Document And Entity Information
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Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Feb. 18, 2013
Jun. 30, 2012
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2012    
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2012    
Entity Registrant Name INVESTORS TITLE CO    
Entity Central Index Key 0000720858    
Current Fiscal Year End Date --12-31    
Entity Filer Category Smaller Reporting Company    
Entity Common Stock, Shares Outstanding   2,038,968  
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Public Float     $ 88,896,707

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Dec. 31, 2012
Dec. 31, 2011
Investments in securities    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2012: $75,573,673; 2011: $78,783,968) $ 81,936,978 $ 85,407,365
Equity securities, available-for-sale, at fair value (cost: 2012: $21,229,114; 2011: $17,652,745) 28,510,933 22,549,975
Short-term investments 13,567,648 14,112,262
Other investments 6,763,100 3,631,714
Total investments 130,778,659 125,701,316
Cash and cash equivalents 20,810,018 18,042,258
Premium and fees receivable (less allowance for doubtful accounts: 2012: $1,902,581; 2011: $1,218,000) 11,037,714 6,810,000
Accrued interest and dividends 1,037,447 1,108,156
Prepaid expenses and other assets 4,651,115 2,743,517
Property, net 3,603,323 3,553,216
Total Assets 171,918,276 157,958,463
Liabilities:    
Reserves for claims 39,078,000 37,996,000
Accounts payable and accrued liabilities 15,477,545 12,330,383
Current income taxes payable 1,336,824 640,533
Deferred income taxes, net 893,156 479,363
Total liabilities 56,785,525 51,446,279
Commitments and Contingencies 0 0
Redeemable Noncontrolling Interest 493,861 0
Stockholders' Equity:    
Preferred stock (1,000,000 authorized shares; no shares issued) 0 0
Common stock - no par value (10,000,000 authorized shares; 2,043,359 and 2,107,681 shares issued and outstanding 2012 and 2011, respectively, excluding 291,676 shares for 2012 and 2011 of common stock held by the Company's subsidiary) 1 1
Retained earnings 105,820,459 99,003,018
Accumulated other comprehensive income 8,818,430 7,509,165
Total stockholders' equity 114,638,890 106,512,184
Total Liabilities and Stockholders' Equity $ 171,918,276 $ 157,958,463

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Consolidated Balance Sheets [Abstract]    
Fixed maturities, available-for-sale, amortized cost $ 75,573,673 $ 78,783,968
Equity securities, available-for-sale, cost 21,229,114 17,652,745
Premiums and fees receivable, allowance for doubtful accounts $ 1,902,581 $ 1,218,000
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 0 0
Common stock, no par value      
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,043,359 2,107,681
Common stock, shares outstanding 2,043,359 2,107,681
Common stock, held by Company's subsidiary 291,676 291,676

Consolidated Statements Of Income
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Consolidated Statements Of Income (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Revenues:    
Net premiums written $ 102,331,102 $ 81,529,333
Investment income - interest and dividends 3,980,411 3,595,036
Net realized gain on investments 1,066,239 28,559
Other 7,701,340 5,532,228
Total Revenues 115,079,092 90,685,156
Operating Expenses:    
Commissions to agents 59,427,070 49,596,250
Provision for claims 6,072,115 3,342,427
Salaries, employee benefits and payroll taxes 21,877,186 18,552,504
Office occupancy and operations 3,936,653 3,722,803
Business development 1,887,398 1,706,834
Filing fees, franchise and local taxes 846,168 516,380
Premium and retaliatory taxes 1,885,760 1,729,830
Professional and contract labor fees 2,487,582 1,513,466
Other 579,253 505,726
Total Operating Expenses 98,999,185 81,186,220
Income before Income Taxes 16,079,907 9,498,936
Provision for Income Taxes 4,889,000 2,565,000
Net Income 11,190,907 6,933,936
Less: Net Income Attributable to Redeemable Noncontrolling Interests 88,411 0
Net Income Attributable to the Company $ 11,102,496 $ 6,933,936
Basic Earnings per Common Share $ 5.33 $ 3.22
Weighted Average Shares Outstanding - Basic 2,081,703 2,151,350
Diluted Earnings per Common Share $ 5.24 $ 3.20
Weighted Average Shares Outstanding - Diluted 2,116,793 2,169,636
Cash Dividends Paid per Common Share $ 0.29 $ 0.28

Consolidated Statements Of Comprehensive Income
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Consolidated Statements Of Comprehensive Income (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Consolidated Statements Of Comprehensive Income [Abstract]    
Net income $ 11,190,907 $ 6,933,936
Other comprehensive income, before tax:    
Amortization related to prior year service cost 9,396 13,038
Amortization of unrecognized gain (loss) 680 (318)
Accumulated postretirement benefit obligation adjustment (82,918) (115,089)
Unrealized gains on investments arising during the year 3,190,737 2,886,294
Reclassification adjustment for sale of securities included in net income (1,166,179) (353,950)
Reclassification adjustment for write-down of securities included in net income 99,940 325,391
Other (36,600) 0
Other comprehensive income, before tax 2,015,056 2,755,366
Income tax benefit related to postretirement health benefits (24,764) (34,804)
Income tax expense related to unrealized gains on investments arising during the year 1,122,003 976,277
Income tax benefit related to reclassification adjustment for sale of securities included in net income (426,017) (122,594)
Income tax expense related to reclassification adjustment for write-down of securities included in net income 34,569 116,027
Net income tax expense on other comprehensive income 705,791 934,906
Other comprehensive income 1,309,265 1,820,460
Comprehensive income 12,500,172 8,754,396
Less: Comprehensive income attributable to redeemable noncontrolling interest (88,411) 0
Comprehensive income $ 12,411,761 $ 8,754,396

