Note 2 - Investments

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Investment Holdings [Text Block]

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Note 2.    Investments

Fixed Maturity

The amortized cost and fair value of available for sale investments as of June 30, 2022 and December 31, 2021 is as follows:
 

	June 30, 2022
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:	(unaudited)
Fixed maturities:
US Treasury securities	$	303,451	$	55,858	$	-		$	359,309
Corporate bonds		19,563,739		11,855		(2,344,887	)		17,230,707
Municipal bonds		5,911,439		36,258		(386,509	)		5,561,188
Redeemable preferred stock		4,044,005		-		(495,473	)		3,548,532
Mortgage backed and asset backed securities		6,065,767		1,373		(568,668	)		5,498,472
Total available for sale	$	35,888,401	$	105,344	$	(3,795,537	)	$	32,198,208

	December 31, 2021
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	303,195	$	144,570	$	-		$	447,765
Corporate bonds		19,397,461		2,101,518		(177,700	)		21,321,279
Municipal bonds		6,306,387		671,263		(14,292	)		6,963,358
Redeemable preferred stock		3,612,625		29,995		(21,094	)		3,621,526
Mortgage backed and asset backed securities		5,636,371		22,617		(70,259	)		5,588,729
Total available for sale	$	35,256,039	$	2,969,963	$	(283,345	)	$	37,942,657

The amortized cost and fair value of debt securities as of June 30, 2022 and December 31, 2021, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	As of June 30, 2022				As of December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:	(unaudited)
One year or less	$	408,288	$	413,641	$	-	$	-
After one year through five years		1,767,797		1,730,772		1,987,421		2,087,132
After five years through ten years		2,434,768		2,401,025		2,540,089		2,865,020
More than 10 years		21,167,776		18,605,766		21,479,533		23,780,250
Redeemable preferred stocks		4,044,005		3,548,532		3,612,625		3,621,526
Mortgage backed and asset backed securities		6,065,767		5,498,472		5,636,371		5,588,729
Total amortized cost and fair value	$	35,888,401	$	32,198,208	$	35,256,039	$	37,942,657

Proceeds from the sale of securities, maturities, and asset paydowns in the six months ended June 30, 2022 and 2021 were $4,170,514 and $2,910,833, respectively. Realized gains and losses related to the sale of securities are summarized as follows:

	Six Months Ended June 30,
	(unaudited)
	2022			2021
Gross gains	$	3,164		$	216,011
Gross losses		(2,541	)		(398	)
Realized gains	$	623		$	215,613

Proceeds from the sale of securities, maturities, and asset paydowns in the three months ended June 30, 2022 and 2021 were $1,128,044 and $2,550,646, respectively. Realized gains and losses related to the sale of securities are summarized as follows:

	Three Months Ended June 30,
	(unaudited)
	2022		2021
Gross gains	$	1,264	$	163,220
Gross losses		-		(3	)
Net security losses	$	1,264	$	163,217

Gross unrealized losses by duration are summarized as follows:

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
June 30, 2022
Available for sale:	(unaudited)
Fixed maturities:
Corporate bonds	$	13,035,236	$	(1,427,669	)	$	2,833,974	$	(917,218	)	$	15,869,210	$	(2,344,887	)
Municipal bonds		4,072,408		(374,802	)		96,376		(11,707	)		4,168,784		(386,509	)
Redeemable preferred stock		3,548,532		(495,473	)		-		-			3,548,532		(495,473	)
Mortgage backed and asset backed securities		4,395,703		(442,709	)		830,312		(125,959	)		5,226,015		(568,668	)
Total fixed maturities	$	25,051,879	$	(2,740,653	)	$	3,760,662	$	(1,054,884	)	$	28,812,541	$	(3,795,537	)

	Less than 12 months					Greater than 12 months				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
December 31, 2021
Available for sale:
Fixed maturities:
Corporate bonds	$	4,496,456	$	(177,700	)	$	-	$	-	$	4,496,456	$	(177,700	)
Municipal bonds		927,122		(14,292	)		-		-		927,122		(14,292	)
Redeemable preferred stock		1,394,650		(21,094	)		-		-		1,394,650		(21,094	)
Mortgage backed and asset backed securities		4,386,306		(70,259	)		-		-		4,386,306		(70,259	)
Total fixed maturities	$	11,204,534	$	(283,345	)	$	-	$	-	$	11,204,534	$	(283,345	)

Unrealized losses occur from market price declines that may be due to a number of factors, including economic downturns, changes in interest rates, competitive forces within an industry, issuer specific events, operational difficulties, lawsuits, and market pricing anomalies caused by factors such as temporary lack of liquidity.

