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Note 4 - Investments

3 Months Ended

Mar. 31, 2015

NOTE 4– Investments

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

			Gross		Gross
March 31, 2015	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Fixed maturity securities:
U.S. government obligations	$	27,058,920	$	1,136,850	$	-	$	28,195,770
States and political subdivisions		37,179,634		6,168,220		10,673		43,337,181
Corporate		221,515,492		18,149,584		595,008		239,070,068
Foreign		63,756,771		3,670,266		518,776		66,908,261
Asset-backed securities		1,432,996		20,269		-		1,453,265
Mortgage-backed securities (MBS):
Commercial MBS		7,705,874		413,781		-		8,119,655
Residential MBS		40,891,117		2,796,344		-		43,687,461
Total fixed maturity securities		399,540,804		32,355,314		1,124,457		430,771,661
Equity securities:
U.S. agencies		707,900		-		-		707,900
Mutual funds		318,284		38,002		-		356,286
Corporate common stock		5,450,643		1,325,475		158,010		6,618,108
Total equity securities		6,476,827		1,363,477		158,010		7,682,294
Total	$	406,017,631	$	33,718,791	$	1,282,467	$	438,453,955

			Gross		Gross
December 31, 2014	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Fixed maturity securities:
U.S. government obligations	$	28,063,178	$	820,997	$	16,164	$	28,868,011
States and political subdivisions		38,021,271		5,985,975		-		44,007,246
Corporate		224,299,411		15,669,733		930,632		239,038,512
Foreign		63,792,040		2,934,542		751,369		65,975,213
Asset-backed securities		1,432,996		33,501		-		1,466,497
Mortgage-backed securities (MBS):
Commercial MBS		7,869,355		266,831		-		8,136,186
Residential MBS		40,118,010		2,507,809		6		42,625,813
Total fixed maturity securities		403,596,261		28,219,388		1,698,171		430,117,478
Equity securities:
U.S. agencies		707,900		-		-		707,900
Mutual funds		318,284		40,038		-		358,322
Corporate common stock		5,305,252		1,157,718		123,373		6,339,597
Total equity securities		6,331,436		1,197,756		123,373		7,405,819
Total	$	409,927,697	$	29,417,144	$	1,821,544	$	437,523,297

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.

	March 31, 2015						December 31, 2014
			Gross		Number				Gross		Number
	Estimated		Unrealized		of		Estimated		Unrealized		of
	Fair Value		Loss		Securities		Fair Value		Loss		Securities
Fixed Maturities:
Less than 12 months:
States and political subdivisions	$	739,328	$	10,673		1	$	-	$	-		-
Corporate		9,069,557		330,560		6		12,473,068		508,818		7
Foreign		5,981,173		258,603		4		10,374,173		310,267		7
Residential MBS		-		-		-		16,862		6		1
Greater than 12 months:
U.S. government obligations		-		-		-		7,736,774		16,164		1
Corporate		3,985,662		264,448		3		3,828,887		421,814		3
Foreign		4,899,184		260,173		2		4,724,455		441,102		2
Total fixed maturities		24,674,904		1,124,457		16		39,154,219		1,698,171		21

Equities:
Less than 12 months:
Corporate common stock		574,114		97,184		8		527,614		103,438		4
Greater than 12 months:
Corporate common stock		165,471		60,826		4		525,865		19,935		4
Total equities		739,585		158,010		12		1,053,479		123,373		8

Total	$	25,414,489	$	1,282,467		28	$	40,207,698	$	1,821,544		29

As of March 31, 2015, all of the above fixed maturity securities individually had a fair value to cost ratio equal to or greater than 90% and the equity securities had a fair value to cost ratio equal to or exceeding 69%. As of December 31, 2014, all of the above fixed maturity securities had a fair value to cost ratio equal to or greater than 86% and the equity securities noted above had a fair value to cost ratio equal to or greater than 78%.

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 ended March 31, 2015 or 2014.

Management believes that the Company will fully recover its cost basis in the securities held at March 31, 2015, 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.

	March 31,			December 31,
	2015			2014
Net unrealized appreciation on available-for sale securities	$	32,436,324		$	27,595,600
Adjustment to deferred acquisition costs		(830,703	)		(711,650	)
Deferred income taxes		(10,745,911	)		(9,140,543	)
Net unrealized appreciation on available-for sale securities	$	20,859,710		$	17,743,407

The amortized cost and fair value of fixed maturity securities at March 31, 2015, 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		Fair
	Cost		Value
Due in one year or less	$	8,830,253	$	9,030,285
Due after one year through five years		84,073,704		92,683,476
Due after five years through ten years		180,399,260		190,895,214
Due after ten years		52,812,115		60,644,458
Due at multiple maturity dates		73,425,472		77,518,228
Total	$	399,540,804	$	430,771,661

Proceeds for the quarters ended March 31, 2015 and 2014 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 March 31,
	2015			2014
Proceeds from sales and maturities	$	12,820,020		$	7,150,048
Gross realized gains		160,792			21,672
Gross realized losses		(1,964	)		(25,478	)

The table below 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 ended March 31, 2015 and 2014.

	Quarter Ended March 31,
	2015		2014
Change in unrealized investment gains:
Available-for-sale:
Fixed maturities	$	4,709,640	$	6,860,197
Equity securities		131,084		311,804
Net realized investment gains (losses):
Available-for-sale:
Fixed maturities	$	90,859	$	-
Equity securities		67,969		(3,806	)

The Company is required to hold assets on deposit for the benefit of policyholders in accordance with statutory rules and regulations. At March 31, 2015 and December 31, 2014, these required deposits had a total fair value of $23,640,234 and $23,951,372, respectively.

The Company also engages in commercial and residential mortgage lending. As of March 31, 2015, investments in commercial and residential properties comprised 38.2% and 61.8%, respectively, of the Company’s mortgage portfolio. At December 31, 2014, investments in commercial and residential properties comprised 41.9% and 58.1%, respectively, of the Company’s mortgage portfolio.

All commercial mortgage loans are either originated in-house or through two mortgage brokers, are secured by first mortgages on the real estate and generally carry personal guarantees by the borrowers. Loan-to-value ratios of 80% or less and debt service coverage from existing cash flows of 115% or higher are generally required. We minimize credit risk in our mortgage loan portfolio through various methods, including stringently underwriting the loan request, maintaining small average loan balances, and reviewing larger mortgage loans on an annual basis.

The Company purchases residential mortgage loans through the secondary market. Each mortgage loan opportunity is reviewed individually, considering both the value of the underlying property and the credit worthiness of the borrower. We are utilizing a third party servicer to administer these loans.

As of March 31, 2015 and December 31, 2014, there were no non-performing loans, loans on nonaccrual status, loans 90 days past due or more, loans in process of foreclosure, or restructured loans. The Company experienced no mortgage loan defaults during the quarters ended March 31, 2015 and 2014.

The Company’s investments in mortgage loans, by state, are as follows:

	March 31,		December 31,
	2015		2014
Florida	$	5,401,368	$	6,047,236
California		5,078,618		4,806,451
Illinois		4,631,248		3,392,446
Texas		3,485,045		2,290,700
Kentucky		3,440,569		3,492,854
Georgia		2,710,588		3,123,530
Ohio		1,777,594		1,805,093
Arizona		1,145,494		927,600
Tennessee		978,461		1,054,671
Indiana		625,664		95,434
West Virginia		433,772		440,725
Pennsylvania		383,560		-
Nevada		376,000		-
North Carolina		358,466		359,308
Missouri		267,324		267,996
New Jersey		251,423		252,612
South Carolina		242,707		248,815
Colorado		224,666		225,772
Massachusetts		219,363		239,399
Idaho		170,680		174,433
Kansas		136,172		136,442
Utah		77,795		77,919
Total	$	32,416,577	$	29,459,436

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 March 31, 2015, the amortized cost and estimated fair value of state-guaranteed receivables, by contractual maturity, are summarized as follows:

	Amortized		Fair
	Cost		Value
Due in one year or less	$	739,517	$	755,505
Due after one year through five years		2,476,155		2,750,467
Due after five years through ten years		3,011,141		3,859,923
Due after ten years		1,532,982		2,284,232
Total	$	7,759,795	$	9,650,127

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

	March 31,		December 31,
	2015		2014
New York	$	3,579,778	$	3,694,805
Massachusetts		1,953,718		1,969,570
Georgia		1,447,195		1,467,774
Pennsylvania		305,144		299,851
Texas		231,722		227,649
California		171,233		188,131
Ohio		71,005		69,599
Total	$	7,759,795	$	7,917,379

Major categories of net investment income are summarized as follows:

	Quarter Ended March 31,
	2015		2014
Fixed maturities	$	4,637,808	$	4,709,081
Equity securities		63,291		51,637
Mortgage loans on real estate		558,396		303,876
Policy loans		118,740		116,929
State-guaranteed receivables		140,675		143,795
Other		60,652		57,057
Gross investment income		5,579,562		5,382,375
Investment expenses		355,750		303,393
Net investment income	$	5,223,812	$	5,078,982