Note 4. Investments

9 Months Ended

Sep. 30, 2014

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, 2014
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	28,631	$	26	$	(682)	$	27,975
Foreign government		7,777		18		(178)		7,617
Collateralized mortgage obligations (CMO) – residential		916		5		(4)		917
CMO – commercial		390		-		(20)		370
States, municipalities and political subdivisions		26,237		186		(311)		26,112
U.S. Government		6,671		3		-		6,674
Government sponsored enterprise (GSE)		1,428		4		(13)		1,419
Agency mortgage backed pass through securities (MBS)		69		3		-		72
Redeemable preferred stocks		274		100		-		374
Total fixed maturities	$	72,393	$	345	$	(1,208)	$	71,530

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		970		34		(1)		1,003
Total available-for-sale equity securities	$	970	$	34	$	(1)	$	1,003

		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
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
GSE		430		4		(12)		422
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

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, 2014, 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	$	526	$	528
Due after one year through five years		22,867		22,790
Due after five years through ten years		24,963		24,566
Due after ten years		22,262		21,893
CMOs and MBSs		1,775		1,753
	$	72,393	$	71,530

The following tables summarize, for all securities in an unrealized loss position at September 30, 2014 and December 31, 2013, 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, 2014
		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	$	11,250	$	180	$	12,873	$	502	$	24,123	$	682
Foreign securities		5,644		95		1,340		83		6,984		178
CMO – residential		600		4		-		-		600		4
CMO – commercial		-		-		370		20		370		20
States, municipalities and political subdivisions		6,187		96		13,676		215		19,863		311
GSE		1,025		5		355		8		1,380		13
Nonredeemable preferred stocks		398		1		-		-		398		1
Total temporarily impaired securities	$	25,104	$	381	$	28,614	$	828	$	53,718	$	1,209
Number of securities in an unrealized loss position		20				23				43

		December 31, 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	$	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
States, municipalities and political subdivisions		14,962		895		2,265		106		17,227		1,001
U.S. Government		493		5		-		-		493		5
GSE		366		12		-		-		366		12
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

Substantially all of the unrealized losses on fixed maturities at September 30, 2014 and December 31, 2013 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 September 30, 2014.

The following table summarizes the Company’s net investment income for three months and nine months ended September 30, 2014 and 2013 (in thousands):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2014		2013		2014		2013
Fixed maturities	$	517	$	511	$	1,627	$	1,461
Equity securities		32		32		87		98
Short-term investments		1		-		2		4
Other		(6)		(6)		(71)		(21)
Net investment income	$	544	$	537	$	1,645	$	1,542

Net realized investment gains for the three months and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2014		2013		2014		2013
Available-for-sale securities:
Fixed maturities	$	621	$	(22)	$	814	$	810
Preferred stock		-		-		-		23
Total available-for-sale securities		621		(22)		814		833
Trading securities		65		75		52		134
Change in unrealized gain on trading securities		(106)		(7)		(3)		6
Net realized investment gains	$	580	$	46	$	863	$	973

For the three months and nine months ended September 30, 2014, the Company recorded realized gross gains of $631,000 and $936,000, respectively, and gross losses of $10,000 and $122,000, respectively, on available-for-sale securities.  For the three months and nine months ended September 30, 2013, the Company recorded realized gross gains of $56,000 and $984,000, respectively, and gross losses of $78,000 and $151,000, respectively, on available-for-sale securities. 

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, 2014 and 2013, 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, 2014 and December 31, 2013.