Fair Value Measures and Disclosures

3 Months Ended

Sep. 30, 2011

Fair Value Measures and Disclosures

Fair Value Disclosures [Text Block]

6.             Fair Value Measurements

For all financial and non-financial instruments accounted for at fair value on a recurring basis, the Company utilizes valuation techniques based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market expectations. These two types of inputs create the following fair value hierarchy:

Level 1 –	Quoted prices for identical instruments in active markets.
Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 –	Instruments where significant value drivers are unobservable.

The following section describes the valuation methodologies we use to measure different financial instruments at fair value.

Investments in fixed maturities and equity securities

Available-for-sale securities included in Level 1 are equity securities with quoted market prices.  Level 2 is primarily comprised of our portfolio of corporate fixed income securities, government agency mortgage-backed securities, government sponsored enterprises, certain CMO securities, municipals and certain preferred stocks that were priced with observable market inputs.  Level 3 securities consist of certain CMO securities, primarily Alt-A mortgages.  For these securities, we use industry-standard pricing methodologies, including discounted cash flow models, whose inputs are based on management’s assumptions and available market information. Further, we retain independent pricing vendors to assist in valuing certain instruments.

The following tables present our financial assets measured at fair value on a recurring basis at September 30, 2011 and December 31, 2010, respectively (in thousands):

				September 30, 2011
				Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities			$	-	$	24,278	$	-	$	24,278
CMO - residential				-		1,165		951		2,116
CMO – commercial				-		-		217		217
States, municipalities and political
	subdivisions			-		12,158		-		12,158
U.S. Government				-		6,295		-		6,295
GSE				-		10,636		-		10,636
MBS - residential				-		217		-		217
		Total fixed maturities		-		54,749		1,168		55,917
Equity securities available-for-sale:
Common stock				1,235		-		-		1,235
Preferred stock with maturities				314		988		-		1,302
Preferred stock without maturities				3,464		-		-		3,464
		Total equity securities		5,013		988		-		6,001
Total financial assets			$	5,013	$	55,737	$	1,168	$	61,918

				December 31, 2010
				Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities			$	-	$	15,769	$	-	$	15,769
CMO - residential				-		634		1,559		2,193
CMO – commercial				-		-		323		323
States, municipalities and political
	subdivisions			-		17,064		-		17,064
U.S. Government				-		10,296		-		10,296
GSE				-		7,818		-		7,818
MBS - residential				-		273		-		273
		Total fixed maturities		-		51,854		1,882		53,736
Equity securities available-for-sale:
Common stock				610		-		-		610
Preferred stock with maturities				327		-		-		327
Preferred stock without maturities				3,060		-		-		3,060
		Total equity securities		3,997		-		-		3,997
Total financial assets			$	3,997	$	51,854	$	1,882	$	57,733

It is the Company’s policy to recognize transfers of assets and liabilities between levels of the fair value hierarchy at the end of a reporting period.  For the three months and nine months ending September 30, 2011, there were no transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy.  No securities were transferred out of the Level 2 and into the Level 3 category as a result of limited or inactive markets during the first nine months of 2011.  The Company does not transfer out of Level 3 and into Level 2 until such time as observable inputs become available and reliable or the range of available independent prices narrow.  No securities were transferred out of the Level 3 category in the first nine months of 2011.  The changes in the carrying value of Level 3 assets and liabilities for the three months and nine months ended September 30, 2011 are summarized as follows (in thousands):

			Three Months Ended						Nine Months Ended
			September 30, 2011						September 30, 2011
			CMOs						CMOs
			Residential		Commercial		Total		Residential		Commercial		Total
Balance, beginning of period		$	1,249	$	294	$	1,543	$	1,559	$	323	$	1,882
Sales of securities			(240)		-		(240)		(451)		-		(451)
Repayments of fixed maturities			(28)		-		(28)		(114)		-		(114)
Net realized
	investment gains		77		-		77		57		-		57
Other-than-temporary
	impairment losses		-		-		-		(20)		-		(20)
Net unrealized gain (loss)
	included in accumulated
	other comprehensive loss		(107)		(77)		(184)		(80)		(106)		(186)
Balance, end of period		$	951	$	217	$	1,168	$	951	$	217	$	1,168