Consolidated Statements Of Stockholders' Equity
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Consolidated Statements Of Stockholders' Equity (USD $)
Common Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income [Member]
Total
Balance at Dec. 31, 2010 $ 1 $ 98,240,109 $ 5,688,705 $ 103,928,815
Balance, shares at Dec. 31, 2010 2,282,596      
Net income attributable to the Company   6,933,936   6,933,936
Dividends   (599,241)   (599,241)
Shares of common stock repurchased and retired   (5,940,463)   (5,940,463)
Shares of common stock repurchased and retired, shares (182,615)      
Stock options exercised   155,163   155,163
Stock options exercised, shares 7,700     7,700
Share-based compensation expense   213,514   213,514
Amortization related to postretirement health benefits     8,394 8,394
Accumulated postretirement benefit obligation adjustment     (75,959) (75,959)
Net unrealized gain on investments     1,888,025 1,888,025
Balance at Dec. 31, 2011 1 99,003,018 7,509,165 106,512,184
Balance, shares at Dec. 31, 2011 2,107,681      
Net income attributable to the Company   11,102,496   11,102,496
Dividends   (603,334)   (603,334)
Shares of common stock repurchased and retired   (3,975,532)   (3,975,532)
Shares of common stock repurchased and retired, shares (70,702)      
Stock options exercised   160,557   160,557
Stock options exercised, shares 6,380     6,380
Share-based compensation expense   74,553   74,553
Amortization related to postretirement health benefits     6,648 6,648
Accumulated postretirement benefit obligation adjustment     (54,726) (54,726)
Net unrealized gain on investments     1,393,943 1,393,943
Other   58,701 (36,600) 22,101
Balance at Dec. 31, 2012 $ 1 $ 105,820,459 $ 8,818,430 $ 114,638,890
Balance, shares at Dec. 31, 2012 2,043,359      

Consolidated Statements Of Stockholders' Equity (Parenthetical)
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Consolidated Statements Of Stockholders' Equity (Parenthetical) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Consolidated Statements Of Stockholders' Equity [Abstract]    
Dividends, per share $ 0.29 $ 0.28

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Operating Activities    
Net income $ 11,190,907 $ 6,933,936
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 486,922 475,679
Amortization, net 468,006 338,967
Amortization related to postretirement benefits obligation 10,076 12,720
Share-based compensation expense related to stock options 74,553 213,514
Increase (decrease) in allowance for doubtful accounts on premiums receivable 684,581 (203,000)
Net (gain) loss on disposals of property (28,538) (26,528)
Net realized gain on investments (1,066,239) (28,559)
Net earnings from other investments (1,674,594) (749,688)
Provision for claims 6,072,115 3,342,427
(Benefit) provision for deferred income taxes (292,000) 21,000
Other 22,101 0
Changes in assets and liabilities:    
(Increase) decrease in receivables (4,912,295) 646,786
(Increase) decrease in other assets (407,252) 77,056
Increase in accounts payable and accrued liabilities 2,372,995 1,913,799
Increase (decrease) in current income taxes payable 696,291 (415,823)
Payments of claims, net of recoveries (4,990,115) (3,545,127)
Net cash provided by operating activities 8,707,514 9,007,159
Investing Activities    
Purchases of available-for-sale securities (15,899,439) (15,318,418)
Purchases of short-term securities (6,347,527) (1,883,562)
Purchases of other investments (3,441,412) (853,599)
Purchase of subsidiary (350,000) 0
Proceeds from maturities of available-for-sale securities 15,646,381 9,851,523
Proceeds from sales and maturities of short-term securities 6,892,141 14,974,850
Proceeds from sales and distributions of other investments 2,301,647 861,865
Proceeds from sale of other assets 220,455 0
Purchases of property (568,728) (361,207)
Proceeds from disposals of property 65,837 31,157
Net cash (used in) provided by investing activities (1,480,645) 7,302,609
Financing Activities    
Repurchases of common stock (3,975,532) (5,940,463)
Exercise of options 160,557 155,163
Distributions to noncontrolling interests (40,800) 0
Dividends paid (603,334) (599,241)
Net cash used in financing activities (4,459,109) (6,384,541)
Net Increase in Cash and Cash Equivalents 2,767,760 9,925,227
Cash and Cash Equivalents, Beginning of Period 18,042,258 8,117,031
Cash and Cash Equivalents, End of Period 20,810,018 18,042,258
Cash Paid During the Year for    
Income taxes, payments, net 4,479,000 2,963,000
Non cash net unrealized gain on investments, net of deferred tax provision of $(730,555) and $(969,710) for 2012 and 2011, respectively (1,393,943) (1,888,025)
Adjustments to postretirement benefits obligation, net of deferred tax provision of $(28,192) and $(39,130) for 2012 and 2011, respectively 54,726 75,959
Non-cash intangible assets acquired from purchase of subsidiary (1,481,900) 0
Non-cash contingent liability from purchase of subsidiary $ 691,250 $ 0

Consolidated Statements Of Cash Flows (Parenthetical)
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Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Consolidated Statements Of Cash Flows [Abstract]    
Non cash net unrealized gain on investments, deferred tax provision $ (730,555) $ (969,710)
Adjustments to postretirement benefits obligation, net of deferred tax (provision) benefit $ (28,192) $ (39,130)

Basis Of Presentation And Summary Of Significant Accounting Policies
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Basis Of Presentation And Summary Of Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
Basis Of Presentation And Summary Of Significant Accounting Policies [Abstract]  
Basis Of Presentation And Summary Of Significant Accounting Policies

1. Basis of Presentation and Summary of Significant Accounting Policies    

Description of Business—Investors Title Company's (the "Company") primary business, and only reportable segment, is title insurance. The title insurance segment, through its two subsidiaries, Investors Title Insurance Company ("ITIC") and National Investors Title Insurance Company ("NITIC"), is licensed to insure titles to residential, institutional, commercial and industrial properties. The Company issues title insurance policies primarily through approved attorneys from underwriting offices and through independent issuing agents in 22 states and the District of Columbia primarily in the eastern half of the United States. The majority of the Company's business is concentrated in Illinois, Kentucky, Michigan, Nebraska, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.

