Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | (5) Investments FASB issued guidance addresses accounting and reporting for (a) investments in equity securities that have readily determinable fair values and (b) all investments in debt securities. FASB issued guidance requires that these securities be classified into one of three categories: (i) held-to-maturity, (ii) trading securities or (iii) available-for-sale. Investments classified as held-to-maturity include debt securities wherein the Company's intent and ability are to hold the investment until maturity. The accounting treatment for held-to-maturity investments is to carry them at amortized cost without consideration to unrealized gains or losses. Investments classified as trading securities include debt and equity securities bought and held primarily for sale in the near term. The accounting treatment for trading securities is to carry them at fair value with unrealized holding gains and losses included in current period operations. Investments classified as available-for-sale include debt and equity securities that are not classified as held-to-maturity or as trading security investments. The accounting treatment for available-for-sale securities is to carry them at fair value with unrealized holding gains and losses excluded from earnings and reported as a separate component of shareholders' equity, namely “Other Comprehensive Income”. Total investments increased $6.1 million, or 5.0%, to $128.6 million as of September 30, 2011, compared with $122.5 million as of December 31, 2010. The debt and equity securities that are available-for-sale and carried at fair value represent 94% and 95% of total investments as of September 30, 2011 and of December 31, 2010, respectively. We did not hold any trading investment securities during the nine months ended September 30, 2011. The FASB-issued guidance also addresses the determination as to when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss. The Company's policy for the valuation of temporarily impaired securities is to determine impairment based on the analysis of the following factors.
Pursuant to FASB-issued guidance, the Company records the unrealized losses, net of estimated income taxes, that are associated with that part of our portfolio classified as available-for-sale through the shareholders' equity account titled “Other Comprehensive Income”. Management periodically reviews the individual investments that comprise our portfolio in order to determine whether a decline in fair value below our cost either is other-than temporarily or permanently impaired. Factors used in such consideration include, but are not limited to, the extent and length of time over which the market value has been less than cost, the financial condition and near-term prospects of the issuer and our ability and intent to keep the investment for a period sufficient to allow for an anticipated recovery in market value. In reaching a conclusion that a security is either other-than-temporarily or permanently impaired we consider such factors as the timeliness and completeness of expected dividends, principal and interest payments, ratings from nationally recognized statistical rating organizations such as Standard and Poor's and Moody's Investors Service, Inc. (“Moody's”), as well as information released via the general media channels. During the nine months ended September 30, 2011, in connection with this process, we have not charged any net realized investment loss to operations. As of September 30, 2011 and December 31, 2010, respectively, all of our securities are in good standing and not impaired as defined by FASB-issued guidance. The investments held as of September 30, 2011 and December 31, 2010, were comprised mainly of corporate bonds held in various industries and municipal and United States government bonds. As of September 30, 2011, 63% of the debt portfolio is in diverse industries and 37% is in United States government bonds. As of September 30, 2011, approximately 82% of the equity holdings are in equities related to diverse industries and 18% are in mutual funds. As of September 30, 2011, 52% of the investment portfolio is in corporate bonds, 3% is in obligations of states and political subdivisions, and 32% is in United States government bonds. Approximately 9% of the common stock holdings are related to foreign entities. As of September 30, 2011 and December 31, 2010, we have classified $7.2 million and $6.2 million, respectively, of our bond portfolio as held-to-maturity. We only classify bonds as held-to-maturity to support securitization of credit requirements. Fully funded trust agreements used for such purposes totaled $4.6 million as of September 30, 2011 and December 31, 2010. During the nine months ended September 30, 2011, we did not re-classify any of our bond portfolio between available-for-sale and held-to-maturity. During the first quarter of the nine months ended September 30, 2010, we re-classified $3.1 million of amortized cost to held-to-maturity from available-for-sale to fund trust agreements. As of September 30, 2011 and December 31, 2010, Federated National maintained fully funded trust agreements that totaled $4.6 million in favor of two of its reinsurers. (A) Debt and Equity Securities The following table summarizes, by type, our investments as of September 30, 2011 and December 31, 2010.
The following table shows the realized gains (losses) for debt and equity securities for the three months ended September 30, 2011 and 2010.
The following table shows the realized gains (losses) for debt and equity securities for the nine months ended September 30, 2011 and 2010.
A summary of the amortized cost, estimated fair value and gross unrealized gains and losses of debt and equity securities at September 30, 2011 and December 31, 2010 is as follows.
The table below reflects our unrealized investment losses by investment class, aged for length of time in a continuous unrealized loss position as of September 30, 2011.
The table below reflects our unrealized investment losses by investment class, aged for length of time in a continuous unrealized loss position as of December 31, 2010.
Below is a summary of debt securities at September 30, 2011 and December 31, 2010, by contractual or expected maturity periods. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
United States Treasury notes with a book value of $2,006,316 and $64,672, maturing in 2012 and 2016, respectively, were on deposit with the Florida OIR as of September 30, 2011, as required by law for Federated National, and are included with other investments held until maturity. The table below sets forth investment results for the three months ended September 30, 2011 and 2010.
Proceeds from sales, paydowns and maturities of debt securities and proceeds from sales of equity securities during the three months ended September 30, 2011 and 2010, were approximately $15.0 million and $30.7 million, respectively. The table below sets forth investment results for the nine months ended September 30, 2011 and 2010.
Proceeds from sales, paydowns and maturities of debt securities and proceeds from sales of equity securities during the nine months ended September 30, 2011 and 2010, were approximately $70.6 million and $111.8 million, respectively. The table below sets forth a summary of net realized investment gains during the three months ended September 30, 2011 and 2010.
The table below sets forth a summary of net realized investment gains during the nine months ended September 30, 2011 and 2010.
The table below sets forth a summary of net unrealized investment gains during the three months ended September 30, 2011 and 2010.
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