Note 5. Investments

12 Months Ended

Dec. 31, 2012

Notes

Note 5. Investments

5.  Investments

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of long-term investment securities are as follows (in thousands):

		DECEMBER 31, 2012
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	33,015	$	883	$	(112)	$	33,786
Collateralized mortgage obligations (CMO) – residential		842		222		-		1,064
CMO – commercial		390		-		(162)		228
States, municipalities and political subdivisions		9,630		398		(21)		10,007
U.S. Government		6,217		216		-		6,433
Government sponsored enterprise (GSE)		6,042		250		-		6,292
Agency mortgage backed pass through securities (MBS)		151		12		-		163
Redeemable preferred stocks		273		83		-		356
Total fixed maturities	$	56,560	$	2,064	$	(295)	$	58,329

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		2,447		60		-		2,507
Total available-for-sale equity securities	$	2,447	$	60	$	-	$	2,507

		DECEMBER 31, 2011
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	30,031	$	510	$	(66)	$	30,475
CMO - residential		1,760		168		(40)		1,888
CMO – commercial		579		-		(364)		215
States, municipalities and political subdivisions		8,851		528		(12)		9,367
U.S. Government		5,982		309		-		6,291
GSE		8,900		129		(46)		8,983
MBS		196		16		-		212
Redeemable preferred stocks		273		35		-		308
Total fixed maturities	$	56,572	$	1,695	$	(528)	$	57,739

EQUITY SECURITIES
AVAILABLE-FOR-SALE
Common stock	$	831	$	42	$	(22)	$	851
Nonredeemable preferred stocks		2,981		91		-		3,072
Total available-for-sale equity securities	$	3,812	$	133	$	(22)	$	3,923

Government-sponsored enterprise mortgage-backed securities consist of Federal Home Loan Mortgage Corporation and Federal National Mortgage Association securities.

The amortized cost and fair value of fixed maturities at December 31, 2012, by contractual maturity, are 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.  The average life of mortgage backed securities is affected by prepayments on the underlying loans and, therefore, is materially shorter than the original stated maturity.

						% OF
			AMORTIZED		FAIR	TOTAL FAIR
			COST		VALUE	VALUE
			(in thousands)
Due in one year or less		$	303	$	311	1%
Due after one year through five years			14,329		14,749	25%
Due after five years through ten years			24,111		24,706	42%
Due after ten years			10,393		10,816	19%
			49,136		50,582	87%
CMO and MBS
	15 years		1,781		1,853	3%
	30 years		5,643		5,894	10%
		$	56,560	$	58,329	100%

The following tables summarize, for all securities in an unrealized loss position at December 31, 2012 and December 31, 2011, the aggregate fair value and gross unrealized loss by length of time, those securities that have continuously been in an unrealized loss position (in thousands):

		December 31, 2012
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Losses		Value		Losses
FIXED MATURITIES:
Corporate securities	$	12,378	$	112	$	-	$	-	$	12,378	$	112
CMO – commercial		-		-		228		162		228		162
States, municipalities and political subdivisions		3,760		21		-		-		3,760		21
Total fixed maturities	$	16,138	$	133	$	228	$	162	$	16,366	$	295
Number of securities in an unrealized loss position		14				1				15

		December 31, 2011
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Losses		Value		Losses
FIXED MATURITIES:
Corporate securities	$	8,538	$	57	$	1,154	$	9	$	9,692	$	66
CMO – residential		-		-		348		40		348		40
CMO – commercial		-		-		215		364		215		364
States, municipalities and political subdivisions		576		12		-		-		576		12
GSE		2,847		43		410		3		3,257		46
Total fixed maturities	$	11,961	$	112	$	2,127	$	416	$	14,088	$	528
EQUITY SECURITIES:
Common stock	$	446	$	22	$	-	$	-	$	446	$	22
Total equity securities	$	446	$	22	$	-	$	-	$	446	$	22
Number of securities in an unrealized loss position		15				5				20

Substantially all of the unrealized losses on fixed maturities at December 31, 2012 and December 31, 2011 were attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase.  Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell, such investments before recovery of their amortized cost bases, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2012.

Major categories of net investment income for years 2012, 2011 and 2010 are summarized as follows (in thousands):

		Year Ended
		December 31,
		2012		2011		2010
Fixed maturities	$	1,848	$	1,918	$	2,052
Equity securities		256		281		262
Short-term investments		6		3		3
Other		16		(13)		201
Net investment income	$	2,126	$	2,189	$	2,518

Other-Than-Temporary Impairment Evaluations

For other-than-temporary impairment losses, we recognize an other-than-temporary impairment loss in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income.  For the years ended December 31, 2012, 2011 and 2010, other-than-temporary impairments recognized in earnings of $189,000, $89,000 and $179,000, respectively, represent credit losses on fixed maturities as a result of the expected cash flows of certain securities being less than the securities’ amortized cost.

Cumulative credit losses for other-than-temporary impairments recorded on securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income were as follows (in thousands):

		2012		2011		2010
Balance at beginning of year	$	145	$	99	$	99
Securities sold		(46)		-		-
Credit portion of other-than-temporary
impairment losses recognized during period		189		46		-
Balance at end of year	$	288	$	145	$	99