Fair Value

12 Months Ended

Dec. 31, 2012

Fair Value [Abstract]

Fair Value

Note O – Fair Value

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

As of December 31, 2012:

Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	70,742	$	70,742	$	-	$	-
Residential mortgage-backed securities		25,040		-		25,040		-
Commercial mortgage-backed securities		11,828		-		11,828		-
State and municipal obligations		194,865		-		194,865		-
Corporate securities		118,945		-		107,263		11,682
Options embedded in convertible securities		1,651		-		1,651		-
Foreign government obligations		22,598		-		22,598		-
Total fixed maturities		445,669		70,742		363,245		11,682
Equity securities		107,582		107,582		-		-
Short term		4,201		4,201		-		-
Cash equivalents		64,450		-		64,450		-
	$	621,902	$	182,525	$	427,695	$	11,682

As of December 31, 2011:

Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	73,137	$	73,137	$	-	$	-
Government sponsored entities		349		-		349		-
Residential mortgage-backed securities		21,872		-		21,872		-
Commercial mortgage-backed securities		11,300		-		11,300		-
State and municipal obligations		190,035		-		190,035		-
Corporate securities		90,141		-		73,091		17,050
Options embedded in convertible securities		1,505		-		1,505		-
Foreign government obligations		21,121		-		21,121		-
Total fixed maturities		409,460		73,137		319,273		17,050
Equity securities		88,085		88,085		-		-
Short term		3,675		2,982		693		-
Cash equivalents		81,756		-		81,756		-
	$	582,976	$	164,204	$	401,722	$	17,050

Level inputs, as defined by the FASB guidance, are as follows:

Level Input:	Input Definition:
Level 1	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Level 3 assets consist of a portfolio of insurance-linked securities. The insurance-linked securities are valued using the average of estimated market quotes from multiple insurance-linked securities brokers. The broker quotes include Level 3 inputs which are significant to the valuation of the insurance-linked securities. There were no Level 3 sales, no transfers into Level 3 and no transfers out of Level 3 during 2012 or 2011. A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows for the years ended December 31:

	2012			2011
Beginning of period balance	$	17,050		$	17,242
Total gains or losses (realized or unrealized)
included in income		1,653			387
Purchases		400			6,522
Settlements		(7,421	)		(7,101	)
End of period balance	$	11,682		$	17,050

Quoted market prices are obtained whenever possible. Where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. These techniques are significantly affected by our assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs have not been considered in estimating fair values.

Transfers between levels, if any, are recorded as of the beginning of the reporting period. There were no significant transfers of assets between Level 1 and Level 2 during 2012, 2011 and 2010.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balance sheets.

Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine the underlying economic value to the Company.

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivables, reinsurance recoverable, notes receivable, accounts payable and accrued expenses, income taxes payable, short term borrowings and unearned income approximate fair value because of the short term nature of these items. These assets and liabilities are not included in the table below.

The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:

Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity. The underlying assets of the Company's investments in limited partnerships are carried at fair value, and, therefore, the Company's carrying value of limited partnerships approximates fair value. As these investments are not actively traded and the corresponding inputs are based on data provided by the investees, they are classified as Level III.

Short-term borrowings: The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to us for debt of similar terms and remaining maturities.

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheet at December 31, 2012 is as follows:

	Carrying		Fair Value
	Value		Level 1		Level II		Level III		Total
Assets:
Limited partnerships	$	59,954	$	-	$	-	$	59,954	$	59,954
Liabilities:
Short-term borrowings		10,000		-		10,000		-		10,000

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheet at December 31, 2011 is as follows:

	Carrying		Fair
	Value		Value
Assets:
Limited partnerships	$	54,705	$	54,705
Liabilities:
Short-term borrowings		10,000		10,000