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Note 2 - Investments

9 Months Ended

Sep. 30, 2023

Note 2. Investments

Fixed Maturity

The amortized cost and fair value of available for sale investments as of September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023

Cost or

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

Available for sale:

(unaudited)

Fixed maturities:

US Treasury securities

788,823

(98,068

)

690,755

Corporate bonds

19,268,536

3,796

(3,906,741

)

15,365,591

Municipal bonds

6,212,897

(942,149

)

5,270,748

Redeemable preferred stock

3,625,096

940

(438,045

)

3,187,991

Term loans

18,986,548

148,003

(298,775

)

18,835,776

Mortgage backed and asset backed securities

25,038,945

353,378

(1,526,370

)

23,865,953

Total available for sale

73,920,845

506,117

(7,210,148

)

67,216,814

December 31, 2022

Cost or

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

Available for sale:

Fixed maturities:

US Treasury securities

993,805

36,313

(5,031

)

1,025,087

Corporate bonds

19,018,738

722

(3,150,382

)

15,869,078

Municipal bonds

6,228,636

(808,227

)

5,420,409

Redeemable preferred stock

3,875,526

(519,911

)

3,355,615

Term loans

18,086,124

209,989

(146,395

)

18,149,718

Mortgage backed and asset backed securities

22,412,895

157,795

(1,074,520

)

21,496,170

Total available for sale

70,615,724

404,819

(5,704,466

)

65,316,077

The amortized cost and fair value of debt securities as of September 30, 2023 and December 31, 2022, 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 September 30, 2023				As of December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:	(unaudited)
One year or less	$	102,457	$	97,506	$	442,846	$	450,461
After one year through five years		17,269,255		17,191,862		17,048,721		17,035,270
After five years through ten years		6,312,529		5,897,906		5,498,364		5,340,498
More than 10 years		21,577,332		16,980,297		21,337,372		17,638,063
Redeemable preferred stocks		3,620,327		3,183,290		3,875,526		3,355,615
Mortgage backed and asset backed securities		25,038,945		23,865,953		22,412,895		21,496,170
Total amortized cost and fair value	$	73,920,845	$	67,216,814	$	70,615,724	$	65,316,077

Proceeds from the sale of securities, maturities, and asset paydowns in the nine months ended September 30, 2023 and 2022 were $10,432,378 and $5,109,627, respectively. With the implementation of CECL, changes in the allowance for credit losses is included in net gains (losses). Realized gains and losses related to the sale of securities and net credit losses recognized in income are summarized as follows:

	Nine Months Ended September 30,
	(unaudited)
	2023			2022
Gross gains	$	14,399		$	3,617
Gross losses		(233,486	)		(18,905	)
Realized gains (losses)	$	(219,087	)	$	(15,288	)


Mortgage loans on real estate		115,762			-
Decrease in allowance for credit losses	$	115,762		$	-

Proceeds from the sale of securities, maturities, and asset paydowns in the three months ended September 30, 2023 and 2022 were $4,666,065 and $939,113, respectively. With the implementation of CECL, changes in the allowance for credit losses is included in net gains (losses). Realized gains and losses related to the sale of securities and net credit losses recognized in income are summarized as follows:

	Three Months Ended September 30,
	(unaudited)
	2023			2022
Gross gains	$	4,542		$	453
Gross losses		(144,746	)		(16,364	)
Net security losses	$	(140,204	)	$	(15,911	)


Mortgage loans on real estate		-			-
Decrease in allowance for credit losses	$	-		$	-

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

September 30, 2023

Available for sale:

(unaudited)

Fixed maturities:

US Treasury securities

690,755

(98,068

)

690,755

(98,068

)

Corporate bonds

690,775

(32,855

)

14,401,537

(3,873,886

)

15,092,312

(3,906,741

)

Municipal bonds

744,392

(48,764

)

4,526,356

(893,385

)

5,270,748

(942,149

)

Redeemable preferred stock

59,531

(2,380

)

3,006,899

(435,665

)

3,066,430

(438,045

)

