Note 5 Derivative Instruments

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities

Note 6 Derivative Instruments

Note 5.                        Derivative Instruments

In connection with its outstanding $10,000,000 amortizing term loan, a subsidiary of IHC entered into an interest rate swap on July 1, 2011 with the commercial bank lender, for a notional amount equal to the debt principal amount, under which the Company receives a variable rate equal to the rate on the debt and pays a fixed rate (1.60%) in order to manage the risk in overall changes in cash flows attributable to forecasted interest payments. As a result of the interest rate swap, interest payments on this debt are fixed at 4.95%. There was no hedge ineffectiveness on this interest rate swap which was accounted for as a cash flow hedge. At December 31, 2011, the fair value of interest rate swap was $494,000 which is included in other liabilities on the accompanying Consolidated Balance Sheet. See Note 6 for further discussion on the valuation techniques utilized to determine the fair value of the interest rate swap. For the year ended December 31, 2011, the Company recorded $297,000 of losses, representing the change in fair value of the interest rate swap, in accumulated other comprehensive income on the accompanying Consolidated Balance Sheet, net of related tax benefits of $197,000. At December 31, 2010, the Company held no derivative instruments.