Principles of Consolidation and Basis of Presentation The accompanying Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") .   Earnings attributable to the redeemable noncontrolling interest are recorded on the Consolidated Statement of Income for majority-owned subsidiaries. The redeemable noncontrolling interest representing the portion of equity not related to the Company's ownership interest is recorded as redeemable equity in a separate section of the Consolidated Balance Sheets.  All intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

For the purpose of presentation in the Company's Consolidated Statements of Cash Flows, cash equivalents are highly liquid instruments with remaining original maturities of three months or less. The carrying amount of cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity at purchase of these instruments.

Investments in Securities

Securities for which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and reported at cost, adjusted for amortization of premiums or accretion of discounts, and other-than-temporary declines in fair value. Securities held principally for resale in the near term are classified as trading securities and recorded at fair values. Realized and unrealized gains and losses on trading securities are included in other income. Securities not classified as either trading or held-to-maturity are classified as available-for-sale and reported at fair value with unrealized gains and losses, net of tax, adjusted for other-than-temporary declines in fair value, reported as accumulated other comprehensive income. Securities are regularly reviewed for differences between the cost and estimated fair value of each security for factors that may indicate that a decline in fair value is other-than-temporary. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include the duration and extent to which the fair value has been less than cost and the Company's ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss. Fair values of the majority of investments are based on quoted market prices. Realized gains and losses are determined on the specific identification method.  Refer to Note 3 for further information regarding investments in securities and fair value. 

Short-term Investments

Short-term investments comprise money market accounts which are invested in short-term funds, time deposits with banks and savings and loan associations, and other investments expected to have maturities or redemptions greater than three months and less than twelve months. The Company monitors any events or changes in circumstances that may have a significant adverse effect on the fair value of these investments.

Other Investments

Other investments consist primarily of investments in title insurance agencies structured as limited liability companies ("LLCs"), which are accounted for under the equity or cost methods of accounting. The aggregate cost of the Company's cost method investments totaled $1,778,115 and $1,210,687 at December 31, 2012 and December 31, 2011, respectively. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.

Property Acquired in Settlement of Claims

Property acquired in settlement of claims is held for sale and valued at the lower of cost or market. Adjustments to reported estimated realizable values and realized gains or losses on dispositions are recorded as increases or decreases in claim costs.

Property and Equipment

Property and equipment are recorded at cost and are depreciated principally under the straight-line method over the estimated useful lives (three to twenty-five years) of the respective assets. Maintenance and repairs are charged to operating expenses and improvements are capitalized.

Income Taxes

The Company makes certain estimates and judgments in determining income tax expense (benefit) for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. The Company provides for deferred income taxes (benefits) for the tax consequences in future years of temporary differences between the financial statements' carrying values and the tax bases of assets and liabilities using currently enacted tax rates.  The Company establishes valuation allowances if it believes that it is more likely than not that some or all of its deferred tax assets will not be realized.  Refer to Note 8 for further information regarding income taxes.

Premiums Written and Commissions to Agents

Generally, title insurance premiums are recognized at the time of closing of the related real estate transaction, as the earnings process is then considered complete. Policies or commitments are issued upon receipt of final certificates or preliminary reports with respect to titles. Title insurance commissions earned by the Company's agents, taxes and a provision for claims losses are recognized as expenses concurrent with recognition of related premium revenue.

The Company's premium revenues from certain agency operations include accruals based on estimates. These accruals estimate unreported agency premiums related to transactions which have settled as of the balance sheet date. Accruals for premiums from certain agencies are necessary because of the lag between policy effective dates and the reporting of these transactions to the Company by the agents. The lag time has historically been between 30 and 120 days, with the majority of agencies reporting within 60 to 90 days. The lag time is reviewed periodically to monitor accruals. The accrual of premium revenues is based on historical data that includes transactional volume, fluctuations in the real estate market and the mix between refinance and purchase transactions. There have been no material changes in historical estimates during the periods presented.

Quarterly, the Company evaluates the collectability of receivables. Premiums not collected within 6 months are fully reserved. Write-offs of receivables have not been material to the Company.

Allowance for Doubtful Accounts

Company management continually evaluates the collectability of receivables and provides an allowance for doubtful accounts equal to estimated losses expected to be incurred in the collection of amounts receivable.  Changes to the allowance for doubtful accounts are reflected  within net premiums written in the Consolidated Statements of Income.  Amounts are charged off in the period they are deemed to be uncollectible.

Exchange Services Revenue

Fees are recognized at the signing of a binding agreement and investment earnings are recognized as they are earned.

Fair Values of Financial Instruments

The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, short-term investments, premium and fees receivable, accrued interest and dividends, accounts payable, commissions payable, reinsurance payable and current income taxes payable approximate fair value due to the short-term nature of these assets and liabilities.  Fair values for the majority of investment securities are based on quoted market prices.  Auction rate securities ("ARS") are valued using discounted cash flow models to determine the estimated fair value of these investments.  Some of the inputs to determining the fair value of ARS are unobservable in the securities markets and are significant. Refer to Note 3 for further information regarding investments in securities and fair value.

Comprehensive Income

The Company's accumulated other comprehensive income is comprised of unrealized holding gains/losses on available-for-sale securities, net of tax, and unrecognized prior service cost and unrealized gains/losses associated with postretirement benefit liabilities, net of tax.  Accumulated other comprehensive income as of December 31, 2012 consists of $8,920,883 of unrealized holding gains on available-for-sale securities and $102,453 of unrecognized prior service cost and unrecognized actuarial losses associated with postretirement benefit liabilities.  Accumulated other comprehensive income as of December 31, 2011 consists of $7,563,541 of unrealized holding gains on available-for-sale securities and $54,376 of unrecognized prior service cost and unrealized losses associated with postretirement benefit liabilities.