The total number of available for sale securities in the investment portfolio in an unrealized loss position as of June 30, 2022 was 196, which represented an unrealized loss of $3,795,537 of the aggregate carrying value of those securities. The 196 securities breakdown as follows: 118 bonds, 62 mortgage and asset backed securities, and 16 redeemable preferred stock. The total number of available for sale securities in the investment portfolio in an unrealized loss position as of December 31, 2021 was 76, which represented an unrealized loss of $283,345 of the aggregate carrying value of those securities. The 76 securities breakdown as follows: 29 bonds, 41 mortgage and asset backed securities, and 6 redeemable preferred stock.The Company determined that no securities were considered to be other-than-temporarily impaired as of June 30, 2022 and December 31, 2021.

Mortgage Loans on Real Estate

The Company has invested in various mortgage loans through participation agreements with the original issuing entity.  The Company’s mortgage loans by property type as of June 30, 2022 and December 31, 2021 are summarized as follows:

	June 30, 2022		December 31, 2021
Commercial mortgage loans by property type	(unaudited)
Condominium	$	1,547,202	$	1,960,547
Multi-property		1,179,501		1,157,950
Multi-family		336,573		534,645
Retail		1,000,000		-
Total commercial mortgages	$	4,063,276	$	3,653,142

The Company utilizes loan-to-value of individual mortgage loans to evaluate the credit quality of its mortgage loan portfolio.  The loan-to-value measures the loan's carrying value to its appraised value.  The Company’s mortgage loans by loan-to-value ratio as of June 30, 2022 and December 31, 2021 are summarized as follows:

	June 30, 2022		December 31, 2021
Loan to value ratio	(unaudited)
Over 60 to 70%	$	2,547,202	$	1,960,547
Over 40 to 50%		336,573		339,335
Over 30 to 40%		-		195,310
Over 10 to 20%		1,179,501		1,157,950
Total	$	4,063,276	$	3,653,142

The Company’s mortgage loans by maturity date as of June 30, 2022 and December 31, 2021 are summarized as follows:

	June 30, 2022		December 31, 2021
Maturity Date	(unaudited)
One year or less	$	1,547,202	$	2,155,857
After one year through five years		2,516,074		1,497,285
Total	$	4,063,276	$	3,653,142

The Company had no mortgage loans that were on non-accrued status as of June 30, 2022 and December 31, 2021.  The were no mortgage loans delinquent on payments due the Company as of June 30, 2022 and December 31, 2021.  In addition, the Company did not establish a valuation allowance on any mortgage loans as of June 30, 2022 and December 31, 2021.

Investment Income, Net of Expenses

The components of net investment income for the six months ended June 30, 2022 and 2021 are as follows:

	Six Months Ended June 30,
	2022			2021
	(unaudited)
Fixed maturities	$	559,262		$	553,641
Mortgages		116,350			189,259
Equity securities		312,498			302,641
Funds withheld		1,621,509			1,649,276
Cash and cash equivalents		5,471			868
		2,615,090			2,695,685
Less investment expenses		(44,403	)		(64,113	)
	$	2,570,687		$	2,631,572

The components of net investment income for the three months ended June 30, 2022 and 2021 are as follows:

	Three Months Ended June 30,
	2022			2021
	(unaudited)
Fixed maturities	$	283,929		$	276,152
Mortgages		88,959		$	116,342
Equity securities		157,824			154,710
Funds withheld		921,201			821,279
Cash and cash equivalents		5,011			560
		1,456,924			1,369,043
Less investment expenses		(37,859	)		(36,463	)
	$	1,419,065		$	1,332,580

Net Investment Gains

Accounting standards require that the unrealized gains and losses on equity securities be reported as income on the consolidated statements of comprehensive loss. For the six months ended June 30, 2022, net investment losses is comprised of $1,463,629 of unrealized losses on our equity portfolio, net realized gains of $623, and a loss on the change in the fair value of our embedded derivative on funds withheld of $691,300. For the six months ended June 30, 2021, net investment gains is comprised of $103,297 of unrealized gains on our equity portfolio, net realized gains of $215,613 and a loss on the change in the fair value of our embedded derivative on funds withheld of $245,120. For the three months ended June 30, 2022, net investment losses is comprised of $1,013,834 of unrealized losses on our equity portfolio, net realized gains of $1,264, and a loss on the change in the fair value of our embedded derivative on funds withheld of $409,083. For the three months ended June 30, 2021, net investment gains is comprised of $70,378 of unrealized gains on our equity portfolio, net realized gains of $163,217 and a loss on the change in the fair value of our embedded derivative on funds withheld of $42,473.