• Filing Date: 2013-03-14
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.6
Investments
12 Months Ended
Dec. 31, 2012
Investments [Abstract]  
Investments

Note 3 — Investments

The Company holds investments in fixed-maturity securities as well as equity securities, which are classified as available-for-sale. At December 31, 2012 and 2011, the amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows (in thousands):

 

                                 
    Amortized     Gross
Unrealized
    Gross
Unrealized
    Estimated
Fair
 
    Cost     Gain     Loss     Value  

As of December 31, 2012

                               

Fixed-maturity securities

                               

U.S. Treasury and U.S. government agencies

  $ 1,359       88       —         1,447  

Corporate bonds

    10,298       572       (10     10,860  

Commercial mortgage-backed securities

    10,708       936       —         11,644  

State, municipalities, and political subdivisions

    10,152       914       —         11,066  

Redeemable preferred stock

    919       18       (1     936  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 33,436       2,528       (11     35,953  
   

 

 

   

 

 

   

 

 

   

 

 

 

Equity securities

  $ 8,756       303       (183     8,876  
   

 

 

   

 

 

   

 

 

   

 

 

 
         

As of December 31, 2011

                               

Fixed-maturity securities

                               

U.S. Treasury and U.S. government agencies

  $ 509       47       —         556  

Corporate bonds

    10,199       58       (417     9,840  

Commercial mortgage-backed securities

    10,574       314       (14     10,874  

State, municipalities, and political subdivisions

    9,982       393       (3     10,372  

Redeemable preferred stock

    1,144       12       (10     1,146  

Other

    2,883       117       —         3,000  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 35,291       941       (444     35,788  
   

 

 

   

 

 

   

 

 

   

 

 

 

Equity securities

  $ 4,220       121       (280     4,061  
   

 

 

   

 

 

   

 

 

   

 

 

 

The scheduled maturities of fixed-maturity securities at December 31, 2012 and 2011 are as follows (in thousands):

 

                                 
    December 31,  
    2012     2011  
          Estimated           Estimated  
    Amortized     Fair     Amortized     Fair  
    Cost     Value     Cost     Value  

Available-for-sale

                               

Due in one year or less

  $ 1,258       1,264       1,009       1,010  

Due after one year through five years

    8,387       8,728       10,523       10,169  

Due after five years through ten years

    8,045       8,612       6,835       7,075  

Due after ten years

    5,038       5,705       6,350       6,660  

Commercial mortgage-backed securities

    10,708       11,644       10,574       10,874  
   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 33,436       35,953       35,291       35,788  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the years ended December 31, 2012, 2011 and 2010 were as follows (in thousands):

 

                         
          Gross
Realized
    Gross
Realized
 
    Proceeds     Gains     Losses  

Year ended December 31, 2012

                       

Fixed-maturity securities

  $ 8,991       421       (6
   

 

 

   

 

 

   

 

 

 

Equity securities

  $ 1,735       91       (230
   

 

 

   

 

 

   

 

 

 
       

Year ended December 31, 2011

                       

Fixed-maturity securities

  $ 24,904       545       (96
   

 

 

   

 

 

   

 

 

 

Equity securities*

  $ 1,665       121       (280
   

 

 

   

 

 

   

 

 

 
       

Year ended December 31, 2010

                       

Fixed-maturity securities

  $ 29,116       1,828       (17
   

 

 

   

 

 

   

 

 

 

Equity securities*

  $ 4,515       369       (177
   

 

 

   

 

 

   

 

 

 

 

* Amounts reported for the year ended December 31, 2011 and 2010 include the gross realized gains and losses from equity option contracts. During the years ended December 31, 2011 and 2010, the Company entered into equity contracts for exchange traded call and put options to meet certain investment objectives. With respect to these option contracts, the Company received net proceeds of $89,000 and $391,000, respectively, and realized gains of $49,000 and $327,000, respectively, during the years ended December 31, 2011 and 2010. Such gains are included in the realized investment gains in the Consolidated Statements of Income. There were no open option contracts at December 31, 2011 and 2010.