Term loans

8,191,836

(298,775

)

8,191,836

(298,775

)

Mortgage backed and asset backed securities

10,769,360

(590,189

)

4,743,609

(936,181

)

15,512,969

(1,526,370

)

Total fixed maturities

21,146,649

(1,071,031

)

26,678,401

(6,139,117

)

47,825,050

(7,210,148

)

Less than 12 months

Greater than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Loss

Value

Loss

Value

Loss

December 31, 2022

Available for sale:

Fixed maturities:

US Treasury securities

398,375

(5,031

)

398,375

(5,031

)

Corporate bonds

12,378,486

(1,883,706

)

3,206,913

(1,266,676

)

15,585,399

(3,150,382

)

Municipal bonds

4,711,896

(587,053

)

708,514

(221,174

)

5,420,410

(808,227

)

Redeemable preferred stock

2,384,771

(363,193

)

970,844

(156,718

)

3,355,615

(519,911

)

Term loans

6,309,005

(146,395

)

6,309,005

(146,395

)

Mortgage backed and asset backed securities

10,358,560

(458,754

)

3,281,132

(615,766

)

13,639,692

(1,074,520

)

Total fixed maturities

36,541,093

(3,444,132

)

8,167,402

(2,260,334

)

44,708,495

(5,704,466

)

Unrealized losses occur from market price declines due to changes in interest rates. The total number of available for sale fixed maturity securities in the investment portfolio in an unrealized loss position as of September 30, 2023 was 238, which represented an unrealized loss of $7,210,148 of the aggregate carrying value of those securities. The 238 securities breakdown as follows: 136 bonds, 78 mortgage and asset backed securities, 9 term loans, and 15 redeemable preferred stock. The total number of available for sale securities in the investment portfolio in an unrealized loss position as of December 31, 2022 was 230, which represented an unrealized loss of $5,704,466 of the aggregate carrying value of those securities. The 230 securities breakdown as follows: 131 bonds, 73 mortgage and asset backed securities, 10 term loans, and 16 redeemable preferred stock.

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 September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023			December 31, 2022
	(unaudited)
Commercial mortgage loans by property type
Condominium	$	902,657		$	1,696,975
Land		-			1,902,277
Multi-property		9,795,198			9,539,738
Multi-family		5,634,612			5,016,424
Retail/Office		5,424,726			5,634,659
Total commercial mortgages	$	21,757,193		$	23,790,073
Allowance for credit losses		(34,611	)		-
Carrying value	$	21,722,582		$	23,790,073

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 September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023			December 31, 2022
	(unaudited)
Loan to value ratio
Over 70 to 80%	$	7,995,198		$	8,219,763
Over 60 to 70%		3,136,506			5,196,975
Over 50 to 60%		4,669,053			4,682,750
Over 40 to 50%		2,151,326			3,235,951
Over 30 to 40%		902,657			-
Over 20 to 30%		1,800,000			1,319,975
Over 10 to 20%		1,102,453			1,134,659
Total	$	21,757,193		$	23,790,073

Allowance for credit losses		(34,611	)		-
Carrying value	$	21,722,582		$	23,790,073

The Company’s mortgage loans by maturity date as of September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023			December 31, 2022
	(unaudited)
Maturity Date
One year or less	$	18,105,867		$	15,354,542
After one year through five years		3,651,326			8,435,531
Total	$	21,757,193		$	23,790,073

Allowance for credit losses		(34,611	)		-
Carrying value	$	21,722,582		$	23,790,073

The Company evaluates its commercial mortgage loan portfolio for the establishment of a loan loss allowance by specific identification of impaired loans. A mortgage loan is impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. If the Company determines that the value of any specific mortgage loan is impaired, the carrying amount of the mortgage loan will be reduced to its fair value, based upon the present value of expected future cash flows from the loan discounted at the loan's effective interest rate, or the fair value of the underlying collateral less estimated costs to sell. The Company had no mortgage loans that were on non-accrued status as of September 30, 2023 and December 31, 2022. The were no mortgage loans delinquent on payments due the Company as of September 30, 2023 and December 31, 2022.

The Company analyzes our commercial mortgage loan portfolio for the need of a general loan allowance for expected credit losses on all other loans on a quantitative and qualitative basis by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual loan. The amount of the general loan allowance is based upon management's evaluation of the collectability of the loan portfolio, historical loss experience, delinquencies, credit concentrations, underwriting standards and national and local economic conditions. The Company does not measure a credit loss allowance on accrued interest receivable as we write off any uncollectible accrued interest receivable balance to net investment income in a timely manner. The Company did not charge off any uncollectible accrued interest receivable on our commercial mortgage loan portfolio during the three and nine month periods ended September 30, 2023 and September 30, 2022.

The Company's commercial mortgage loans are pooled by risk rating and property collateral type and an estimated loss ratio is applied against each risk pool. The loss ratios are generally based upon historical loss experience for each risk pool and are adjusted for current and forecasted economic factors management believes to be relevant and supportable. Economic factors are forecasted for two years with immediate reversion to historical experience.

The following table presents a roll-forward of our specific and general valuation allowances for our commercial mortgage loan portfolio:

	Nine Months Ended September 30, 2023
	(unaudited)
	Specific Allowance		General Allowance
Beginning allowance balance	$	-	$	-
Cumulative adjustment for changes in accounting principles		-		150,373
Charge-offs		-		-
Recoveries		-		-
Change in provision for credit losses		-		(115,762	)
Ending Allowance	$	-	$	34,611

The specific allowance represents the total credit loss allowances on loans which are individually evaluated for impairment. The general allowance is for the group of loans discussed above which are collectively evaluated for impairment.

Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of other investments and the loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. Recoveries are situations where the Company has received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance). The Company did not own any real estate related to our mortgage participations during the nine months ended September 30, 2023 and 2022.

Investment Income, Net of Expenses

The components of net investment income for the nine months ended September 30, 2023 and 2022 are as follows:

	Nine Months Ended September 30,
	2023			2022
	(unaudited)
Fixed maturities	$	3,520,865		$	856,256
Mortgages		1,520,564			207,865
Equity securities		552,098			488,436
Funds withheld		-			2,932,068
Other invested assets		159,935			-
Cash and cash equivalents		67,353			26,797
		5,820,815			4,511,422
Less investment expenses		(727,952	)		(82,130	)
	$	5,092,863		$	4,429,292

The components of net investment income for the three months ended September 30, 2023 and 2022 are as follows:

	Three Months Ended September 30,
	2023		2022
	(unaudited)
Fixed maturities	$	625,328	$	296,994
Mortgages		517,551	$	91,515
Equity securities		157,298		175,938
Funds withheld		-		1,310,559
Other invested assets		59,070		-
Cash and cash equivalents		31,393		21,326
		1,390,640		1,896,332
Less investment expenses		412,729		(37,727	)
	$	1,803,369	$	1,858,605

Net Investment Gains (Losses)

Accounting standards require that the unrealized gains and losses on equity securities be reported as income on the consolidated statements of comprehensive income (loss). For the nine months ended September 30, 2023, net investment gains is comprised of $311,127 of unrealized gains on our equity portfolio, net realized losses including net credit losses recognized of $103,325, and a gain on the unrealized change in the fair value of our embedded derivative of $425,122. For the nine months ended September 30, 2022, net investment losses is comprised of $1,704,079 of unrealized losses on our equity portfolio, net realized losses of $15,288 and a loss on the change in the fair value of our embedded derivative of $1,090,435.

For the three months ended September 30, 2023, net investment losses is comprised of $45,317 of unrealized losses on our equity portfolio, net realized losses including net credit losses recognized of $140,204, and a loss on the unrealized change in the fair value of our embedded derivative of $72,031. For the three months ended September 30, 2022, net investment losses is comprised of $240,450 of unrealized losses on our equity portfolio, net realized losses of $15,911 and a loss on the change in the fair value of our embedded derivative of $399,134.