This excerpt taken from the RAMR 10-K filed Mar 9, 2007.
10 FAIR VALUES OF FINANCIAL INSTRUMENTS
Management has estimated the fair value of certain financial instruments based upon market information using appropriate valuation methodologies. The estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.
The fair values of investments are based on quoted market prices or dealer quotes. The carrying amounts of cash and cash equivalents, interest and premiums receivable, other assets, accounts payable and accrued liabilities and other liabilities are considered reasonable estimates of their fair values.
The fair values of the Companys redeemable preferred shares and long term debt and accrued interest payable are assumed to approximate carrying value.
The carrying amount of unearned premiums represents the Companys future earned premium revenue on policies where the premium was received at the inception of the policy and the risk is not yet expired. The fair value of the unearned premiums is the market value the Company would receive in the reinsurance market under current market conditions, we perceive the market value to approximate the carrying value. For instalment premiums, consistent with industry practice, there is no carrying amount since the Company will receive premiums on an instalment basis over the term of the reinsurance contract. Similar to the treatment of unearned premiums, the fair value of instalment premiums is estimated as the present value of the future contractual premiums that are expected to be received under a reinsurance agreement. The present value of future instalment premiums, discounted at a rate of 4.56% and 4.36%, is $161.4 million and $126.6 million at December 31, 2006 and 2005, respectively.