Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments 

The guidance under US GAAP establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. These unobservable inputs are derived from the Company's internal calculations, estimates and assumptions and require significant management judgment or estimation.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents: The estimated fair value of the Company's cash and cash equivalents approximates their carrying value.

Fixed maturity securities: Fair values of fixed maturity securities were obtained from market value quotations provided by an independent pricing service.

Common and preferred stock: The fair value of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The values of common stocks that are not publicly traded were based on prices obtained from an independent pricing service.

Notes receivable: The carrying amounts approximate fair value because the interest rates charged approximate current market rates for similar credit risks. These values are net of allowance for doubtful accounts.

Other receivables: The carrying amounts approximate fair value because of the short duration there is no associated interest rate charged.

Short-term investments:The carrying amounts approximate fair value because of the short maturities of these instruments.

Notes payable, preferred trust securities, redeemable preferred stock: The carrying amounts approximate fair value because the applicable interest rates approximate current rates offered to the Company for similar instruments.

Interest rate swap: The fair value of the Company's interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The following tables set forth the Company's financial assets and liabilities that were accounted for at fair value by level within the fair value hierarchy at September 30, 2011 and December 31, 2010:

			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
September 30, 2011	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	85,169	$	—	$	85,169	$	—
Common stock - publicly traded	139		101		—		38
Preferred stock - publicly traded	52		52		—		—
Common stock - non-publicly traded	48		—		—		48
Preferred stock - non-publicly traded	1,001		—		—		1,001
Short-term investments	1,070		1,070		—		—
Total assets	$	87,479	$	1,223	$	85,169	$	1,087
Liabilities
Interest rate swap contract	3,299		—		3,299		—
Total liabilities	$	3,299	$	—	$	3,299	$	—
December 31, 2010
Assets
Fixed maturity securities	$	85,786	—		$	85,786	$	—
Common stock - publicly traded	314		314		—		—
Preferred stock - publicly traded	196		53		143		—
Common stock - non-publicly traded	424		—		—		424
Preferred stock - non-publicly traded	1,001		—		—		1,001
Short-term investments	1,170		1,170		—		—
Total Assets	$	88,891	$	1,537	$	85,929	$	1,425

The Company's use of Level 3 unobservable inputs included 7 securities that accounted for 1.2% of total investments at September 30, 2011 and 5 securities that accounted for 1.6% of total investments at December 31, 2010. The following table summarizes the changes in Level 3 assets measured at fair value as of:

	September 30, 2011
Beginning balance	$	1,425
Total gains or losses (realized/unrealized):
Included in net income	372
Included in comprehensive (loss)	(148		)
Sales	(607		)
Net transfers into Level 3	45
Ending balance	$	1,087

The carrying value and fair value of financial instruments are presented in the following table:

	September 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	23,114	$	23,114	$	43,389	$	43,389
Fixed maturity securities	85,169		85,169		85,786		85,786
Common stock - publicly traded	139		139		314		314
Preferred stock - publicly traded	52		52		196		196
Common stock - non-publicly traded	48		48		424		424
Preferred stock - non-publicly traded	1,001		1,001		1,001		1,001
Notes receivable	2,604		2,604		1,485		1,485
Other receivables	25,284		25,284		25,473		25,473
Short-term investments	1,070		1,070		1,170		1,170
Total financial assets	$	138,481	$	138,481	$	159,238	$	159,238
Financial liabilities:
Notes payable	$	64,000	$	64,000	$	36,713	$	36,713
Preferred trust securities	35,000		35,000		35,000		35,000
Redeemable preferred stock	100		100		11,040		11,040
Interest rate swap contract	3,299		3,299		—		—
Total financial liabilities	$	102,399	$	102,399	$	82,753	$	82,753