 

Other-than-temporary Impairment (“OTTI”)

The Company regularly reviews its individual investment securities for OTTI. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including:

 

   

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or income;

 

   

the length of time and the extent to which the market value of the security has been below its cost or amortized cost;

 

   

general market conditions and industry or sector specific factors;

 

   

nonpayment by the issuer of its contractually obligated interest and principal payments; and

 

   

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

Securities with gross unrealized loss positions at December 31, 2012 and 2011, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows (in thousands):

 

                                                 
    Less Than Twelve Months     Twelve Months or
Greater
    Total  
As of December 31, 2012   Gross
Unrealized
Loss
    Estimated
Fair

Value
    Gross
Unrealized
Loss
    Estimated
Fair
Value
    Gross
Unrealized
Loss
    Estimated
Fair
Value
 
             

Fixed-maturity securities

                                               

Corporate bonds

  $ (2     444       (8     981       (10     1,425  

Redeemable preferred stock

    (1     66       —         —         (1     66  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed-maturity securities

    (3     510       (8     981       (11     1,491  

Equity securities

    (136     3,019       (47     201       (183     3,220  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ (139     3,529       (55     1,182       (194     4,711  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                 
    Less Than Twelve Months     Twelve Months or
Greater
    Total  
As of December 31, 2011   Gross
Unrealized
Loss
    Estimated
Fair

Value
    Gross
Unrealized
Loss
    Estimated
Fair
Value
    Gross
Unrealized
Loss
    Estimated
Fair
Value
 
             

Fixed-maturity securities

                                               

Corporate bonds

  $ (417     5,112       —         —         (417     5,112  

States, municipalities and political subdivisions

    (3     2,449       —         —         (3     2,449  

Commercial mortgage-backed securities

    (14     612       —         —         (14     612  

Redeemable preferred stock

    (10     232       —         —         (10     232  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed-maturity securities

    (444     8,405       —         —         (444     8,405  

Equity securities

    (191     2,464       (89     87       (280     2,551  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ (635     10,869       (89     87       (724     10,956  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company believes there were no fundamental issues such as credit losses or other factors with respect to any of its available-for-sale securities. The unrealized losses on investments in fixed-maturity securities were caused by interest rate changes. It is expected that the securities would not be settled at a price less than the par value of the investments. In determining whether equity securities are other than temporarily impaired, the Company considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost. Because the decline in fair value is attributable to changes in interest rates or market conditions and not credit quality, and because the Company has the ability and intent to hold its available-for-sale investments until a market price recovery or maturity, the Company does not consider any of its investments to be other-than-temporarily impaired at December 31, 2012 and 2011.

Other Investments

Other investments consist primarily of real estate and the related assets and operations of the marina acquired in 2011 and the real estate and related assets of the marina and restaurant facilities acquired in April 2012 (see Note 5 – Business Acquisitions). Operating activities related to the Company’s real estate investments include leasing of office and retail space to tenants, wet and dry boat storage, a restaurant, and fuel services with respect to marina clients and recreational boaters.

Other investments consist of the following as of December 31, 2012 and 2011 (in thousands):

 

                 
    December 31,  
    2012     2011  

Land

  $ 10,993       4,438  

Land improvements

    1,326       283  

Building

    2,869       1,418  

Other

    1,238       404  
   

 

 

   

 

 

 

Total, at cost

    16,426       6,543  

Less: accumulated depreciation and amortization

    (339     (60
   

 

 

   

 

 

 

Other investments

  $ 16,087       6,483  
   

 

 

   

 

 

 

 

Depreciation and amortization expense under other investments was $279,000 and $60,000, respectively, for the years ended December 31, 2012 and 2011.

Net investment income, by source, is summarized as follows (in thousands):

 

                         
    Years Ended December 31,  
    2012     2011     2010  

Available-for-sale securities

  $ 1,806       1,494       1,112  

Time deposits

    357       538       530  

Other investments

    (1,334     (96     —    

Cash and cash equivalents

    151       125       226  

Short-term investments

    —         —         94  
   

 

 

   

 

 

   

 

 

 
    $ 980       2,061       1,962  
   

 

 

   

 

 

   

 

 

 

At December 31, 2012, deposits at two national banks totaled $208.9 million, representing 90.7% of the Company’s cash and cash equivalents. In addition, at December 31, 2011, cash and cash equivalents included $62.8 million on deposit at one national bank. At December 31, 2012 and 2011, the Company also had an aggregate of $23.0 million and $18.0 million, respectively, in money market funds at two custodial firms.