred as the difference between fair value and cost. Based on our review, the Company experienced no other-than-temporary impairments during the quarters or six months ended June 30, 2013 or 2012.

Management believes that the Company will fully recover its cost basis in the securities held at June 30, 2013, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities until they recover or mature. The temporary impairments shown herein are primarily the result of the current interest rate environment rather than credit factors that would imply other-than-temporary impairment.

Net unrealized gains for investments classified as available-for-sale are presented below, net of the effect on deferred income taxes and deferred acquisition costs assuming that the appreciation (depreciation) had been realized.

	June 30, 2013			December 31, 2012
Net unrealized appreciation on available-for sale securities	$	22,350,445		$	44,222,622
Adjustment to deferred acquisition costs		(642,329	)		(1,312,922	)
Deferred income taxes		(7,602,595	)		(14,821,597	)
Net unrealized appreciation on available-for sale securities	$	14,105,521		$	28,088,103

The amortized cost and fair value of fixed maturity securities at June 30, 2013, by contractual maturity, are presented below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
	Amortized Cost		Fair Value
Due in one year or less	$	14,110,704	$	14,320,095
Due after one year through five years		78,878,291		85,896,877
Due after five years through ten years		182,871,810		190,795,379
Due after ten years		88,294,695		93,482,348
Due at multiple maturity dates		32,556,197		34,724,719
Corporate redeemable preferred stock		691,665		656,657
Total	$	397,403,362	$	419,876,075

Proceeds for the quarters and six months ended June 30, 2013 and 2012 from sales and maturities of investments in available-for-sale securities, as well as gross gains and gross losses realized, are presented below.

	Quarter Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Proceeds from sales and maturities	$	16,566,630		$	4,819,899	$	28,664,356		$	19,120,215
Gross realized gains		5,719			86,606		108,383			203,629
Gross realized losses		(16,429	)		-		(31,126	)		(5,370	)

Presented below is investment information, including the accumulated quarter and year-to-date change in net unrealized investment gains or losses. Additionally, the table shows the change in net unrealized investment gains (losses) and the amount of realized investment gains (losses) on fixed maturities and equity securities for the quarters and six months ended June 30, 2013 and 2012.

	Quarter Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Change in unrealized investment gains (losses):
Available-for-sale:
Fixed maturities	$	(18,548,532	)	$	5,425,453	$	(21,480,323	)	$	7,270,291
Equity securities		(414,588	)		47,184		(391,854	)		53,484
Realized investment gains (losses) :
Available-for-sale:
Fixed maturities	$	1,680		$	86,606	$	89,647		$	198,259
Equity securities		(12,390	)		-		(12,390	)		-

In addition to the realized investment gains and losses above, the Company also experienced a realized loss of $14,006 during the quarter ended June 30, 2013 relative to the demolition of a building owned by the Company.

The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At June 30, 2013 and December 31, 2012, these required deposits had a total fair value of $25,521,798 and $26,169,953, respectively.

The Company owns certain investments in state-guaranteed receivables. These investments represent an assignment of the future rights to cash flows from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries and guaranteed by the states. The state-guaranteed receivables are carried at their amortized cost basis on the balance sheet. At June 30, 2013, the amortized cost and estimated fair value of state-guaranteed receivables, by contractual maturity, are summarized as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	701,042	$	708,696
Due after one year through five years		2,471,437		2,649,076
Due after five years through ten years		2,771,836		3,304,332
Due after ten years		2,156,209		2,881,253
Total	$	8,100,524	$	9,543,357

The amortized cost of state-guaranteed receivables, by state, is summarized as follows:

	June 30, 2013		December 31, 2012
New York	$	3,925,561	$	3,973,862
Massachusetts		1,877,347		1,838,166
Georgia		1,542,166		1,531,078
Pennsylvania		280,212		270,657
California		189,144		202,563
Texas		205,353		198,260
Ohio		80,741		97,083
Total	$	8,100,524	$	8,111,669

At June 30, 2013, the Company owned a $3,000,000 position in a Morgan Stanley market-indexed note. The note pays 1% interest annually and matures in six years from the issue date. At maturity, the Company participates at 110% of any increase in the Dow Jones Industrial Average since the purchase date, but is guaranteed against market-related downside risk. Accordingly, a portion of the investment is classified as a derivative and bifurcated for reporting purposes. The derivative portion, having a cost basis of $645,000 calculated at 21.5% of the total value of the purchase price of the note, is reported as an investment in derivative on the balance sheet. The remaining non-derivative portion of the note is reported within fixed maturities on the balance sheet. This derivative is marked-to-market through the income statement, with the change in value reported as a component of investment income on the income statement. This investment was sold subsequent to June 30, 2013 for $3,945,000.

Major categories of net investment income are summarized as follows:

	Quarter Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Fixed maturities	$	4,798,389	$	4,850,660		$	9,605,911	$	9,716,457
Equity securities		35,836		14,497			49,731		27,384
Mortgage loans on real estate		274,334		315,105			552,398		671,182
Policy loans		117,978		121,159			236,090		244,493
State-guaranteed receivables		143,622		113,889			289,876		227,996
Gain (loss) on investment in derivative		121,500		(57,000	)		243,000		(72,900	)
Other		60,559		17,118			119,013		56,396
Gross investment income		5,552,218		5,375,428			11,096,019		10,871,008
Investment expenses		282,510		261,060			565,020		522,121
Net investment income	$	5,269,708	$	5,114,368		$	10,530,999	$	10,348,887