XML 41 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Investments
 9 Months Ended
Sep. 30, 2012
Investments [Abstract]  
INVESTMENTS
(5) Investments

Total investments increased $15.5 million, or 12.0%, to $145.0 million as of September 30, 2012, compared with $129.5 million as of December 31, 2011.

We account for our investment securities consistent with FASB issued guidance that requires our 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 where the Company's intent and ability are to hold the investment until maturity and are carried 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 and are carried 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 and are carried 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."

The debt and equity securities that are available-for-sale and carried at fair value represent 95% of total investments as of September 30, 2012, compared with 94% as of December 31, 2011.
 
We did not hold any trading investment securities during the nine months ended September 30, 2012.

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.

•
rating downgrade or other credit event (e.g., failure to pay interest when due);

•
length of time and the extent to which the fair value has been less than amortized cost;

•
financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology or discontinuance of a business segment;

•
prospects for the issuer's industry segment;

•
intent and ability of the Company to retain the investment for a period of time sufficient to allow for anticipated recovery in market value;

•
historical volatility of the fair value of the security.

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 ("S&P") and Moody's Investors Service, Inc. ("Moody's"), as well as information released via the general media channels. In connection with this process, we have not charged net realized losses to operations during the three months ended September 30, 2012; in connection with this process we have charged $44,000 of net realized investment losses to operations during the nine months ended September 30, 2012.

As of September 30, 2012 and December 31, 2011, respectively, all of our securities are in good standing and not impaired as defined by FASB issued guidance, except as noted above.
 
As of September 30, 2012 and December 31, 2011, approximately 86% of our investment portfolio was in debt instruments and 14% was in equity instruments. As of September 30, 2012, 64% of our debt portfolio was in diverse industries and 36% is in United States government bonds.  As of September 30, 2012, approximately 87% of our equity holdings were in equities related to diverse industries and 13% were in mutual funds. As of December 31, 2011, 61% of our debt portfolio was in diverse industries and 39% is in United States government bonds.  As of December 31, 2011, approximately 83% of our equity holdings were in equities related to diverse industries and 17% were in mutual funds.

As of September 30, 2012 and December 31, 2011, we have classified $7.5 million and $7.1 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, 2012 and December 31, 2011.
 
During the three and nine months ended September 30, 2012 and 2011, respectively, we did not re-classify any of our bond portfolio between available-for-sale and held-to-maturity.
 
(A) Debt and Equity Securities
 
The following table summarizes, by type, our investments as of September 30, 2012 and December 31, 2011.

 
September 30, 2012
 
 
December 31, 2011
 
 
Carrying
 
 
Percent
 
 
Carrying
 
 
Percent
 
 
Amount
 
 
of Total
 
 
Amount
 
 
of Total
 
 
(Dollars in Thousands)
 
Debt securities, at market:
 
 
 
 
 
 
 
 
 
 
 
 
     United States government obligations and authorities
 
$
37,928
 
 
 
26.15
%
 
$
37,217
 
 
 
28.75
%
     Obligations of states and political subdivisions
 
 
3,467
 
 
 
2.39
%
 
 
2,303
 
 
 
1.77
%
     Corporate
 
 
72,836
 
 
 
50.22
%
 
 
63,268
 
 
 
48.87
%
     International
 
 
2,275
 
 
 
1.57
%
 
 
1,523
 
 
 
1.18
%
 
 
116,506
 
 
 
80.33
%
 
 
104,311
 
 
 
80.57
%
Debt securities, at amortized cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Corporate
 
 
1,328
 
 
 
0.92
%
 
 
962
 
 
 
0.74
%
     United States government obligations and authorities
 
 
6,127
 
 
 
4.22
%
 
 
6,166
 
 
 
4.76
%
 
 
7,455
 
 
 
5.14
%
 
 
7,128
 
 
 
5.50
%
          Total debt securities
 
 
123,961
 
 
 
85.47
%
 
 
111,439
 
 
 
86.07
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities, at market:
 
 
21,070
 
 
 
14.53
%
 
 
18,028
 
 
 
13.93
%
          Total investments
 
$
145,031
 
 
 
100.00
%
 
$
129,467
 
 
 
100.00
%
 
The following table shows the realized gains for debt and equity securities for the three months ended September 30, 2012 and 2011.

 
Three Months Ended September 30,
 
 
2012
 
 
2011
 
 
Gains
 
 
Fair Value
 
 
Gains
 
 
Fair Value
 
 
(Losses)
 
 
at Sale
 
 
(Losses)
 
 
at Sale
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt securities
 
$
410
 
 
$
9,716
 
 
$
620
 
 
$
10,177
 
     Equity securities
 
 
145
 
 
 
1,349
 
 
 
273
 
 
 
1,502
 
          Total realized gains
 
 
555
 
 
 
11,065
 
 
 
893
 
 
 
11,679
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt securities
 
 
(56
)
 
 
1,637
 
 
 
(10
)
 
 
213
 
     Equity securities
 
 
(354
)
 
 
682
 
 
 
(170
)
 
 
492
 
          Total realized losses
 
 
(410
)
 
 
2,319
 
 
 
(180
)
 
 
705
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized gains on investments
 
$
145
 
 
$
13,384
 
 
$
713
 
 
$
12,384
 

The following table shows the realized (losses) gains for debt and equity securities for the nine months ended September 30, 2012 and 2011.