Share-Based Compensation

The Company accounts for share-based compensation in accordance with the fair value based principles required by the Financial Accounting Standards Board ("FASB").  Estimated compensation expense for awards outstanding at the effective date is recognized over their remaining service period using the compensation cost.  Share-based compensation cost is generally measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee's requisite service period.

As the share-based compensation expense recognized in the Consolidated Statements of Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Subsequent Events

The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial Statements.

Recently Issued Accounting Standards

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income.  The objectives of this accounting update are to facilitate convergence of GAAP and International Financial Reporting Standards ("IFRS"), to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  The main provisions of the guidance require that all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  For public entities, this update became effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company's financial condition or results of operations.

In May 2011, the FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in accordance with GAAP and IFRS.  For public entities, this guidance became effective during interim and annual periods beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company's financial condition or results of operations.

Pending Accounting Standards

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income.  In December 2011, the FASB issued a subsequent update to defer those changes in the June 2011 update that relate to the presentation of reclassification adjustments.  All other requirements of the June 2011 update are not affected by the December 2011 update.  The amendments were being made to allow the FASB time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. On February 5, 2013, the FASB did add new disclosure requirements for items reclassified out of accumulated other comprehensive income. This update will become effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The guidance is not expected to have an impact on the Company's financial condition or results of operations.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period and accompanying notes. Actual results could differ materially from those estimates and assumptions used.  The more significant of these estimates and assumptions include the following:

ClaimsThe Company's reserves for claims are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy incurred claims of policyholders which may be reported in the future (incurred but not reported,  or "IBNR").  A provision for estimated future claims payments is recorded at the time policy revenue is recorded as a percentage of premium income. By their nature, title claims can often be complex, vary greatly in dollar amounts, vary in number due to economic and market conditions such as an increase in mortgage foreclosures, and involve uncertainties as to ultimate exposure. In addition, some claims may require a number of years to settle and determine the final liability for indemnity and loss adjustment expense. The payment experience may extend for more than 20 years after the issuance of a policy. Events such as fraud, defalcation and multiple property defects can substantially and unexpectedly cause increases in estimates of losses. Due to the length of time over which claim payments are made and regularly occurring changes in underlying economic and market conditions, these estimates are subject to variability.

Management considers factors such as the Company's historical claims experience, case reserve estimates on reported claims, large claims, actuarial projections and other relevant factors in determining loss provision rates and the aggregate recorded expected liability for claims. In establishing reserves, actuarial projections are compared with recorded reserves to evaluate the adequacy of such recorded claims reserves and any necessary adjustments are then recorded in current operations. As the most recent claims experience develops and new information becomes available, the loss reserve estimate related to prior periods will change to more accurately reflect updated and improved emerging data. The Company reflects any adjustments to reserves in the results of operations in the period in which new information (principally claims experience) becomes available.

ImpairmentsSecurities are regularly evaluated and reviewed for differences between the cost and estimated fair value of each security for factors that may indicate that a decline in fair value is other-than-temporaryWhen, in the opinion of management, a decline in the fair value of an investment is considered to be other-than-temporary, such investment is written down to its fair value. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include the duration and extent to which the fair value has been less than cost, the probability that the Company will be unable to collect all amounts due under the contractual terms of the security; with respect to equity securities, whether the Company's ability and intent to retain the investment for a period of time is sufficient to allow for a recovery in value; with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before recovery in value; and the financial condition and prospects of the issuer (including credit ratings).  These factors are reviewed quarterly and any material degradation in the prospect for recovery will be considered in the other-than-temporary impairment analysis.  Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss.  The fair values of the majority of the Company's investments are based on quoted market prices from independent pricing services.

 


Basis Of Presentation And Summary Of Significant Accounting Policies (Policy)
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Basis Of Presentation And Summary Of Significant Accounting Policies (Policy)
12 Months Ended
Dec. 31, 2012
Basis Of Presentation And Summary Of Significant Accounting Policies [Abstract]  
Principles Of Consolidation And Basis Of Presentation

Principles of Consolidation and Basis of Presentation The accompanying Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") .   Earnings attributable to the redeemable noncontrolling interest are recorded on the Consolidated Statement of Income for majority-owned subsidiaries. The redeemable noncontrolling interest representing the portion of equity not related to the Company's ownership interest is recorded as redeemable equity in a separate section of the Consolidated Balance Sheets.  All intercompany balances and transactions have been eliminated in consolidation.

Cash And Cash Equivalents

Cash and Cash Equivalents

For the purpose of presentation in the Company's Consolidated Statements of Cash Flows, cash equivalents are highly liquid instruments with remaining original maturities of three months or less. The carrying amount of cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity at purchase of these instruments.

Investments In Securities

Investments in Securities

Securities for which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and reported at cost, adjusted for amortization of premiums or accretion of discounts, and other-than-temporary declines in fair value. Securities held principally for resale in the near term are classified as trading securities and recorded at fair values. Realized and unrealized gains and losses on trading securities are included in other income. Securities not classified as either trading or held-to-maturity are classified as available-for-sale and reported at fair value with unrealized gains and losses, net of tax, adjusted for other-than-temporary declines in fair value, reported as accumulated other comprehensive income. Securities are regularly reviewed for differences between the cost and estimated fair value of each security for factors that may indicate that a decline in fair value is other-than-temporary. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include the duration and extent to which the fair value has been less than cost and the Company's ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss. Fair values of the majority of investments are based on quoted market prices. Realized gains and losses are determined on the specific identification method.  Refer to Note 3 for further information regarding investments in securities and fair value. 

Short-Term Investments

Short-term Investments

Short-term investments comprise money market accounts which are invested in short-term funds, time deposits with banks and savings and loan associations, and other investments expected to have maturities or redemptions greater than three months and less than twelve months. The Company monitors any events or changes in circumstances that may have a significant adverse effect on the fair value of these investments.

