Fair Value

3 Months Ended

Mar. 31, 2012

Fair Value [Abstract]

Fair Value

(8) Fair Value:

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

As of March 31, 2012:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	72,810	$	72,810	$	-	$	-
Government sponsored entities		172		-		172		-
Residential mortgage-backed securities		19,917		-		19,917		-
Commercial mortgage-backed securities		13,614		-		13,614		-
State and municipal obligations		186,148		-		186,148		-
Corporate securities		108,667		-		92,923		15,744
Options embedded in convertible securities		1,817				1,817
Foreign government obligations		22,515		-		22,515		-
Total fixed maturities		425,660		72,810		337,106		15,744
Equity securities		105,290		105,290		-		-
Short term		3,293		3,169		124
Cash equivalents		71,474		-		71,474		-
	$	605,717	$	181,269	$	408,704	$	15,744

As of December 31, 2011:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	73,137	$	73,137	$	-	$	-
Government sponsored entities		349		-		349		-
Residential mortgage-backed securities		21,872		-		21,872		-
Commercial mortgage-backed securities		11,300		-		11,300		-
State and municipal obligations		190,035				190,035
Corporate securities		90,141		-		73,091		17,050
Options embedded in convertible securities		1,505		-		1,505		-
Foreign government obligations		21,121		-		21,121		-
Total fixed maturities		409,460		73,137		319,273		17,050
Equity securities		88,085		88,085		-		-
Short term		3,675		2,982		693
Cash equivalents		81,756		-		81,756		-
	$	582,976	$	164,204	$	401,722	$	17,050

Level inputs, as defined by FASB Fair Value Measurements, are as follows:

Level Input:	Input Definition:
Level 1	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following methods, assumptions and inputs were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:

Cash equivalents:  Cash equivalents primarily consist of highly rated money market funds with maturities of three months or less, and are purchased daily at par value with specified yield rates. Due to underlying assets of these funds, we designate all cash equivalents as Level 2.

Fixed maturities: Fair values of fixed maturities are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level I or Level II inputs for the determination of fair value to facilitate fair value measurements and disclosures. U.S. government obligations represent Level I securities, while Level II securities primarily include corporate securities, states and municipal obligations, foreign government obligations, and mortgage-backed securities. For securities not actively traded, the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds.

Equity securities: Fair values of equity securities are designated as Level I and are based on quoted market prices.

The Level 3 assets consist of an investment portfolio of insurance-linked securities.  The insurance-linked securities are valued using the average of estimated market quotes from multiple insurance-linked securities brokers.  The broker quotes include Level 3 inputs which are significant to the valuation of the insurance-linked securities and vary by 0-3% from each other. There were no Level 3 sales, no transfers into Level 3 and no transfers out of Level 3 during 2012 or 2011.  A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows for the three months ended March 31, 2012 and for the year ended December 31, 2011:

	2012			2011
Beginning of period balance	$	17,050		$	17,242
Total gain or losses (realized or unrealized)
Included in earnings (or changes in net assets)		(206	)		387
Purchases		400			6,522
Settlements		(1,500	)		(7,101	)
End of period balance	$	15,744		$	17,050

There were no transfers of assets between level 1 and level 2 during the three months ended March 31, 2012 and 2011.  Transfers between levels, if any, are recorded as of the beginning of the reporting period.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balance sheets.

Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures.  Therefore, the fair value amounts cannot be aggregated to determine the Company's underlying economic value.

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivables, reinsurance recoverable, notes receivable, accounts payable and accrued expenses, income taxes receivable or payable and unearned income approximate fair value because of the short term nature of these items.  These assets and liabilities are not included in the table below.

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

Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity, which approximates fair value.   As these investments are not actively traded and the corresponding inputs are based on data provided by the investees, they are classified as Level III.

Short-term borrowings: The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to us for debt of similar terms and remaining maturities.

 A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheet at March 31, 2012 is as follows:

	Carrying		Fair Value
	Value		Level 1		Level II		Level III		Total
Assets:
Limited partnerships	$	58,247	$	-	$	-	$	58,247	$	58,247
Liabilities:
Short-term borrowings		10,000		-		10,000		-		10,000

A summary of the carrying value and fair value of financial instruments not recorded at fair value on the Company's consolidated balance sheet at December 31, 2011 is as follows:

	Carrying		Fair
	Value		Value
Assets:
Limited partnerships	$	54,705	$	54,705
Liabilities:
Short-term borrowings		10,000		10,000