Note 9. Investments

The following tables set forth the carrying value, gross unrealized gains, gross unrealized losses and amortized cost of the Company's investments, aggregated by type and industry, as of September 30, 2012 and December 31, 2011.

Investments were comprised of the following:

	September 30, 2012
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	27,548	$	4,648	$	-	$	22,900
Obligations of states and political subdivisions		17,849		2,596		-		15,253
Corporate securities:
Utilities and telecom		17,888		3,039		-		14,849
Financial services		43,343		3,326		468		40,485
Other business – diversified		65,934		7,556		-		58,378
Other consumer – diversified		51,647		8,538		2		43,111
Total corporate securities		178,812		22,459		470		156,823
Redeemable preferred stocks:
Financial services		5,786		41		14		5,759
Other consumer – diversified		193		-		-		193
Total redeemable preferred stocks		5,979		41		14		5,952
Total fixed maturities		230,188		29,744		484		200,928
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,367		403		-		964
Financial services		7,690		915		14		6,789
Other business – diversified		132		85		-		47
Other consumer – diversified		2,350		673		-		1,677
Total equity securities		11,539		2,076		14		9,477
Other invested assets		588		-		-		588
Policy loans		2,320		-		-		2,320
Real estate		38		-		-		38
Investments in unconsolidated trusts		1,238		-		-		1,238
Total investments	$	245,911	$	31,820	$	498	$	214,589

	December 31, 2011
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	35,922	$	4,186	$	-	$	31,736
Obligations of states and political subdivisions		17,030		1,757		-		15,273
Corporate securities:
Utilities and telecom		18,598		2,736		-		15,862
Financial services		34,900		725		1,346		35,521
Other business – diversified		56,553		5,043		152		51,662
Other consumer – diversified		46,908		6,170		12		40,750
Total corporate securities		156,959		14,674		1,510		143,795
Redeemable preferred stocks:
Utilities and telecom		2,668		168		-		2,500
Financial services		4,576		29		462		5,009
Other consumer – diversified		193		-		-		193
Total redeemable preferred stocks		7,437		197		462		7,702
Total fixed maturities		217,348		20,814		1,972		198,506
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,203		239		-		964
Financial services		5,148		558		199		4,789
Other business – diversified		115		68		-		47
Other consumer – diversified		1,882		205		-		1,677
Total equity securities		8,348		1,070		199		7,477
Other invested assets		567		-		-		567
Policy loans		2,246		-		-		2,246
Real estate		38		-		-		38
Investments in unconsolidated trusts		1,238		-		-		1,238
Total investments	$	229,785	$	21,884	$	2,171	$	210,072

The amortized cost and carrying value of the Company's investments in fixed maturities at September 30, 2012 by contractual maturity were as follows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.

	September 30, 2012
	Carrying Value		Amortized Cost
Due in one year or less	$	1,523	$	1,500
Due after one year through five years		4,666		4,219
Due after five years through ten years		40,238		36,987
Due after ten years		182,582		157,228
Varying maturities		1,179		994
Totals	$	230,188	$	200,928

The following table sets forth the carrying value, amortized cost, and net unrealized gains or losses of the Company's investments aggregated by industry as of September 30, 2012 and December 31, 2011.

	September 30, 2012						December 31, 2011
	Carrying Value		Amortized Cost		Unrealized Gains		Carrying Value		Amortized Cost		Unrealized Gains (Losses)
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	27,548	$	22,900	$	4,648	$	35,922	$	31,736	$	4,186
Obligations of states and political subdivisions		17,849		15,253		2,596		17,030		15,273		1,757
Utilities and telecom		19,255		15,813		3,442		22,469		19,326		3,143
Financial services		56,819		53,033		3,786		44,624		45,319		(695	)
Other business – diversified		66,066		58,425		7,641		56,668		51,709		4,959
Other consumer – diversified		54,190		44,981		9,209		48,983		42,620		6,363
Other investments		4,184		4,184		-		4,089		4,089		-
Investments	$	245,911	$	214,589	$	31,322	$	229,785	$	210,072	$	19,713

The following tables present the Company's unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of September 30, 2012 and December 31, 2011.