Other Investments

Other Investments

Other investments consist primarily of investments in title insurance agencies structured as limited liability companies ("LLCs"), which are accounted for under the equity or cost methods of accounting. The aggregate cost of the Company's cost method investments totaled $1,778,115 and $1,210,687 at December 31, 2012 and December 31, 2011, respectively. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.

Property Acquired Settlement Of Claims

Property Acquired in Settlement of Claims

Property acquired in settlement of claims is held for sale and valued at the lower of cost or market. Adjustments to reported estimated realizable values and realized gains or losses on dispositions are recorded as increases or decreases in claim costs.

Property And Equipment

Property and Equipment

Property and equipment are recorded at cost and are depreciated principally under the straight-line method over the estimated useful lives (three to twenty-five years) of the respective assets. Maintenance and repairs are charged to operating expenses and improvements are capitalized.

Reserves For Claims
Income Taxes

Income Taxes

The Company makes certain estimates and judgments in determining income tax expense (benefit) for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. The Company provides for deferred income taxes (benefits) for the tax consequences in future years of temporary differences between the financial statements' carrying values and the tax bases of assets and liabilities using currently enacted tax rates.  The Company establishes valuation allowances if it believes that it is more likely than not that some or all of its deferred tax assets will not be realized.  Refer to Note 8 for further information regarding income taxes.

Premiums Written And Commissions To Agents

Premiums Written and Commissions to Agents

Generally, title insurance premiums are recognized at the time of closing of the related real estate transaction, as the earnings process is then considered complete. Policies or commitments are issued upon receipt of final certificates or preliminary reports with respect to titles. Title insurance commissions earned by the Company's agents, taxes and a provision for claims losses are recognized as expenses concurrent with recognition of related premium revenue.

The Company's premium revenues from certain agency operations include accruals based on estimates. These accruals estimate unreported agency premiums related to transactions which have settled as of the balance sheet date. Accruals for premiums from certain agencies are necessary because of the lag between policy effective dates and the reporting of these transactions to the Company by the agents. The lag time has historically been between 30 and 120 days, with the majority of agencies reporting within 60 to 90 days. The lag time is reviewed periodically to monitor accruals. The accrual of premium revenues is based on historical data that includes transactional volume, fluctuations in the real estate market and the mix between refinance and purchase transactions. There have been no material changes in historical estimates during the periods presented.

Quarterly, the Company evaluates the collectability of receivables. Premiums not collected within 6 months are fully reserved. Write-offs of receivables have not been material to the Company.

Allowance For Doubtful Accounts

Allowance for Doubtful Accounts

Company management continually evaluates the collectability of receivables and provides an allowance for doubtful accounts equal to estimated losses expected to be incurred in the collection of amounts receivable.  Changes to the allowance for doubtful accounts are reflected  within net premiums written in the Consolidated Statements of Income.  Amounts are charged off in the period they are deemed to be uncollectible.

Exchange Services Revenue

Exchange Services Revenue

Fees are recognized at the signing of a binding agreement and investment earnings are recognized as they are earned.

Fair Values Of Financial Instruments

Fair Values of Financial Instruments

The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, short-term investments, premium and fees receivable, accrued interest and dividends, accounts payable, commissions payable, reinsurance payable and current income taxes payable approximate fair value due to the short-term nature of these assets and liabilities.  Fair values for the majority of investment securities are based on quoted market prices.  Auction rate securities ("ARS") are valued using discounted cash flow models to determine the estimated fair value of these investments.  Some of the inputs to determining the fair value of ARS are unobservable in the securities markets and are significant. Refer to Note 3 for further information regarding investments in securities and fair value.

Comprehensive Income

Comprehensive Income

The Company's accumulated other comprehensive income is comprised of unrealized holding gains/losses on available-for-sale securities, net of tax, and unrecognized prior service cost and unrealized gains/losses associated with postretirement benefit liabilities, net of tax.  Accumulated other comprehensive income as of December 31, 2012 consists of $8,920,883 of unrealized holding gains on available-for-sale securities and $102,453 of unrecognized prior service cost and unrecognized actuarial losses associated with postretirement benefit liabilities.  Accumulated other comprehensive income as of December 31, 2011 consists of $7,563,541 of unrealized holding gains on available-for-sale securities and $54,376 of unrecognized prior service cost and unrealized losses associated with postretirement benefit liabilities.

Share-Based Compensation

Share-Based Compensation

The Company accounts for share-based compensation in accordance with the fair value based principles required by the Financial Accounting Standards Board ("FASB").  Estimated compensation expense for awards outstanding at the effective date is recognized over their remaining service period using the compensation cost.  Share-based compensation cost is generally measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee's requisite service period.

As the share-based compensation expense recognized in the Consolidated Statements of Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Other Intangible Assets
Subsequent Events

Subsequent Events

The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial Statements.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income.  The objectives of this accounting update are to facilitate convergence of GAAP and International Financial Reporting Standards ("IFRS"), to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  The main provisions of the guidance require that all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  For public entities, this update became effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company's financial condition or results of operations.

In May 2011, the FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in accordance with GAAP and IFRS.  For public entities, this guidance became effective during interim and annual periods beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company's financial condition or results of operations.

Pending Accounting Standards

Pending Accounting Standards

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income.  In December 2011, the FASB issued a subsequent update to defer those changes in the June 2011 update that relate to the presentation of reclassification adjustments.  All other requirements of the June 2011 update are not affected by the December 2011 update.  The amendments were being made to allow the FASB time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. On February 5, 2013, the FASB did add new disclosure requirements for items reclassified out of accumulated other comprehensive income. This update will become effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The guidance is not expected to have an impact on the Company's financial condition or results of operations.

Use Of Estimates And Assumptions

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period and accompanying notes. Actual results could differ materially from those estimates and assumptions used.  The more significant of these estimates and assumptions include the following:

ClaimsThe Company's reserves for claims are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy incurred claims of policyholders which may be reported in the future (incurred but not reported,  or "IBNR").  A provision for estimated future claims payments is recorded at the time policy revenue is recorded as a percentage of premium income. By their nature, title claims can often be complex, vary greatly in dollar amounts, vary in number due to economic and market conditions such as an increase in mortgage foreclosures, and involve uncertainties as to ultimate exposure. In addition, some claims may require a number of years to settle and determine the final liability for indemnity and loss adjustment expense. The payment experience may extend for more than 20 years after the issuance of a policy. Events such as fraud, defalcation and multiple property defects can substantially and unexpectedly cause increases in estimates of losses. Due to the length of time over which claim payments are made and regularly occurring changes in underlying economic and market conditions, these estimates are subject to variability.

Management considers factors such as the Company's historical claims experience, case reserve estimates on reported claims, large claims, actuarial projections and other relevant factors in determining loss provision rates and the aggregate recorded expected liability for claims. In establishing reserves, actuarial projections are compared with recorded reserves to evaluate the adequacy of such recorded claims reserves and any necessary adjustments are then recorded in current operations. As the most recent claims experience develops and new information becomes available, the loss reserve estimate related to prior periods will change to more accurately reflect updated and improved emerging data. The Company reflects any adjustments to reserves in the results of operations in the period in which new information (principally claims experience) becomes available.

ImpairmentsSecurities are regularly evaluated and reviewed for differences between the cost and estimated fair value of each security for factors that may indicate that a decline in fair value is other-than-temporaryWhen, in the opinion of management, a decline in the fair value of an investment is considered to be other-than-temporary, such investment is written down to its fair value. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include the duration and extent to which the fair value has been less than cost, the probability that the Company will be unable to collect all amounts due under the contractual terms of the security; with respect to equity securities, whether the Company's ability and intent to retain the investment for a period of time is sufficient to allow for a recovery in value; with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before recovery in value; and the financial condition and prospects of the issuer (including credit ratings).  These factors are reviewed quarterly and any material degradation in the prospect for recovery will be considered in the other-than-temporary impairment analysis.  Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss.  The fair values of the majority of the Company's investments are based on quoted market prices from independent pricing services.


Basis Of Presentation And Significant Accounting Policies (Details)
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Basis Of Presentation And Significant Accounting Policies (Details) (USD $)
12 Months Ended
Dec. 31, 2012
item
state
Dec. 31, 2011
Number of title insurance subsidiaries 2  
Number of states in which entity issues insurance 22  
Aggregated cost of investment under cost method $ 1,778,115 $ 1,210,687
Premium collection period before reserved 6 months  
Unrealized holding gains on available-for-sale securities 8,920,883 7,563,541
Amount recognized in accumulated other comprehensive income, net of tax $ 102,453 $ 54,376
Potential claim payment period after policy issuance 20 years  
Minimum [Member]
   
Remaining original maturities of short-term investments 3 months  
Property and equipment useful lives 3 years  
Lag time period 30 days  
Transaction reporting period 60 days  
Maximum [Member]
   
Remaining original maturities of cash equivalents 3 months  
Remaining original maturities of short-term investments 12 months  
Property and equipment useful lives 25 years  
Lag time period 120 days  
Transaction reporting period 90 days  

Statutory Restrictions On Consolidated Stockholders' Equity And Investments
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Statutory Restrictions On Consolidated Stockholders' Equity And Investments
12 Months Ended
Dec. 31, 2012
Statutory Restrictions On Consolidated Stockholders' Equity And Investments [Abstract]  
Statutory Restrictions On Consolidated Stockholders' Equity And Investments

2. Statutory Restrictions on Consolidated Stockholders' Equity and Investments

     The Company has designated approximately $44,829,000 and $42,288,000 of retained earnings as of December 31, 2012 and 2011, respectively, as appropriated to reflect the required statutory premium and supplemental reserves. See Note 8 for the tax treatment of the statutory premium reserve.

     As of December 31, 2012 and 2011 approximately $76,167,000 and $73,216,000, respectively, of consolidated stockholders' equity represents net assets of the Company's subsidiaries that cannot be transferred in the form of dividends, loans or advances to the parent company under statutory regulations without prior insurance department approval.

     Bonds totaling approximately $6,700,000 and $6,704,000 at December 31, 2012 and 2011 respectively, are deposited with the insurance departments of the states in which business is conducted.


Statutory Restrictions On Consolidated Stockholders' Equity And Investments (Details)
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Statutory Restrictions On Consolidated Stockholders' Equity And Investments (Details) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Statutory Restrictions On Consolidated Stockholders' Equity And Investments [Abstract]    
Statutory accounting statutory premium and supplemental reserves $ 44,829,000 $ 42,288,000
Amount available for dividend distributions with approval from regulatory agencies 76,167,000 73,216,000
Investments on deposit with state insurance departments $ 6,700,000 $ 6,704,000

Investments In Securities And Fair Value
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Investments In Securities And Fair Value
12 Months Ended
Dec. 31, 2012
Investments In Securities And Fair Value [Abstract]  
Investments In Securities And Fair Value

3. Investments in Securities and Fair Value

     The aggregate fair value, gross unrealized holding gains, gross unrealized holding losses, and amortized cost for securities by major security type at December 31 were as follows:

        Gross   Gross   Estimated
    Amortized   Unrealized   Unrealized   Fair
December 31, 2012   Cost   Gains   Losses   Value
Fixed maturities, available-for-sale, at fair value-                
General obligations of U.S. States, territories                
and political subdivisions $ 38,658,463 $ 3,211,445 $ 0 $ 41,869,908
Issuer obligations of U.S. States, territories and                
political subdivisions special revenue   18,933,299   1,909,106   10,455   20,831,950
Corporate debt securities   17,064,697   1,252,973   14,750   18,302,920
Auction rate securities   917,214   14,986   0   932,200
Total $ 75,573,673 $ 6,388,510 $ 25,205 $ 81,936,978
Equity securities, available-for-sale at fair value-                
Common stocks and nonredeemable preferred stocks $ 21,229,114 $ 7,373,056 $ 91,237 $ 28,510,933
Total $ 21,229,114 $ 7,373,056 $ 91,237 $ 28,510,933
Short-term investments-                
Certificates of deposit and other $ 13,567,648 $ 0 $ 0 $ 13,567,648
Total $ 13,567,648 $ 0 $ 0 $ 13,567,648

