Note 3 – Investments

Available for Sale Securities – Fixed Maturity and Equity Securities

The Company's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment.

Investments in available for sale securities are summarized as follows:

March 31, 2013		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	38,428,537	$	5,454,621	$	(281)	$	43,882,877
States, municipalities and political subdivisions		150,000		5,993		0		155,993
U.S. special revenue and assessments		2,150,766		157,779		0		2,308,545
Collateralized mortgage obligations		1,780,601		158,444		0		1,939,045
Public utilities		399,903		61,207		0		461,110
All other corporate bonds		133,203,699		9,682,828		(1,787,643)		141,098,884
		176,113,506		15,520,872		(1,787,924)		189,846,454
Equity securities		29,747,616		1,284,494		(496,936)		30,535,174
Total	$	205,861,122	$	16,805,366	$	(2,284,860)	$	220,381,628

December 31, 2012		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	33,430,165	$	5,457,009	$	0	$	38,887,174
States, municipalities and political subdivisions		160,000		6,637		0		166,637
U.S. special revenue and assessments		2,150,070		153,545		0		2,303,615
Collateralized mortgage obligations		2,241,384		183,409		(8)		2,424,785
Public utilities		399,900		63,662		0		463,562
All other corporate bonds		135,145,198		9,747,565		(1,811,251)		143,081,512
		173,526,717		15,611,827		(1,811,259)		187,327,285
Equity securities		29,497,001		1,303,328		(295,415)		30,504,914
Total	$	203,023,718	$	16,915,155	$	(2,106,674)	$	217,832,199

The amortized cost and estimated market value of debt securities at March 31, 2013, by contractual maturity, is shown 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.

Fixed Maturities Available for Sale March 31, 2013		Amortized Cost		Estimated Fair Value

Due in one year or less	$	2,400,052	$	2,423,382
Due after one year through five years		30,181,928		32,745,345
Due after five years through ten years		108,860,492		117,999,294
Due after ten years		32,703,905		34,549,122
Collateralized mortgage obligations		1,967,129		2,129,311
Total	$	176,113,506	$	189,846,454

The fair value of investments with sustained gross unrealized losses at March 31, 2013 and December 31, 2012 are as follows:

March 31, 2013		Less than 12 months			12 months or longer			Total

		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
U.S. Government and govt. agencies and authorities	$	4,995,703	(282)	$	0	0	$	4,995,703	(282)
All other corporate bonds		6,638,079	(50,703)		4,383,021	(1,736,939)		11,021,100	(1,787,642)
Total fixed maturities	$	11,633,782	(50,985)	$	4,383,021	(1,736,939)	$	16,016,803	(1,787,924)

Equity securities	$	1,253,075	(496,936)	$	0	0	$	1,253,075	(496,936)

December 31, 2012		Less than 12 months			12 months or longer			Total

		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
Collateralized mortgage obligations	$	4,513	(8)	$	0	0	$	4,513	(8)
All other corporate bonds		13,776,705	(245,846)		385,823	(1,565,405)		14,162,528	(1,811,251)
Total fixed maturities	$	13,781,218	(245,854)	$	385,823	(1,565,405)	$	14,167,041	(1,811,259)

Equity securities	$	594,081	(295,415)	$	0	0	$	594,081	(295,415)

Additional information regarding investments in an unrealized loss position is as follows:

	Less than 12 months	12 months or longer	Total
As of March 31, 2013
Fixed maturities	8	4	12
Equity securities	4	0	4
As of December 31, 2012
Fixed maturities	8	3	11
Equity securities	9	0	9

Substantially all of the unrealized losses on fixed maturities available for sale at March 31, 2013 and December 31, 2012 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized losses on equity investments were primarily attributable to normal market fluctuations. 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, the Company deems these securities to be temporarily impaired as of March 31, 2013 and December 31, 2012.

The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary. The factors considered by management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support, whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates. If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations.

Equity securities may experience other-than-temporary impairments in the future based on the prospects for full recovery in value in a reasonable period of time and the Company's ability and intent to hold the security to recovery. If a decline in fair value is judged by management to be other-than-temporary or management does not have the intent or ability to hold a security, a loss is recognized by a charge to other-than-temporary impairment losses in the Condensed Consolidated Statements of Operations.

Based on management's review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Condensed Consolidated Statements of Operations:

		Three Months Ended
		March 31,
		2013		2012

Other than temporary impairments:
Real Estate	$	26,926	$	0

The other-than-temporary impairment recognized during 2013 was due to Management's assessment of the value of the real estate. The real estate was written down to better reflect current expected market value.

Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations. Trading securities include exchange-traded equities and exchange-traded options. Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale. The fair value of derivatives included in trading security assets and trading security liabilities as of March 31, 2013 was $1,324,513 and $(1,442,933), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2012 was $6,745,528 and $(6,050,344), respectively. Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

Trading revenue charged to net investment income from trading securities was:

		Three Months Ended
		March 31,
		2013		2012

Net unrealized losses	$	(297,344)	$	528,698
Net realized gains (losses)		86,271		2,310,507
Net unrealized and realized gains (losses)	$	(211,073)	$	2,839,205

Mortgage Loans

As of March 31, 2013 and December 31, 2012, the Company's mortgage loan portfolio contained 58 and 71 mortgage loans, including discounted mortgage loans, with a carrying value of $37,712,726 and $44,008,507, respectively.

Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers' ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Given the uncertainty of the current market, management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held. Discount accruals reported during 2012 and 2013 were the result of the loan basis already being fully paid.

On the remainder of the mortgage loan portfolio, interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

A mortgage loan reserve is established and adjusted based on management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The Company acquires the discounted mortgage loans at below fair value, therefore no reserve for delinquent loans is deemed necessary. Those loans not currently paying are being vigorously worked by management. The current discounted commercial mortgage loan portfolio has an average price of 37.3% of face value and management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased.