XML 76 R11.htm IDEA: XBRL DOCUMENT v2.4.0.8
Investments
 12 Months Ended
Dec. 31, 2013
Investments Debt And Equity Securities [Abstract]  
Investments
3. Investments

Investments, Available-for-Sale

The following tables summarize the Company’s investment securities (in thousands).

 

December 31, 2013

    Amortized
Cost		      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		     Fair
Value		  

U.S. government and agencies

    $ 12,006       $ 495       $ (16 )    $ 12,485   

State

      697         39         —          736   

Political subdivisions

      601         11         —          612   

Revenue and assessment

      14,050         619         (11 )      14,658   

Corporate bonds

      73,461         2,127         (2,263 )      73,325   

Collateralized mortgage obligations:

           

Agency backed

      7,113         401         —          7,514   

Non-agency backed – residential

      4,181         480         (1 )      4,660   

Non-agency backed – commercial

      3,363         580         —          3,943   

Redeemable preferred stock

      1,500         78         —          1,578   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total fixed maturities, available-for-sale

      116,972         4,830         (2,291 )      119,511   

Mutual funds, available-for-sale

      9,901         836         —          10,737   
  

 

 

     

 

 

     

 

 

    

 

 

  
   $ 126,873       $ 5,666       $ (2,291 )    $ 130,248   
  

 

 

     

 

 

     

 

 

    

 

 

  

 

December 31, 2012

    Amortized
Cost		      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		     Fair
Value		  

U.S. government and agencies

    $ 11,202       $ 908       $ —        $ 12,110   

State

      3,994         117         —          4,111   

Political subdivisions

      753         37         —          790   

Revenue and assessment

      16,449         1,553         (6 )      17,996   

Corporate bonds

      68,114         3,669         (246 )      71,537   

Collateralized mortgage obligations:

           

Agency backed

      11,079         791         —          11,870   

Non-agency backed – residential

      5,098         472         (98 )      5,472   

Non-agency backed – commercial

      4,652         457         —          5,109   

Redeemable preferred stock

      1,500         218         —          1,718   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total fixed maturities, available-for-sale

      122,841         8,222         (350 )      130,713   

Mutual fund, available-for-sale

      7,501         832         —          8,333   
  

 

 

     

 

 

     

 

 

    

 

 

  
   $ 130,342       $ 9,054       $ (350 )    $ 139,046   
  

 

 

     

 

 

     

 

 

    

 

 

  

The following tables set forth the scheduled maturities of the Company’s fixed maturity securities based on their fair values (in thousands). Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.

 

December 31, 2013

    Securities
with
Unrealized
Gains		      Securities
with
Unrealized
Losses		      Securities
with No
Unrealized
Gains or
Losses		      All
Fixed
Maturity
Securities		  

One year or less

    $ 14,305       $ —         $ —         $ 14,305   

After one through five years

      25,667         10,888         —           36,555   

After five through ten years

      20,445         22,836         —           43,281   

After ten years

      3,667         4,008         —           7,675   

No single maturity date

      17,506         189         —           17,695   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 81,590       $ 37,921       $ —         $ 119,511   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

December 31, 2012

    Securities
with
Unrealized
Gains		      Securities
with
Unrealized
Losses		      Securities
with No
Unrealized
Gains or
Losses		      All
Fixed
Maturity
Securities		  

One year or less

    $ 9,380       $ —         $ 5       $ 9,385   

After one through five years

      34,460         11,518         —           45,978   

After five through ten years

      25,230         15,181         —           40,411   

After ten years

      10,770         —           —           10,770   

No single maturity date

      23,833         336         —           24,169   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 103,673       $ 27,035       $ 5       $ 130,713   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

 

The fair value and gross unrealized losses of investments, available-for-sale, by the length of time that individual securities have been in a continuous unrealized loss position follows (in thousands).

 

     Less than 12 months     12 months or longer     Total Gross
Unrealized
Losses		  

December 31, 2013

    Fair
Value		      Gross
Unrealized
Losses		     Fair
Value		      Gross
Unrealized
Losses		    

U.S. government and agencies

    $ 988       $ (16 )    $ —         $ —        $ (16 ) 

State

      —           —          —           —          —     

Political subdivisions

      —           —          —           —          —     

Revenue and assessment

      983         (11 )      —           —          (11 ) 

Corporate bonds

      21,781         (993 )      13,980         (1,270 )      (2,263 ) 

Collateralized mortgage obligations:

             

Agency backed

      —           —          —           —          —     

Non-agency backed – residential

      189         (1 )      —           —          (1 ) 

Non-agency backed – commercial

      —           —          —           —          —     

Redeemable preferred stock

      —           —          —           —          —     
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  

Total fixed maturities, available-for-sale

      23,941         (1,021 )      13,980         (1,270 )      (2,291 ) 

Mutual fund, available-for-sale

      —           —          —           —          —     
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  
   $ 23,941       $ (1,021 )    $ 13,980       $ (1,270 )    $ (2,291 ) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  

 

     Less than 12 months     12 months or longer     Total Gross
Unrealized
Losses		  

December 31, 2012

    Fair
Value		      Gross
Unrealized
Losses		     Fair
Value		      Gross
Unrealized
Losses		    

U.S. government and agencies

    $ —         $ —        $ —         $ —        $ —     

State

      —           —          —           —          —     

Political subdivisions

      —           —          —           —          —     

Revenue and assessment

      702         (6 )      —           —          (6 ) 

Corporate bonds

      25,997         (246 )      —           —          (246 ) 

Collateralized mortgage obligations:

             

Agency backed

      —           —          —           —          —     

Non-agency backed – residential

      124         (20 )      212         (78 )      (98 ) 

Non-agency backed – commercial

      —           —          —           —          —     

Redeemable preferred stock

      —           —          —           —          —     
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  

Total fixed maturities, available-for-sale

      26,823         (272 )      212         (78 )      (350 ) 

Mutual fund, available-for-sale

      —           —          —           —          —     
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  
   $ 26,823       $ (272 )    $ 212       $ (78 )    $ (350 ) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

  

The following table reflects the number of fixed maturity securities with gross unrealized gains and losses. Gross unrealized losses are further segregated by the length of time that individual securities have been in a continuous unrealized loss position.

 

     Gross Unrealized Losses      Gross
Unrealized
Gains		  

At:

    Less than
or equal to
12 months		      Greater
than 12
months		     

December 31, 2013

      12         7         83   

December 31, 2012

      13         1         108   

 

 

The following tables reflect the fair value and gross unrealized losses of those fixed maturity securities in a continuous unrealized loss position for greater than 12 months. Gross unrealized losses are further segregated by the percentage of amortized cost (in thousands, except number of securities).

 

Gross Unrealized Losses

at December 31, 2013:

    Number
of
Securities		      Fair
Value		      Gross
Unrealized
Losses		  

Less than or equal to 10%

      7       $ 13,980       $ (1,270 ) 

Greater than 10%

      —           —           —     
  

 

 

     

 

 

     

 

 

  
     7       $ 13,980       $ (1,270 ) 
  

 

 

     

 

 

     

 

 

  

Gross Unrealized Losses

at December 31, 2012:

    Number
of
Securities		      Fair
Value		      Gross
Unrealized
Losses		  

Less than or equal to 10%

      —         $ —         $ —     

Greater than 10%

      1         212         (78 ) 
  

 

 

     

 

 

     

 

 

  
     1       $ 212       $ (78 ) 
  

 

 

     

 

 

     

 

 

  

The following tables set forth the amount of gross unrealized losses by current severity (as compared to amortized cost) and length of time that individual securities have been in a continuous unrealized loss position (in thousands).

 

     Fair Value of
Securities
with Gross
Unrealized
Losses		      Gross
Unrealized
Losses		     Severity of Gross Unrealized Losses  

Length of Gross Unrealized Losses at December 31, 2013:

         Less
than 5%		     5% to
10%		     Greater
than
10%		  

Less than or equal to:

            

Three months

    $ 6,417       $ (40 )    $ (40 )    $ —        $ —     

Six months

      1,653         (129 )      —          (129 )      —     

Nine months

      15,871         (852 )      (153 )      (699 )      —     

Twelve months

      —           —          —          —          —     

Greater than twelve months

      13,980         (1,270 )      (85 )      (1,185 )      —     
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 37,921       $ (2,291 )    $ (278 )    $ (2,013 )    $ —     
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

     Fair Value of
Securities
with Gross
Unrealized
Losses		      Gross
Unrealized
Losses		     Severity of Gross Unrealized Losses  

Length of Gross Unrealized Losses at December 31, 2012:

         Less
than 5%		     5% to
10%		      Greater
than
10%		  

Less than or equal to:

             

Three months

    $ 26,121       $ (266 )    $ (246 )    $ —         $ (20 ) 

Six months

      —           —          —          —           —     

Nine months

      —           —          —          —           —     

Twelve months

      702         (6 )      (6 )      —           —     

Greater than twelve months

      212         (78 )      —          —           (78 ) 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ 27,035       $ (350 )    $ (252 )    $ —         $ (98 ) 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

 

 

Limited Partnership Interests

Limited partnership interests consist of investments in three funds that invest in small balance distressed secured loans, securities and international equity and distressed corporate financing opportunities, respectively. These investments have redemption and transfer restrictions, however, the Company does not intend to sell these limited partnership interests, and it is more likely than not that the Company will not be required to sell them before the expiration of such restrictions. At December 31, 2013, the Company had unfunded commitments of $2.4 million to these limited partnerships.

Net earnings from limited partnership interests is recorded in investment income in the consolidated statements of operations and comprehensive income (loss).

Restrictions

At December 31, 2013, fixed maturities and cash equivalents with a fair value and amortized cost of $5.3 million were on deposit with various insurance departments as a requirement of doing business in those states. Cash equivalents with a fair value and amortized cost of $9.4 million were on deposit with another insurance company as collateral for an assumed reinsurance contract.

Investment Income and Net Realized Gains and Losses

The major categories of investment income follow (in thousands).

 

     Year Ended
December 31,		     Six Months
Ended
December 31,		     Year
Ended
June 30,		  
     2013     2012     2011     2011  

Fixed maturities, available-for-sale

    $ 5,037      $ 6,513      $ 3,897      $ 8,296   

Mutual funds, available-for-sale

      766        613        290        625   

Limited partnership interests

      200        —          —          —     

Equity in earnings of limited partnership interest

      199        —          —          —     

Other

      90        92        59        125   

Investment expenses

      (576 )      (619 )      (316 )      (651 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ 5,716      $ 6,599      $ 3,930      $ 8,395   
  

 

 

    

 

 

    

 

 

    

 

 

  

The components of net realized gains (losses) on investments, available-for-sale at fair value follow (in thousands).

 

     Year Ended
December 31,		     Six Months
Ended
December 31,		     Year
Ended
June 30,		  
     2013     2012     2011     2011  

Gains

    $ 100      $ 3,296      $ 15      $ 231   

Losses

      (68 )      (31 )      (120 )      (3 ) 

Other-than-temporary impairment

      (61 )      (23 )      (127 )      (413 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ (29 )    $ 3,242      $ (232 )    $ (185 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Realized gains and losses on sales and redemptions are computed based on specific identification. The non-credit related portion of OTTI is included in other comprehensive income (loss). The amounts of non-credit OTTI for securities still owned was $0.9 million for non-agency backed residential CMOs and $0.2 million for non-agency backed commercial at December 31, 2013, and $1.0 million for non-agency backed residential CMOs and $0.2 million for non-agency backed commercial CMOs at December 31, 2012 and 2011.

Other-Than-Temporary Impairment

The Company separates OTTI into the following two components: (i) the amount related to credit losses, which is recognized in the consolidated statement of operations and comprehensive income (loss) and (ii) the amount related to all other factors, which is recorded in other comprehensive income (loss). The credit-related portion of an OTTI is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the impairment charge.

The determination of whether unrealized losses are “other-than-temporary” requires judgment based on subjective as well as objective factors. The Company routinely monitors its investment portfolio for changes in fair value that might indicate potential impairments and performs detailed reviews on such securities. Changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer or (ii) market-related factors such as interest rates or sector declines.

Securities with declines attributable to issuer-specific fundamentals are reviewed to identify all available evidence to estimate the potential for impairment. Resources used include historical financial data included in filings with the United States Securities and Exchange Commission (“SEC”) for corporate bonds and performance data regarding the underlying loans for CMOs. Securities with declines attributable solely to market or sector declines where the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security before the full recovery of its amortized cost basis are not deemed to be other-than-temporarily impaired.

The issuer-specific factors considered in reaching the conclusion that securities with declines are not other-than-temporary include (i) the extent and duration of the decline in fair value, including the duration of any significant decline in value, (ii) whether the security is current as to payments of principal and interest, (iii) a valuation of any underlying collateral, (iv) current and future conditions and trends for both the business and its industry, (v) changes in cash flow assumptions for CMOs and (vi) rating agency actions. Based on these factors, the Company makes a determination as to the probability of recovering principal and interest on the security.

 

The number and amount of securities for which the Company has recognized OTTI charges in net income (loss) are presented in the following tables (in thousands, except for the number of securities).

 

     Year Ended December 2013,     Six Months Ended
December 31
2011		     Year Ended June 30,
2011		  
     2013     2012      
     Number
of
Securities		      OTTI     Number
of
Securities		      OTTI     Number
of
Securities		      OTTI     Number
of
Securities		      OTTI  

Collateralized mortgage obligations:

                     

Non-agency backed – residential

      1       $ (61 )      2       $ (8 )      3       $ (127 )      5       $ (119 ) 

Non-agency backed – commercial

      —           —          1         (15 )      1         (12 )      5         (296 ) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
     1         (61 )      3         (23 )      4         (139 )      10         (415 ) 

Portion of loss recognized in accumulated other comprehensive income (loss)

         —             —             12           2   
     

 

 

       

 

 

       

 

 

       

 

 

  

Net OTTI recognized in net income (loss)

       $ (61 )       $ (23 )       $ (127 )       $ (413 ) 
     

 

 

       

 

 

       

 

 

       

 

 

  

The following is a progression of the credit-related portion of OTTI on investments owned at December 31, 2013, 2012 and 2011and June 30, 2011 (in thousands).

 

           Six Months
Ended
December 31,
2011		     Year Ended
June 30,
2011		  
     Year Ended December 31,      
         2013             2012          

Beginning balance

    $ (2,666 )    $ (3,425 )    $ (3,343 )    $ (3,301 ) 

Additional credit impairments on:

         

Previously impaired securities

      (61 )      (23 )      (127 )      (413 ) 

Securities without previous impairments

      —          —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  
     (61 )      (23 )      (127 )      (413 ) 

Reductions for securities sold (realized)

      95        782        45        371   
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ (2,632 )    $ (2,666 )    $ (3,425 )    $ (3,343 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

The Company believes that the remaining securities having unrealized losses at December 31, 2013 were not other-than-temporarily impaired. The Company also does not intend to sell any of these securities and it is more likely than not that the Company will not be required to sell any of these securities before the recovery of their amortized cost basis.