 

        Gross   Gross   Estimated
    Amortized   Unrealized   Unrealized   Fair
December 31, 2011   Cost   Gains   Losses   Value
Fixed maturities, available-for-sale, at fair value-                
General obligations of U.S. States, territories                
and political subdivisions $ 41,469,367 $ 3,595,144 $ 64 $ 45,064,447
Issuer obligations of U.S. States, territories and                
political subdivisions special revenue   20,573,562   1,988,589   13,805   22,548,346
Corporate debt securities   12,188,639   1,202,149   148,616   13,242,172
Auction rate securities   4,552,400   0   0   4,552,400
Total $ 78,783,968 $ 6,785,882 $ 162,485 $ 85,407,365
Equity securities, available-for sale at fair value-                
Common stocks and nonredeemable preferred stocks $ 17,652,745 $ 4,939,053 $ 41,823 $ 22,549,975
Total $ 17,652,745 $ 4,939,053 $ 41,823 $ 22,549,975
Short-term investments-                
Certificates of deposit and other $ 14,112,262 $ 0 $ 0 $ 14,112,262
Total $ 14,112,262 $ 0 $ 0 $ 14,112,262

 

The scheduled maturities of fixed maturity securities at December 31, 2012 were as follows:

    Available-for-Sale
    Amortized   Fair
    Cost   Value
Due in one year or less $ 8,717,614 $ 8,851,190
Due after one year through five years   49,575,672   53,834,059
Due five years through ten years   14,328,875   15,800,393
Due after ten years   2,951,512   3,451,336
Total $ 75,573,673 $ 81,936,978

 

 

Earnings on investments for the years ended December 31 were as follows:

    2012   2011
 
Fixed maturities $ 3,154,131 $ 3,233,988
Equity securities   815,674   347,843
Invested cash and other short-term investments   10,576   12,725
Miscellaneous interest   30   480
Investment income $ 3,980,411 $ 3,595,036

 

Gross realized gains and losses on sales of available-for-sale securities for the years ended December 31 are summarized as follows:

    2012     2011  
Gross realized gains:            
General obligations of U.S. States, territories and political subdivisions $ 250   $ 386  
Corporate   52,396     20,459  
Common stocks and nonredeemable preferred stocks   450,461     529,811  
Auction rate securities   211,061     43,199  
Total   714,168     593,855  
Gross realized losses:            
Common stocks and nonredeemable preferred stocks   (91,975 )   (247,117 )
Other than temporary impairment of securities   (93,436 )   (280,987 )
Total   (185,411 )   (528,104 )
Net realized gain $ 528,757   $ 65,751  

 

     Realized gains and losses are determined on the specific identification method. Also included in net realized gain on sales in the Consolidated Statements of Income are net gains and impairments of other investments and net gains (losses) on sales and impairments of property acquired in the settlement of claims totaling $537,482 and $(37,192) for the twelve months ended December 31, 2012 and 2011, respectively.

     The following table presents the gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at December 31, 2012 and 2011.

    Less than 12 Months     12 Months or Longer     Total  
December 31, 2012   Fair Value Unrealized Loss     Fair Value Unrealized Loss     Fair Value Unrealized Loss  
Issuer obligations of U.S.                              
States, territories and                              
political subdivisions                              
special revenue $ 1,236,906 $ (10,455 ) $ 0 $ 0   $ 1,236,906 $ (10,455 )
Corporate debt securities   985,250   (14,750 )   0   0     985,250   (14,750 )
Total fixed maturity                              
securities $ 2,222,156 $ (25,205 ) $ 0 $ 0   $ 2,222,156 $ (25,205 )
Equity securities   2,551,215   (91,237 )   0   0     2,551,215   (91,237 )
Total temporarily                              
impaired securities $ 4,773,371 $ (116,442 ) $ 0 $ 0   $ 4,773,371 $ (116,442 )
 
December 31, 2011                              
General obligations of                              
U.S. States, territories                              
and political                              
subdivisions $ 663,666 $ (64 ) $ 0 $ 0   $ 663,666 $ (64 )
Issuer obligations of U.S.                              
States, territories and                              
political subdivisions                              
special revenue   0   0     1,023,180   (13,805 )   1,023,180   (13,805 )
Corporate debt securities   3,015,769   (148,616 )   0   0     3,015,769   (148,616 )
Total fixed maturity                              
securities $ 3,679,435 $ (148,680 ) $ 1,023,180 $ (13,805 ) $ 4,702,615 $ (162,485 )
Equity securities   957,072   (40,893 )   104,130   (930 )   1,061,202   (41,823 )
Total temporarily                              
impaired securities $ 4,636,507 $ (189,573 ) $ 1,127,310 $ (14,735 ) $ 5,763,817 $ (204,308 )

 

 

     As of December 31, 2012, the Company held $2,222,156 in fixed maturity securities with unrealized losses of $25,205. As of December 31, 2011, the Company held $4,702,615 in fixed maturity securities with unrealized losses of $162,485. The decline in fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and likely will not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

     As of December 31, 2012, the Company held $2,551,215 in equity securities with unrealized losses of $91,237. As of December 31, 2011, the Company held $1,061,202 in equity securities with unrealized losses of $41,823. The unrealized losses related to holdings of equity securities were caused by market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity income securities until a recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

     Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 7 and 13 securities had unrealized losses at December 31, 2012 and December 31, 2011, respectively. Reviews of the values of securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. During 2012, the Company recorded an other-than-temporary impairment charge in the amount of $93,436 related to securities. During 2011, the Company recorded an other-than-temporary impairment charge in the amount of $280,987 related to securities, of which, $101,861 was related to Level 3 ARS that have had a history of being below cost and a change in intent not to sell. Other-than-temporary impairment charges are included in net realized gain on investments in the Consolidated Statements of Income.

