• Filing Date: 2014-03-12
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.8
Investments
12 Months Ended
Dec. 31, 2013
Investments Debt And Equity Securities [Abstract]  
Investments

Note 4 — Investments

The Company holds investments in fixed-maturity securities as well as equity securities, which are classified as available-for-sale. At December 31, 2013 and 2012, the cost or 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:

 

     Cost or
Amortized
Cost
     Gross
Unrealized
Gain
     Gross
Unrealized
Loss
    Estimated
Fair

Value
 

As of December 31, 2013

          

Fixed-maturity securities

          

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

   $ 4,549       $ 37       $ (22   $ 4,564   

Corporate bonds

     25,139         484         (219     25,404   

Commercial mortgage-backed securities

     10,929         499         (96     11,332   

State, municipalities, and political subdivisions

     69,715         917         (181     70,451   

Redeemable preferred stock

     406         5         (11     400   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

     110,738         1,942         (529     112,151   

Equity securities

     17,248         920         (519     17,649   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ 127,986       $ 2,862       $ (1,048   $ 129,800   
  

 

 

    

 

 

    

 

 

   

 

 

 

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   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ 42,192       $ 2,831       $ (194   $ 44,829   
  

 

 

    

 

 

    

 

 

   

 

 

 

At December 31, 2013, fixed-maturity securities included $105 of U.S. Treasury securities, which represents a statutory deposit held in trust with the Treasurer of Alabama.

 

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities at December 31, 2013 and 2012 are as follows:

 

     December 31,  
     2013      2012  
     Amortized
Cost
     Estimated
Fair

Value
     Amortized
Cost
     Estimated
Fair
Value
 

Available-for-sale

           

Due in one year or less

   $ 2,366       $ 2,381       $ 1,258       $ 1,264   

Due after one year through five years

     24,829         25,145         8,387         8,728   

Due after five years through ten years

     59,083         59,582         8,045         8,612   

Due after ten years

     13,531         13,711         5,038         5,705   

Commercial mortgage-backed securities

     10,929         11,332         10,708         11,644   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 110,738       $ 112,151       $ 33,436       $ 35,953   
  

 

 

    

 

 

    

 

 

    

 

 

 

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the years ended December 31, 2013, 2012 and 2011 were as follows:

 

     Proceeds      Gross
Realized
Gains
     Gross
Realized
Losses
 

Year ended December 31, 2013

        

Fixed-maturity securities

   $ 1,749       $ 92       $ (4
  

 

 

    

 

 

    

 

 

 

Equity securities

   $ 2,809       $ 155       $ (163
  

 

 

    

 

 

    

 

 

 

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
  

 

 

    

 

 

    

 

 

 

 

* Amounts reported for the year ended December 31, 2011 include the gross realized gains and losses from equity option contracts. During the year ended December 31, 2011, 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 and realized gains of $49 during the year ended December 31, 2011. 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 or in subsequent years.

 

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, 2013 and 2012, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

 

     Less Than Twelve Months      Twelve Months or
Greater
     Total  
As of December 31, 2013    Gross
Unrealized
Loss
    Estimated
Fair

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

Fixed-maturity securities

              

U.S. treasury and U.S. government agencies

   $ (22   $ 3,291       $ —        $ —         $ (22   $ 3,291   

Corporate bonds

     (212     9,502         (7     230         (219     9,732   

Commercial mortgage-backed securities

     (96     2,179         —          —           (96     2,179   

State, municipalities, and political subdivisions

     (181     20,233         —          —           (181     20,233   

Redeemable preferred stock

     (11     239         —          —           (11     239   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total fixed-maturity securities

     (522     35,444         (7     230         (529     35,674   

Equity securities

     (273     10,742         (246     1,069         (519     11,811   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ (795   $ 46,186       $ (253   $ 1,299       $ (1,048   $ 47,485   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     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   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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, 2013 and 2012.

Other Investments

Other investments consist primarily of the Company’s real estate portfolio and the related assets of the marina and restaurant facilities acquired in 2012 and 2011. 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, 2013 and 2012:

 

     December 31,  
     2013     2012  

Land

   $ 11,299      $ 10,993   

Land improvements

     1,351        1,326   

Building

     3,022        2,869   

Other

     1,262        1,238   
  

 

 

   

 

 

 

Total, at cost

     16,934        16,426   

Less: accumulated depreciation and amortization

     (706     (339
  

 

 

   

 

 

 

Other investments

   $ 16,228      $ 16,087   
  

 

 

   

 

 

 

Depreciation and amortization expense for other investments was $388 and $279, respectively, for the years ended December 31, 2013 and 2012.

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

 

     Years Ended December 31,  
     2013     2012     2011  

Available-for-sale securities:

      

Fixed-maturity securities

   $ 1,868      $ 1,464      $ 1,339   

Equity securities

     499        492        247   

Investment expense

     (210     (150     (92

Time deposits

     —          357        538   

Other investments

     (1,045     (1,334     (96

Cash and cash equivalents

     357        151        125   
  

 

 

   

 

 

   

 

 

 
   $ 1,469      $ 980      $ 2,061   
  

 

 

   

 

 

   

 

 

 

At December 31, 2013, $241,378 or 82.3% of the Company’s cash and cash equivalents were deposited at three national banks and included $22,252 in two custodial accounts. At December 31, 2012, deposits at two national banks totaled $208,890, representing 90.7% of the Company’s cash and cash equivalents and included $22,957 in two custodial accounts.