ASC 820, “Fair Value Measurements and Disclosures” established a hierarchical disclosure framework based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. ASC 820 defines the input levels as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. U.S. treasuries are in Level 1 and valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access. Equity securities that are actively traded on an exchange listed in the U.S. are also included in Level 1. Equity security valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access.

Level 2 - Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets consist of fixed income investments valued based on quoted prices for identical or similar assets in markets that are not active.

Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The Company does not have any Level 3 financial assets or liabilities.

2011		Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	59,735,100	$	64,632,760	$	215,317	$	124,583,177
Equity Securities, available for sale		0		7,344,260		9,955,368		17,299,628
Trading Securities		8,519,064		0		0		8,519,064
Total	$	68,254,164	$	71,977,020	$	10,170,685	$	150,401,869

Liabilities
Trading Securities	$	5,471,475	$	0	$	0	$	5,471,475

2010		Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	6,881,434	$	141,024,514	$	0	$	147,905,948
Equity Securities, available for sale		0		19,021,957		0		19,021,957
Trading Securities		37,029,550		0		0		37,029,550
Total	$	43,910,984	$	160,046,471	$	0	$	203,957,455

Liabilities
Trading Securities	$	18,429,677	$	0	$	0	$	18,429,677

		Fixed Maturities, Available for Sale		Equity Securities, Available for Sale		Total
Balance at December 31, 2010	$	0	$	0	$	0
Transfers in to Level 3		215,317		9,955,368		10,170,685
Transfers out of Level 3		0		0		0
Balance at December 31, 2011	$	215,317	$	9,955,368	$	10,170,685

The Level 3 securities include collateralized debt obligations of trust preferred securities issued by banks and insurance companies and certain equity securities with unobservable inputs. None of the collateral is subprime or Alt-A mortgages (loans for which the typical documentation was not provided by the borrower).

The following table presents transfers in and out of each of the valuation levels of fair value.

Certain assets are not carried at fair value on a recurring basis, including investments such as mortgage loans and policy loans. Accordingly such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and the resulting re-measurement is reflected in the consolidated financial statements.

As of December 31, 2011 and 2010, the Company held $63 million and $53 million of investment real estate, respectively. The real estate is recorded at the lower of the net investment in the loan or the fair value of the real estate less costs to sell. The determination of fair value assessments are performed on a periodic, non-recurring basis by external appraisal and assessment of property values by management. Management believes these fair value assessments are classified as a Level 3 valuation technique under ASC 820, Fair Value Measurements and Disclosures as of December 31, 2011 and 2010.

The financial statements include various estimated fair value information at December 31, 2011 and 2010, as required by ASC 820. Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that guidance and does not purport to represent the aggregate net fair value of the Company.

The Company utilized a pricing service to estimate fair value measurements for its fixed maturities and public common and preferred stocks. The pricing service utilizes market quotations for securities that have quoted market prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing. As the fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes, the estimates of fair value other than U.S. Treasury securities are included in Level 2 of the hierarchy. U.S. Treasury securities are included in the amount disclosed in Level 1 as the estimates are based on unadjusted prices. The Company’s Level 2 investments include obligations of U.S. government agencies, municipal bonds, corporate debt securities and other mortgage backed securities.

Securities designated as trading securities are reported at fair value using market quotes, with gains or losses resulting from changes in fair value recognized in earnings. Trading securities include exchange traded equities and exchange traded equity long and short options.

The Company has been purchasing non-performing loans at a deep discount through an auction process led by the federal government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price. Management has determined the fair value to be too difficult to calculate but believes it approximates the carrying value of these investments. Management works the loans with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.

Policy loans are carried at the aggregate unpaid principal balances in the consolidated balance sheets which approximates fair value, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances.

For borrowings subject to floating rates of interest, carrying value is a reasonable estimate of fair value. For fixed rate borrowings fair value is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities.

		2011				2010
Assets		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Fixed maturities available for sale	$	124,583,177	$	124,583,177	$	147,905,948	$	147,905,948
Equity securities		17,299,628		17,299,628		19,021,957		19,021,957
Trading securities		8,519,064		8,519,064		37,029,550		37,029,550
Mortgage loans on real estate		9,272,919		9,116,148		12,411,587		12,524,140
Discounted mortgage loans		27,467,920		27,467,920		47,523,860		47,523,860
Policy loans		13,312,229		13,312,229		13,976,019		13,976,019
Liabilities
Notes payable		9,531,645		9,519,300		10,372,239		10,136,433
Trading securities		5,471,475		5,471,475		18,429,677		18,429,677

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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