Fair Value Measurement

9 Months Ended

Sep. 30, 2011

Fair Value Measurement [Abstract]

Fair Value Measurement

Note 6 - Fair Value Measurement

Valuation Hierarchy.The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows.Level 1 inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2 inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.Level 3 inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value.

Valuation Techniques. A financial instrument's classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement—consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument's hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.

The Level 1 category includes equity securities that are measured at fair value using quoted active market prices.

The Level 2 category includes fixed maturity investments such as corporate bonds, U.S. government and agency bonds and municipal bonds. Their fair value is principally based on market values obtained from a third party pricing service. Factors that are used in determining their fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from the pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of September 30, 2011 and December 31, 2010, the Company did not adjust any Level 2 fair values.

A number of the Company's investment grade corporate bonds are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities were classified as Level 2 because the third party pricing service from which the Company has obtained fair values for these instruments uses valuation models which use observable market inputs in addition to traded prices. Substantially all of the input assumptions used in the service's model are observable in the marketplace or can be derived or supported by observable market data.

The Level 3 category only includes the Company's investments in student loan auction rate securities ("ARS") because quoted prices were unavailable due to the failure of auctions. Some of the inputs to this model are unobservable in the market and are significant—therefore, the Company utilizes another third party pricing service to assist in the determination of fair market value of these securities. That service uses a proprietary valuation model that considers factors such as the following: the financial standing of the issuer; reported prices and the extent of public trading in similar financial instruments of the issuer or comparable companies; the ability of the issuer to obtain required financing; changes in the economic conditions affecting the issuer; pricing by other dealers in similar securities; time to maturity; and interest rates. The following table summarizes some key assumptions the service used to determine fair value as of September 30, 2011 and December 31, 2010:

	2011	2010
Cumulative probability of earning maximum rate until maturity	0.0-0.1%	0.0-0.8%
Cumulative probability of principle returned prior to maturity	95.4-98.7%	85.3-98.6%
Cumulative probability of default at some future point	1.3-4.6%	1.4-14.7%

Based upon these inputs and assumptions, the pricing service provides a range of values to the Company for its ARS. The Company records the fair value based on the midpoint of the range and believes that this valuation is the most reasonable estimate of fair value. In 2011 and 2010, the difference in the low and high values of the ranges was between approximately three and four percent of the carrying value of the Company's ARS.

The Company's ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of the ARS bonds was $5,000,000 and $5,900,000 as of September 30, 2011 and December 31, 2010, respectively, with approximately 79.6% and 82.2% as of September 30, 2011 and December 31, 2010, respectively, guaranteed by the U.S. Department of Education.

The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of September 30, 2011 and December 31, 2010.The table does not include cash on hand and also does not include assets which are measured at historical cost or any basis other than fair value.

As of September 30, 2011	Level 1	Level 2	Level 3	Total
Equity Securities
Common stock and nonredeemable preferred stock	$ 17,770,019	$                -	$                 -	$   17,770,019
Fixed Maturities
Obligations of states and political subdivisions*	-	66,842,938	1,837,200	68,680,138
Corporate Debt Securities*	-	12,140,622	2,783,200	14,923,822
Total	$ 17,770,019	$ 78,983,560	$    4,620,400	$ 101,373,979

As of December 31, 2010	Level 1	Level 2	Level 3	Total
Equity Securities
Common stock and nonredeemable preferred stock	$ 13,872,370	$                -	$                 -	$   13,872,370
Fixed Maturities
Obligations of states and political subdivisions*	-	67,202,641	2,618,844	69,821,485
Corporate Debt Securities*	-	13,358,672	2,853,400	16,212,072
Total	$ 13,872,370	$ 80,561,313	$    5,472,244	$   99,905,927
*Denotes fair market value obtained from pricing services.

There were no transfers into or out of Levels 1 and 2 during the period.The following table presents a reconciliation of the Company's assets measured at fair value using significant unobservable inputs (Level 3) for the period ended September 30, 2011 and the year ended December 31, 2010:

Changes in fair value during the period ended:	2011	2010
Beginning balance at January 1	$      5,472,244	$    10,097,795
Redemptions and sales	(900,000)	(4,938,500)
Realized gain (loss)-included in realized (loss) gain on investments	8,248	(314,386)
Unrealized gain-included in other comprehensive income	39,908	627,335
Ending balance	$      4,620,400	$      5,472,244

Certain investments and other assets are measured at estimated fair value on a non-recurring basis, such as investments that are impaired during the period and recorded at estimated fair value in the financial statements as of or during the periods ended September 30, 2011 and December 31, 2010.The following table summarizes the corresponding estimated fair value hierarchy of such investments and other assets at September 30, 2011 and December 31, 2010 and the related impairments recognized.

    September 30, 2011 Valuation Method  Impaired Level 1 Level 2 Level 3 Total at Estimated Fair Value Impairment Losses

Cost method investment Other assets	Fair Value Fair Value	Yes Yes	$               - -	$              - -	$          58,281 17,000	$     58,281 17,000	$     (28,904) (15,500)
Total cost method investments and other assets			$               -	$              -	$          75,281	$     75,281	$       44,404

December 31, 2010	Valuation Method	Impaired	Level 1	Level 2	Level 3	Total at Estimated Fair Value	Impairment Losses
Cost method investment Other assets	Fair Value Fair Value	Yes Yes	$               - -	$              - -	$          52,625 -	$     52,625 -	$     (47,141)      (47,550)
Total cost method investments and other assets			$               -	$              -	$          52,625	$     52,625	$     (94,691)

      To help ensure that fair value determinations are consistent with ASC 820 fair value measurements, prices from our pricing services go through multiple review processes to ensure appropriate pricing.  Pricing procedures and inputs used to price each security include, but are not limited to the following: unadjusted quoted market prices for identical securities such as stock market closing prices, non-binding quoted prices for identical securities in markets that are not active, interest rates, yield curves observable at commonly quoted intervals, volatility, prepayment speeds, loss severity, credit risks and default rates.  The Company reviews the procedures and inputs used by its pricing services and verifies a sample of the services' quotes by comparing them to values obtained from other pricing resources.  In the event the Company disagrees with a price provided by its pricing services, the service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data.  The Company believes that these processes and inputs result in appropriate classifications and fair values consistent with ASC 820.