Note 4 - Investments

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

4. INVESTMENTS

In September 2021, the Company liquidated its entire investment in fixed income securities and equity securities in order to fund its commitment under the Commutation Agreement, as discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of fixed maturity investments, by major security type, and equity securities at December 31, 2021 and 2020 are as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2021
Fixed maturity investments:
U.S. government agency securities	$	—	$	—	$	—	$	—
Obligations of U.S. states and political subdivisions		—		—		—		—
Corporate debt securities		—		—		—		—
Total fixed maturity investments		—		—		—		—
Total equity securities		—		—		—		—
Total investments	$	—	$	—	$	—	$	—

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2020
Fixed maturity investments:
U.S. government agency securities	$	2,551,741	$	39,421	$	—		$	2,591,162
Obligations of U.S. states and political subdivisions		10,157,542		337,695		—			10,495,237
Corporate debt securities		7,051,948		207,833		(2,053	)		7,257,728
Total fixed maturity investments		19,761,231		584,949		(2,053	)		20,344,127
Total equity securities		—		—		—			—
Total investments	$	19,761,231	$	584,949	$	(2,053	)	$	20,344,127

The following tables summarize the Company’s fixed maturity and equity securities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

12 months or greater

Less than 12 months

Total

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

December 31, 2021

Fixed maturity investments:

U.S. government agency securities

$

—

$

—

$

—

$

—

$

—

$

—

Obligations of states and political subdivisions

—

—

—

—

—

—

Corporate debt securities

—

—

—

—

—

—

Total fixed maturity investments

—

—

—

—

—

—

Equity securities

—

—

—

—

—

—

Total equity securities

—

—

—

—

—

—

Total investments

$

—

$

—

$

—

$

—

$

—

$

—

	12 months or greater				Less than 12 months					Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
December 31, 2020
Fixed maturity investments:
U.S. government agency securities	$	—	$	—	$	—	$	—		$	—	$	—
Obligations of states and political subdivisions		—		—		—		—			—		—
Corporate debt securities		—		—		789,106		(2,053	)		789,106		(2,053	)
Total fixed maturity investments		—		—		789,106		(2,053	)		789,106		(2,053	)
Equity securities		—		—		—		—			—		—
Total equity securities		—		—		—		—			—		—
Total investments	$	—	$	—	$	789,106	$	(2,053	)	$	789,106	$	(2,053	)

12 months or greater

Less than 12 months

Total

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Equity securities

—

—

—

—

—

—

Total equity securities

—

—

—

—

—

—

Total investments

$

—

$

—

$

—

$

—

$

—

$

—

As of December 31, 2021 and 2020, there were 0 and 3 fixed income securities in an unrealized loss position with an estimated fair value of $0 and $789,106, respectively. Of these fixed income securities as at December 31, 2021 and 2020, none had been in an unrealized loss position for 12 months or greater.

The cost or amortized cost and estimated fair value of fixed maturity investments at December 31, 2021 and 2020 by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.

	Amortized Cost		Estimated Fair Value
December 31, 2021
Due in one year or less	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		—		—
Due after ten years		—		—
Total	$	—	$	—

	Amortized Cost		Estimated Fair Value
December 31, 2020
Due in one year or less	$	2,623,260	$	2,637,533
Due after one year through five years		12,982,049		13,388,495
Due after five years through ten years		3,700,157		3,843,880
Due after ten years		455,765		474,219
Total	$	19,761,231	$	20,344,127

Information on sales and maturities of investments during the twelve months ended December 31, 2021 and 2020 are as follows:

	2021			2020
Total proceeds on sales of available-for-sale securities	$	1,684,014		$	14,941,172
Total proceeds from redemptions of fixed maturity investments		21,650,652			3,362,080
Total proceeds from maturities of fixed maturity investments		2,336,000			2,535,000
Gross gains on sales		499,859			4,346,482
Gross losses on sales		(72,926	)		(1,635,142	)
Net unrealized (losses) gains on equity investments		—			(4,475,616	)
Total	$	426,933		$	(1,764,276	)

Fair Value of Investments

The following tables show the fair value of the Company’s investments in accordance with ASC 820, “Fair Value Measurements and Disclosures” as of December 31, 2021 and 2020.

					Fair value measurement using:
	Carrying amount		Total fair value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2021
U.S. government agency securities	$	—	$	—	$	—	$	—	$	—
Obligations of U.S. state and political subdivisions		—		—				—
Corporate debt securities		—		—				—
Total fixed maturity investments		—		—
Equity securities		—		—
Total equity securities		—		—
Total investments	$	—	$	—	$	—	$	—	$	—

					Fair value measurement using:
	Carrying amount		Total fair value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2020
U.S. government agency securities	$	2,591,162	$	2,591,162	$	—	$	2,591,162	$	—
Obligations of U.S. state and political subdivisions		10,495,237		10,495,237				10,495,237
Corporate debt securities		7,257,728		7,257,728				7,257,728
Total fixed maturity investments		20,344,127		20,344,127
Equity securities		—		—
Total equity securities		—		—
Total investments	$	20,344,127	$	20,344,127	$	—	$	20,344,127	$	—

There were no transfers between Levels 1 and 2 during the years ended December 31, 2021 and 2020.

In accordance with U.S. GAAP, we are required to recognize certain assets at their fair value in our consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures Topic of FASB’s ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the hierarchy based on the input that is significant to determining such measurement. The three levels are defined as follows:

• Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.

At each measurement date, we estimate the fair value of the security using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held and what level within the fair value hierarchy each valuation technique resides:

• U.S. government agency securities: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S. Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2 in the fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not used for fair value pricing.

• Obligations of U.S. state and political subdivisions: Comprised of fixed income obligations of U.S. state and local governmental municipalities. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level 2 in the fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not used for fair value pricing.

• Corporate debt securities: Comprised of bonds issued by corporations. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level 2 in the fair value hierarchy. We consider that there is a liquid market for the types of securities held. Broker quotes are not used for fair value pricing.

• Equity securities, at fair value: Comprised primarily of investments in the common stock of publicly traded companies in the U.S. All of the Company’s equities were classified as Level 1 in the fair value hierarchy. The Company received prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.

While we obtain pricing from independent pricing services, management is ultimately responsible for determining the fair value measurements for all securities. To ensure fair value measurement is applied consistently and in accordance with U.S. GAAP, we periodically update our understanding of the pricing methodologies used by the independent pricing services. We also challenge any prices we believe may not be representative of fair value under current market conditions. Our review process includes, but is not limited to: (i) initial and ongoing evaluation of the pricing methodologies and valuation models used by outside parties to calculate fair value; (ii) quantitative analysis; (iii) a review of multiple quotes obtained in the pricing process and the range of resulting fair values for each security, if available, and (iv) randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates provided by the independent pricing sources.

There have been no material changes to any of our valuation techniques from what was used as of December 31, 2020. Since the fair value of a financial instrument is an estimate of what a willing buyer would pay for our asset if we sold it, we will not know the ultimate value of our financial instruments until they are sold. We believe the valuation techniques utilized provide us with the best estimate of the price that would be received to sell our assets or transfer our liabilities in an orderly transaction between participants at the measurement date.

Major categories of net interest and dividend income are summarized as follows:

	2021			2020
Interest earned:
Fixed maturity investments	$	235,090		$	347,488
Short term investments and cash and cash equivalents		7,637			11,600
Dividends earned		13,508			134,457
Investment expenses		(50,384	)		(109,735	)
Net investment income	$	205,851		$	383,810