Note 5. Investments

12 Months Ended

Dec. 31, 2013

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, 2013
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	35,788	$	140	$	(1,361)	$	34,567
Foreign government		2,665		20		(166)		2,519
Collateralized mortgage obligations (CMO) – residential		1,147		8		(3)		1,152
CMO – commercial		390		-		(153)		237
States, municipalities and political subdivisions		22,921		163		(1,001)		22,083
U.S. government		6,698		118		(5)		6,811
Government sponsored enterprise (GSE)		430		4		(12)		422
Agency mortgage backed pass through securities (MBS)		79		4		-		83
Redeemable preferred stocks		273		74		-		348
Total fixed maturities	$	70,392	$	531	$	(2,701)	$	68,222

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		970		24		(6)		988
Total available-for-sale equity securities	$	970	$	24	$	(6)	$	988

		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 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, 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	$	537	$	548
Due after one year through five years		15,824		16,030
Due after five years through ten years		27,231		26,077
Due after ten years		24,755		23,673
CMOs and MBSs		2,045		1,894
	$	70,392	$	68,222

The following tables summarize, for all securities in an unrealized loss position at December 31, 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):

		December 31, 2013
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Losses		Value		Losses
Corporate securities	$	22,800	$	879	$	5,562	$	482	$	28,362	$	1,361
Foreign government		-		-		1,279		166		1,279		166
CMO – residential		742		3		-		-		742		3
CMO – commercial		-		-		237		153		237		153
U.S. Government		493		5		-		-		493		5
GSE		366		12		-		-		366		12
States, municipalities and political subdivisions		14,962		895		2,265		106		17,227		1,001
Nonredeemable preferred stocks		393		6		-		-		393		6
Total temporarily impaired securities	$	39,756	$	1,800	$	9,343	$	907	$	49,099	$	2,707
Number of securities in an unrealized loss position		31				9				40

		December 31, 2012
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Losses		Value		Losses
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 temporarily impaired securities	$	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 December 31, 2013 and December 31, 2012 were attributable to changes in market interest rates.  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, 2013.

The following table summarizes the Company’s net investment income for the years indicated (in thousands):

		Year Ended
		December 31,
		2013		2012		2011
Fixed maturities	$	2,017	$	1,848	$	1,918
Equity securities		120		256		281
Short-term investments		4		6		3
Other		(37)		16		(13)
Net investment income	$	2,104	$	2,126	$	2,189

The following table summarizes the Company’s net realized investment gains (losses) for the years indicated (in thousands):

		Year Ended
		December 31,
		2013		2012		2011
Available-for-sale securities:
Fixed maturities	$	834	$	579	$	737
Common stock		-		-		(146)
Preferred stock		23		(4)		(71)
Total available-for-sale securities		857		575		520
Trading securities		214		9		-
Unrealized gain (loss) on trading securities:
Available-for-sale securities transferred
to trading category		-		20		-
Change in unrealized gain on trading securities		11		(1)		-
Total unrealized gain on trading securities		11		19		-
Net realized investment gains	$	1,082	$	603	$	520

For the twelve months ended December 31, 2013, the Company recorded realized gross gains of $1,377,000 and gross losses of $306,000 on sales of available-for-sale securities.  For the twelve months ended December 31, 2012, the Company recorded realized gross gains of $937,000 and gross losses of $353,000 on sales of available-for-sale securities.  For the twelve months ended December 31, 2011, the Company recorded realized gross gains of $1,042,000 and gross losses of $522,000 on sales of available-for-sale securities.

In January 2012, the Company transferred equity securities previously classified as available-for-sale into the trading category and, as a result, recognized $42,000 of gross gains and $22,000 of gross losses in net realized investment gains on the accompanying Consolidated Statements of Income.  These gains and losses were previously included in accumulated other comprehensive income.

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, 2013, 2012 and 2011, other-than-temporary impairments recognized in earnings of $0, $189,000 and $89,000, 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):

		2013		2012		2011
Balance at beginning of year	$	288	$	145	$	99
Securities sold		-		(46)		-
Credit portion of other-than-temporary
impairment losses recognized during period		-		189		46
Balance at end of year	$	288	$	288	$	145