Note 4. Investments

9 Months Ended

Sep. 30, 2013

Notes

Note 4. Investments

4.             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):

		SEPTEMBER 30, 2013
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	31,373	$	201	$	(1,054)	$	30,520
Foreign securities		3,165		25		(126)		3,064
Collateralized mortgage obligations (CMO) – residential		2,465		38		-		2,503
CMO – commercial		390		-		(161)		229
States, municipalities and political subdivisions		23,356		204		(359)		23,201
U.S. Government		7,701		146		(24)		7,823
Government sponsored enterprise (GSE)		441		4		(11)		434
Agency mortgage backed pass through securities (MBS)		99		6		-		105
Redeemable preferred stocks		273		73		-		346
Total fixed maturities	$	69,263	$	697	$	(1,735)	$	68,225

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		970		38		-		1,008
Total available-for-sale equity securities	$	970	$	38	$	-	$	1,008

		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
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
GSE		6,042		250		-		6,292
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

Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government, or its various insurance and lease programs that carry the full faith and credit obligation of the US Government.

The amortized cost and fair value of fixed maturities at September 30, 2013, 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.  CMOs and MBSs are shown separately, as they are not due at a single maturity.

		AMORTIZED		FAIR
		COST		VALUE
		(In thousands)
Due in one year or less	$	541	$	555
Due after one year through five years		15,094		15,320
Due after five years through ten years		25,762		24,892
Due after ten years		24,471		24,186
CMOs and MBSs		3,395		3,272
	$	69,263	$	68,225

The following tables summarize, for all securities in an unrealized loss position at September 30, 2013 and December 31, 2012, 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):

		September 30, 2013
		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	$	20,856	$	1,054	$	-	$	-	$	20,856	$	1,054
Foreign securities		490		1		1,327		125		1,817		126
CMO – commercial		-		-		229		161		229		161
U.S. Government		1,473		24		-		-		1,473		24
GSE		371		11		-		-		371		11
States, municipalities and political subdivisions		15,024		271		2,283		88		17,307		359
Total fixed maturities	$	38,214	$	1,361	$	3,839	$	374	$	42,053	$	1,735
Number of securities in an unrealized loss position		30				4				34

		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

Substantially all of the unrealized losses on fixed maturities at September 30, 2013 and December 31, 2012 were attributable to changes in market interest rates 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 September 30, 2013.

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 (loss).  For the nine months ended September 30, 2013 and 2012, there were no other-than-temporary impairments recognized in earnings.

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 (loss) were $288,000 as of September 30, 2013 and December 31, 2012.