 
Nine Months Ended September 30,
 
 
2012
 
 
2011
 
 
Gains
 
 
Fair Value
 
 
Gains
 
 
Fair Value
 
 
(Losses)
 
 
at Sale
 
 
(Losses)
 
 
at Sale
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt securities
 
$
958
 
 
$
27,760
 
 
$
1,045
 
 
$
39,630
 
     Equity securities
 
 
805
 
 
 
5,437
 
 
 
1,010
 
 
 
5,751
 
          Total realized gains
 
 
1,763
 
 
 
33,197
 
 
 
2,055
 
 
 
45,381
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt securities
 
 
(371
)
 
 
11,050
 
 
 
(442
)
 
 
14,046
 
     Equity securities
 
 
(1,475
)
 
 
6,073
 
 
 
(561
)
 
 
3,019
 
          Total realized losses
 
 
(1,846
)
 
 
17,123
 
 
 
(1,003
)
 
 
17,065
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized (losses) gains on investments
 
$
(83
)
 
$
50,320
 
 
$
1,052
 
 
$
62,446
 
 
A summary of the amortized cost, estimated fair value and gross unrealized gains and losses of debt and equity securities at September 30, 2012 and December 31, 2011 is as follows.

 
 
 
 
Gross
 
 
Gross
 
 
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Estimated
 
 
Cost
 
 
Gains
 
 
Losses
 
 
Fair Value
 
 
(Dollars in Thousands)
 
September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
     Debt Securities  - Available-For-Sale:
 
 
 
 
 
 
 
 
 
 
 
 
United States government obligations and authorities
 
$
36,721
 
 
$
1,229
 
 
$
22
 
 
$
37,928
 
Obligations of states and political  subdivisions
 
 
3,294
 
 
 
174
 
 
 
1
 
 
 
3,467
 
          Corporate
 
 
68,622
 
 
 
4,227
 
 
 
13
 
 
 
72,836
 
          International
 
 
2,187
 
 
 
89
 
 
 
1
 
 
 
2,275
 
 
$
110,824
 
 
$
5,719
 
 
$
37
 
 
$
116,506
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt Securities  - Held-To-Maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States government obligations  and authorities
 
$
6,127
 
 
$
182
 
 
$
1
 
 
$
6,308
 
          Corporate
 
 
1,328
 
 
 
75
 
 
 
-
 
 
 
1,403
 
 
$
7,455
 
 
$
257
 
 
$
1
 
 
$
7,711
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Equity securities - common stocks
 
$
19,142
 
 
$
2,581
 
 
$
653
 
 
$
21,070
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt Securities  - Available-For-Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States government obligations  and authorities
 
$
36,558
 
 
$
686
 
 
$
27
 
 
$
37,217
 
Obligations of states and political subdivisions
 
 
2,165
 
 
 
138
 
 
 
-
 
 
 
2,303
 
          Corporate
 
 
61,724
 
 
 
1,934
 
 
 
390
 
 
 
63,268
 
          International
 
 
1,519
 
 
 
9
 
 
 
5
 
 
 
1,523
 
 
$
101,966
 
 
$
2,767
 
 
$
422
 
 
$
104,311
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Debt Securities  - Held-To-Maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States government obligations and authorities
 
$
6,166
 
 
$
249
 
 
$
-
 
 
$
6,415
 
          Corporate
 
 
962
 
 
 
39
 
 
 
1
 
 
 
1,000
 
 
$
7,128
 
 
$
288
 
 
$
1
 
 
$
7,415
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Equity securities - common stocks
 
$
18,966
 
 
$
1,057
 
 
$
1,995
 
 
$
18,028
 

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, 2012.

 
Unrealized Losses
 
 
Less than 12 months
 
 
12 months or longer
 
 
(Dollars in Thousands)
 
Debt securities:
 
 
 
 
 
 
 
 
 
United States government obligations          and authorities
 
$
22
 
 
$
22
 
 
$
-
 
     Obligations of states and political subdivisions
 
 
1
 
 
 
1
 
 
 
-
 
     Corporate
 
 
13
 
 
 
7
 
 
 
6
 
     International
 
 
1
 
 
 
1
 
 
 
-
 
 
 
37
 
 
 
31
 
 
 
6
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
     Common stocks
 
 
653
 
 
 
440
 
 
 
213
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt and equity securities
 
$
690
 
 
$
471
 
 
$
219
 
 
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, 2011.