	September 30, 2012
	Less than 12 months						12 months or longer						Total
	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Corporate securities		$	2,888		$	30		$	1,560		$	440		$	4,448		$	470
Redeemable preferred stocks			1,909			10			996			4			2,905			14
Common and non-redeemable preferred stocks			986			14			-			-			986			14
Total temporarily impaired securities		$	5,783		$	54		$	2,556		$	444		$	8,339		$	498

	December 31, 2011
	Less than 12 months						12 months or longer						Total
	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Corporate securities		$	30,675		$	1,112		$	1,602		$	398		$	32,277		$	1,510
Redeemable preferred stocks			-			-			2,807			462			2,807			462
Common and non-redeemable preferred stocks			824			176			1,245			23			2,069			199
Total temporarily impaired securities		$	31,499		$	1,288		$	5,654		$	883		$	37,153		$	2,171

The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer's financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management's intent and ability to hold these securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer's continued satisfaction of its obligations in accordance with their contractual terms, and management's expectation as to the issuer's ability and intent to continue to do so, as well as ratings actions that may affect the issuer's credit status.

As of September 30, 2012, securities in an unrealized loss position primarily included certain of the Company's investments in fixed maturities within the financial services sector. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impaired as of September 30, 2012.

The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.

Level 1

Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company's financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.

Level 2

Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company's financial instruments valued using Level 2 criteria include substantially all of its fixed maturities, which consist of U.S. Treasury securities and U.S. Government securities, municipal bonds, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements using Level 2 criteria, the Company utilizes various external pricing sources.

Level 3

Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). The Company's financial instruments valued using Level 3 criteria include certain fixed maturities and a zero cost interest rate collar. Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. As of September 30, 2012, the value of the Company's fixed maturities valued using Level 3 criteria was $2,100 and the value of the zero cost interest rate collar was a liability of $342 (See Note 5). The use of different criteria or assumptions regarding data may have yielded different valuations.

As of September 30, 2012, financial instruments carried at fair value were measured on a recurring basis as summarized below:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Fixed maturities	$	-	$	228,088	$	2,100	$	230,188
Equity securities		4,059		7,480		-		11,539
Cash equivalents		18,870		-		-		18,870
Total	$	22,929	$	235,568	$	2,100	$	260,597
Liabilities:
Derivative	$	-	$	-	$	342	$	342

As of December 31, 2011, financial instruments carried at fair value were measured on a recurring basis as summarized below:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Fixed maturities	$	-	$	215,313	$	2,035	$	217,348
Equity securities		3,374		4,974		-		8,348
Cash equivalents		19,519		-		-		19,519
Total	$	22,893	$	220,287	$	2,035	$	245,215
Liabilities:
Derivative	$	-	$	-	$	876	$	876

The following is a roll-forward of the financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three month and nine month periods ended September 30, 2012.

	Fixed Maturities		Derivative (Liability)
Balance, December 31, 2011	$	2,035	$	(876)
Total unrealized gains (losses) included in comprehensive income		(61)		153
Balance, March 31, 2012		1,974		(723)
Total unrealized gains included in comprehensive income		125		193
Balance, June 30, 2012		2,099		(530)
Total unrealized gains included in comprehensive income		1		188
Balance, September 30, 2012	$	2,100	$	(342)

The Company's fixed maturities valued using Level 3 inputs consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows (based on current cash flows) discounted at reasonable estimated rates of interest. There are no assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. government agency strips to support repayment of the principal. Other qualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable. As the derivative is an interest rate collar, changes in valuation are more closely correlated with changes in interest rates and, accordingly, values are estimated using projected cash flows at current interest rates discounted at a reasonably estimated rate of interest. At September 30, 2012, the value of the derivative was determined based on the difference between the contractual interest rate of 4.77% and the current 3-month LIBOR rate of 0.42%. Fair value quotations are also obtained and considered, as applicable, from the counterparty to the transaction.