4. Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Text Block]

4.  Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted ASC 820, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value.  ASC 820 establishes a hierarchal disclosure framework associated with the level of observable pricing to be utilized in measuring assets and liabilities at fair value.  The three broad levels defined by ASC 820 hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities.  These generally provide the most reliable evidence and are used to measure fair value whenever available.  The Company’s level 1 assets and liabilities primarily include equity securities that are traded in an active exchange market.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data.  Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities and other observable inputs.  The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities, short-term investments and cash equivalents (primarily money market funds).  Valuations are generally obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 – Fair value is based on significant unobservable inputs for the asset or liability.  These inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability.  The Company’s Level 3 assets and liabilities primarily include certain private fixed maturities.  Valuations are determined using valuation methodologies such as discounted cash flow models, other similar techniques and consultation with investment brokers.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis, as of June 30, 2011.

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Trading Securities
Equity Securities - Banks	$	6,200	$	-	$	-	$	6,200
Equity Securities - Industrial and Other		994,229		-		-		994,229
Total Trading Securities	$	1,000,429	$	-	$	-	$	1,000,429
Fixed Maturities, Held to Maturity
US Treasury Securities and     Obligations of  US Government Corporations and Agencies	$	5,945,860	$	-	$	-	$	5,945,860
Canadian Government		1,009,767		-		-		1,009,767
Corporate Securities		2,679,283		-		159,163		2,838,446
Mortgage-Backed Securities GNMA and FNMA CMO		6,364,468		-		-		6,364,468
Total Fixed Maturities, Held to Maturity	$	15,999,378	$	-	$	159,163	$	16,158,541
Other Long Term Investments	$	-	$	-	$	865,970	$	865,970
Cash		2,920,756		-		-		2,920,756
Cash Equivalents		4,965,949		-		-		4,965,949
Total Other Investments	$	7,886,705	$	-	$	865,970	$	8,752,675
Total Assets	$	24,886,512	$	-	$	1,025,133	$	25,911,645

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the period January 1, 2011 to June 30, 2011, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at June 30, 2011.

	Other Long-term Investments			Fixed Maturity		Total
Beginning balance	$	876,423		$	152,520	$	1,028,943
Transfers into Level 3		-			-		-
Transfers out of Level 3		-			-		-
Total gains or losses
Included in earnings (or changes in net assets)		-			-		-
Included in other comprehensive income		-			-		-
Purchases, Issuance, sales and settlements
Purchases		-			-		-
Issuances		-			-		-
Sales		-			-		-
Settlements		-			-		-
Temporary increase (decline) in fair value		(10,453	)		6,643		(3,810	)
Ending Balance	$	865,970		$	159,163	$	1,025,133

The following table summarizes the fair value and carrying amount of all financial assets and liabilities as of June 30, 2011.

	2011
	Carrying		Fair
Assets	Amount		Value
Cash and cash equivalents	$	7,886,706	$	7,886,706	(a)
Investments-fixed maturity, held to maturity		15,668,090		16,158,541	(b)
Investments-equity securities		1,000,429		1,000,429	(b)
Other long term investments		1,054,418		865,970	(b)
Other financial instruments-Assets		312,336		312,336	(a)
Total financial instruments-Assets	$	25,921,979	$	26,223,982
Liabilities
Premium deposit funds	$	20,498	$	20,498	(a)
Bonds payable		1,299,088		1,299,088	(a)
Supplementary contracts without life contingencies		50,715		50,715	(a)
Annuity deposits		2,291,163		2,291,163	(a)
Total financial instruments-Liabilities	$	3,661,464	$	3,661,464

(a) The indicated assets and liabilities are carried at book value, which approximates fair value.

(b) Fair value of investments is based on methods prescribed in ASC 820 as described herein.