 
Unrealized (Losses)
 
 
Less than 12 months
 
 
12 months or longer
 
 
(Dollars in Thousands)
 
Debt securities:
 
 
 
 
 
 
 
 
 
United States government obligations          and authorities
 
$
27
 
 
$
27
 
 
$
-
 
     Obligations of states and political subdivisions
 
 
-
 
 
 
-
 
 
 
-
 
     Corporate
 
 
390
 
 
 
390
 
 
 
-
 
     International
 
 
4
 
 
 
4
 
 
 
-
 
 
 
421
 
 
 
421
 
 
 
-
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
     Common stocks
 
 
1,996
 
 
 
1,620
 
 
 
376
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt and equity securities
 
$
2,417
 
 
$
2,041
 
 
$
376
 
 
Below is a summary of debt securities at September 30, 2012 and December 31, 2011, 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.

 
September 30, 2012
 
 
December 31, 2011
 
 
Amortized
 
 
Estimated
 
 
Amortized
 
 
Estimated
 
 
Cost
 
 
Fair Value
 
 
Cost
 
 
Fair Value
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
7,222
 
 
$
7,308
 
 
$
8,284
 
 
$
8,376
 
Due after one through five years
 
 
55,689
 
 
 
57,837
 
 
 
47,294
 
 
 
48,314
 
Due after five through ten years
 
 
36,812
 
 
 
39,219
 
 
 
36,525
 
 
 
37,448
 
Due after ten years
 
 
18,556
 
 
 
19,853
 
 
 
16,991
 
 
 
17,588
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
118,279
 
 
$
124,217
 
 
$
109,094
 
 
$
111,726
 
 
United States Treasury notes with a book value of $2,178,935 and $63,725, maturing in 2012 and 2016, respectively, were on deposit with the Florida OIR as of September 30, 2012, as required by law for FNIC, and are included with other investments held until maturity.

The table below sets forth investment results for the three months ended September 30, 2012 and 2011.

 
Three Months Ended September 30,
 
 
2012
 
 
2011
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
Interest on debt securities
 
$
839
 
 
$
950
 
Dividends on equity securities
 
 
113
 
 
 
80
 
Interest on cash and cash equivalents
 
 
1
 
 
 
1
 
 
 
 
 
 
 
 
 
Total investment income
 
$
953
 
 
$
1,031
 
 
 
 
 
 
 
 
 
Net realized gains
 
$
145
 
 
$
713
 
 
Proceeds from sales, pay downs and maturities of debt securities and proceeds from sales of equity securities during the three months ended September 30, 2012 and 2011, were approximately $17.9 million and $15.0 million, respectively.

The table below sets forth investment results for the nine months ended September 30, 2012 and 2011.

 
Nine Months Ended September 30,
 
 
2012
 
 
2011
 
 
(Dollars in Thousands)
 
 
 
 
 
 
 
Interest on debt securities
 
$
2,563
 
 
$
2,805
 
Dividends on equity securities
 
 
279
 
 
 
246
 
Interest on cash and cash equivalents
 
 
7
 
 
 
3
 
 
 
 
 
 
 
 
 
Total investment income
 
$
2,849
 
 
$
3,054
 
 
 
 
 
 
 
 
 
Net realized (losses) gains
 
$
(83
)
 
$
1,052
 
 
Proceeds from sales, pay downs and maturities of debt securities and proceeds from sales of equity securities during the nine months ended September 30, 2012 and 2011, were approximately $60.7 million and $70.6 million, respectively.

The table below sets forth a summary of net realized and unrealized investment gains during the three months ended September 30, 2012 and 2011.

 
Three Months Ended September 30,
 
 
2012
 
 
2011
 
 
(Dollars in Thousands)
 
Net realized gains
 
 
 
 
 
 
Debt securities
 
$
354
 
 
$
610
 
Equity securities
 
 
(209
)
 
 
103
 
 
 
 
 
 
 
 
 
    Total
 
$
145
 
 
$
713
 
 
 
 
 
 
 
 
 
Net unrealized gains
 
 
 
 
 
 
 
 
Debt securities
 
$
5,682
 
 
$
3,877
 
Equity securities
 
 
1,928
 
 
 
(3,183
)
 
 
 
 
 
 
 
 
    Total
 
$
7,610
 
 
$
694
 
 
The table below sets forth a summary of net realized and unrealized investment (losses) gains during the nine months ended September 30, 2012 and 2011.

 
Nine Months Ended September 30,
 
 
2012
 
 
2011
 
 
(Dollars in Thousands)
 
Net realized (losses) gains
 
 
 
 
 
 
Debt securities
 
$
587
 
 
$
603
 
Equity securities
 
 
(670
)
 
 
449
 
 
 
 
 
 
 
 
 
    Total
 
$
(83
)
 
$
1,052
 
 
 
 
 
 
 
 
 
Net unrealized gains
 
 
 
 
 
 
 
 
Debt securities
 
$
5,682
 
 
$
5,070
 
Equity securities
 
 
1,928
 
 
 
(2,328
)
 
 
 
 
 
 
 
 
    Total
 
$
7,610
 
 
$
2,742