Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments 

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 cash and cash equivalents approximates their carrying value.

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

Equity securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The fair values of non-publicly traded common stocks 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.

Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets.

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

Notes payable and preferred trust securities: 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 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 carrying and fair values of financial instruments are as follows:	At
	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	11,284	$	11,284	$	31,339	$	31,339
Fixed maturity securities	110,833		110,833		93,509		93,509
Equity securities	6,085		6,085		1,219		1,219
Notes receivable	4,281		4,281		3,603		3,603
Accounts and premiums receivable, net	25,056		25,056		20,172		20,172
Other receivables	15,708		15,708		9,103		9,103
Short-term investments	970		970		1,070		1,070
Total financial assets	$	174,217	$	174,217	$	160,015	$	160,015
Financial liabilities:
Notes payable	$	71,168	$	71,168	$	73,000	$	73,000
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	4,599		4,599		3,601		3,601
Total financial liabilities	$	110,767	$	110,767	$	111,601	$	111,601

The FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value 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 Company's policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.

The following tables set forth the Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy at:

September 30, 2012			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	110,833	$	—	$	110,781	$	52
Equity securities	6,085		4,960		46		1,079
Short-term investments	970		970		—		—
Total assets	$	117,888	$	5,930	$	110,827	$	1,131
Liabilities
Interest rate swap	$	4,599	$	—	$	4,599	$	—

December 31, 2011			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Fixed maturity securities	$	93,509	$	—	$	93,433	$	76
Equity securities	1,219		91		—		1,128
Short-term investments	1,070		1,070		—		—
Total Assets	$	95,798	$	1,161	$	93,433	$	1,204
Liabilities
Interest rate swap	$	3,601	$	—	$	3,601	$	—

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2012. For the nine months ended September 30, 2012, a single equity security was transferred from Level 3 to Level 2. This transfer occurred due to the availability of Level 2 pricing for the equity security, which was unavailable in prior periods. The Company's use of Level 3 unobservable inputs included 7 individual securities that accounted for 1.0% of total investments at September 30, 2012. The Company utilized an independent third party pricing service to value 6 individual fixed maturity securities for Level 3.The value of the single equity security in Level 3, which is a non-publicly traded preferred stock, was calculated by the Company taking into account the strength of the issuer's parent company guaranteeing the dividend of the issuer. At December 31, 2011, the Company had 12 individual securities valued under Level 3 that accounted for 1.3% of total investments.

The following table summarizes the changes in Level 3 assets measured at fair value:

	For the Nine Months Ended
	September 30, 2012			September 30, 2011
Beginning balance, January 1,	$	1,204		$	1,425
Total investment gains or losses (realized/unrealized):
Included in net income	—			372
Included in other comprehensive (loss) income	(19		)	(148		)
Sales	(47		)	(607		)
Transfers (out of) into Level 3	(7		)	45
Ending balance, September 30,	$	1,131		$	1,087