     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 price resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with 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 December 31, 2012 and 2011, 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 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 December 31, 2012 and 2011:

  2012   2011  
Cumulative probability of earning maximum rate until maturity % 0.0-0.1 %
Cumulative probability of principle returned prior to maturity
96.1
% 95.4-98.7%  
Cumulative probability of default at some future point
3.9
% 1.3-4.6 %

 

     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 2012 and 2011, the difference in the low and high values of the ranges was approximately zero and three 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 $1,000,000 and $5,000,000 as of December 31, 2012 and 2011, respectively, with approximately 97.0% and 79.6% as of December 31, 2012 and 2011, 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 December 31, 2012 and 2011. 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. Level 3assets are comprised solely of ARS.

As of December 31, 2012   Level 1   Level 2   Level 3   Total
Short Term $ 13,567,648 $ 0 $ 0 $ 13,567,648
Equity Securities                
Common stock and nonredeemable preferred stock   28,510,933   0   0   28,510,933
Fixed Maturities                
Obligations of U.S. States, territories and political subdivisions*   0   62,701,858   0   62,701,858
Corporate debt securities*   0   18,302,920   932,200   19,235,120
Total $ 42,078,581 $ 81,004,778 $ 932,200 $ 124,015,559

 

As of December 31, 2011   Level 1   Level 2   Level 3   Total
Short Term $ 14,112,262 $ 0 $ 0 $ 14,112,262
Equity Securities                
Common stock and nonredeemable preferred stock   22,549,975   0   0   22,549,975
Fixed Maturities                
Obligations of U.S. States, territories and political subdivisions*   0   67,612,793   1,834,700   69,447,493
Corporate debt securities*   0   13,242,172   2,717,700   15,959,872
Total $ 36,662,237 $ 80,854,965 $ 4,552,400 $ 122,069,602

 

*Denotes fair market value obtained from pricing services.

There were no transfers into or out of Levels 1 and 2 during the period.

     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.

Other Financial Instruments

     The Company uses various financial instruments in the normal course of its business. In the measurement of the fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.

In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:

Cash and cash equivalents

The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.

Cost-basis investments

The estimated fair value of cost basis investments is calculated from the book value of the underlying entities, which is not materially different from the fair market value of the underlying entity.

Accrued dividends and interest

The carrying amount for accrued dividends and interest is a reasonable estimate of fair value due to the short-term maturity of these assets.

Contingent consideration

     The fair value of the contingent consideration was estimated based on the discounted value of the future cash flows. Contingent consideration consists of additional monies the Company may become obligated to pay based on the future performance of a business the Company acquired, as discussed in Note 18.

 

     The carrying amounts and fair values of these financial instruments (please note investments are disclosed in a previous table) as of December 31, 2012 and 2011 are presented in the following table:

As of December 31, 2012:

        Estimated Fair            
Financial Assets   Carrying Value   Value   Level 1 Level 2   Level 3
Cash $ 20,810,018 $ 20,810,018 $ 20,810,018 $ 0 $ 0
Cost-basis investments   1,871,315   1,952,323   0   0   1,952,323
Accrued dividends and interest   1,037,447   1,037,447   1,037,447   0   0
Total $ 23,718,780 $ 23,799,788 $ 21,847,465 $ 0 $ 1,952,323
 
Financial Liabilities                    
Contingent consideration $ 691,250 $ 691,250 $ 0 $ 0 $ 691,250
Total $ 691,250 $ 691,250 $ 0 $ 0 $ 691,250

 

As of December 31, 2011:

        Estimated Fair              
Financial Assets   Carrying Value   Value   Level 1 Level 2   Level 3  
Cash $ 18,042,258 $ 18,042,258 $ 18,042,258 $ 0 $ 0  
Cost-basis investments   1,303,887   1,688,262   0   0   1,688,262  
Accrued dividends and interest   1,108,156   1,108,156   1,108,156   0   0  
Total $ 20,454,301 $ 20,838,676 $ 19,150,414 $ 0   1,688,262 

 

     The following table presents a reconciliation of the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), which are all ARS securities, for the twelve months ended December 31, 2012 and 2011:

Changes in fair value during the year ended December 31:   2012     2011  
Beginning balance at January 1 $ 4,552,400   $ 5,472,244  
Redemptions and sales   (3,900,000 )   (900,000 )
Realized gain – included in net realized gain on investments   211,061     43,199  
Realized loss – included in net realized gain on investments   0     (101,861 )
Unrealized gain - included in other comprehensive income   68,739     38,818  
Ending balance at December 31 $ 932,200   $ 4,552,400  

 

     The following table presents a reconciliation of the Company's liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), consisting solely of contingent consideration, for the twelve months ended December 31, 2012 and 2011:

Changes in fair value during the period ended:   2012   2011
Beginning balance at January 1 $ - $ -
Addition of contingent consideration   691,250   -
Ending balance, net $ 691,250 $ -

 

     Certain cost method investments are measured at estimated fair value on a non-recurring basis, such as investments that are determined to be other-than temporarily impaired during the period and recorded at estimated fair value in the Consolidated Financial Statements as of December 31, 2012 and 2011. The following table summarizes the corresponding estimated fair value hierarchy of such investments at December 31, 2012 and 2011 and the related impairments recognized:

 

                    Total at      
                    Estimated      
  Valuation                 Fair   Impairment  
December 31, 2012 Method Impaired Level 1   Level 2   Level 3   Value   Losses  
Cost method                          
investments Fair Value Yes $ 0 $ 0 $ 36,406 $ 36,406 $ (6,504 )
Other assets Fair Value Yes