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Note 2 - Investments

6 Months Ended

Jun. 30, 2024

Note 2.

Investments

Fixed Maturity

The amortized cost and fair value of available for sale investments as of June 30, 2024 and December 31, 2023 is as follows:

June 30, 2024

Cost or

Allowance for

Gross

Amortized

Credit

Unrealized

Cost

Losses

Gains

Losses

Fair Value

Available for sale:

(unaudited)

Fixed maturities:

US Treasury securities

797,297

(86,674

)

710,623

Corporate bonds

20,249,652

(116,563

)

60,319

(2,975,117

)

17,218,291

Municipal bonds

5,479,432

(632,476

)

4,846,956

Redeemable preferred stock

3,290,872

190

(177,163

)

3,113,899

Term loans

17,532,991

150,906

(290,534

)

17,393,363

Mortgage backed and asset backed securities

33,320,800

671,450

(1,003,732

)

32,988,518

Total available for sale

80,671,044

(116,563

)

882,865

(5,165,696

)

76,271,650

December 31, 2023

Cost or

Allowance for

Gross

Amortized

Credit

Unrealized

Cost

Losses

Gains

Losses

Fair Value

Available for sale:

Fixed maturities:

US Treasury securities

790,976

(66,308

)

724,668

Corporate bonds

20,234,444

95,085

(2,516,167

)

17,813,362

Municipal bonds

6,207,596

4,044

(575,547

)

5,636,093

Redeemable preferred stock

3,622,572

1,699

(318,702

)

3,305,569

Term loans

17,177,179

162,011

(286,770

)

17,052,420

Mortgage backed and asset backed securities

30,621,025

520,599

(1,164,216

)

29,977,408

Total available for sale

78,653,792

783,438

(4,927,710

)

74,509,520

The amortized cost and fair value of debt securities as of June 30, 2024 and December 31, 2023, 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, 2024				As of December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(unaudited)
Amounts maturing in:
One year or less	$	323,268	$	323,268	$	152,840	$	147,835
After one year through five years		16,561,985		16,521,520		16,397,124		16,461,777
After five years through ten years		6,024,798		5,808,614		6,371,607		6,112,389
More than 10 years		21,149,321		17,515,831		21,488,624		18,504,542
Redeemable preferred stocks		3,290,872		3,113,899		3,622,572		3,305,569
Mortgage backed and asset backed securities		33,320,800		32,988,518		30,621,025		29,977,408
Total amortized cost and fair value	$	80,671,044	$	76,271,650	$	78,653,792	$	74,509,520

Proceeds from the sale of securities, maturities, and asset paydowns for the six months ended June 30, 2024 and 2023 were $12,730,393 and $5,766,313, 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:

	Six Months Ended June 30,
	(unaudited)
	2024			2023
Gross gains	$	22,070		$	188,777
Gross losses		(67,024	)		(267,660	)
Realized gains (losses)	$	(44,954	)	$	(78,883	)


Fixed maturity securities		(116,563	)		-
Mortgage loans on real estate		(9,137	)		115,762
(Increase) Decrease in allowance for credit losses	$	(125,700	)	$	115,762

Proceeds from the sale of securities, maturities, and asset paydowns for the three months ended June 30, 2024 and 2023 were $9,149,837 and $4,030,195, respectively. Realized gains and losses related to the sale of securities and net credit losses recognized in income are summarized as follows:

	Three Months Ended June 30,
	(unaudited)
	2024			2023
Gross gains	$	16,006		$	-
Gross losses		(25,062	)		(263,968	)
Net security losses	$	(9,056	)	$	(263,968	)



Fixed maturity securities		(116,563	)		-
Mortgage loans on real estate		(9,137	)		102,537
Decrease in allowance for credit losses	$	(125,700	)	$	102,537

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, 2024

(unaudited)

Available for sale:

Fixed maturities:

US Treasury securities

710,623

(86,674

)

710,623

(86,674

)

Corporate bonds

763,733

(9,373

)

14,316,660

(2,965,744

)

15,080,393

(2,975,117

)

Municipal bonds

789,733

(22,888

)

4,057,223

(609,588

)

4,846,956

(632,476

)

Redeemable preferred stock

2,989,680

(177,163

)

2,989,680

(177,163

)

Term loans

155,150

(2,076

)

7,561,890

(288,458

)

7,717,040

(290,534

)

Mortgage backed and asset backed securities

6,828,387

(243,281

)

4,963,571

(760,451

)

11,791,958

(1,003,732

)

Total fixed maturities

8,537,003

(277,618

)

34,599,647

(4,888,078

)

43,136,650

(5,165,696

)

Less than 12 months

Greater than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Loss

Value

Loss

Value

Loss

December 31, 2023

Available for sale:

Fixed maturities:

US Treasury securities

724,668

(66,308

)

724,668

(66,308

)

Corporate bonds

262,673

(863

)

15,653,914

(2,515,304

)

15,916,587

(2,516,167

)

Municipal bonds

523,744

(4,792

)

4,825,568

(570,755

)

5,349,312

(575,547

)

Redeemable preferred stock

3,305,569

(318,702

)

3,305,569

(318,702

)

Term loans

3,739,859

(174,955

)

3,534,621

(111,815

)

7,274,480

(286,770

)

Mortgage backed and asset backed securities

9,549,515

(219,946

)

6,228,220

(944,270

)

15,777,735

(1,164,216

)

Total fixed maturities

14,800,459

(466,864

)

33,547,892

(4,460,846

)

48,348,351

(4,927,710

)

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 June 30, 2024 was 216, which represented an unrealized loss of $5,165,696 of the aggregate carrying value of those securities. The 216 securities breakdown as follows: 122 bonds, 70 mortgage and asset backed securities, 11 term loans, and 13 redeemable preferred stock. Management does not intend to sell and it is likely that management will not be required to sell before their anticipated recovery.

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, 2024 and December 31, 2023 are summarized as follows:

	June 30, 2024			December 31, 2023
	(unaudited)
Commercial mortgage loans by property type
Condominium	$	-		$	377,621
Multi-property		4,796,721			8,923,604
Multi-family		4,191,879			2,855,008
Industrial		1,000,000			1,000,000
Retail/Office		11,608,338			6,482,664
Total commercial mortgages	$	21,596,938		$	19,638,897
Allowance for credit losses		(30,781	)		(21,644	)
Carrying value	$	21,566,157		$	19,617,253

The Company’s mortgage loans by loan-to-value ratio as of June 30, 2024 and December 31, 2023 are summarized as follows:

	June 30, 2024			December 31, 2023
	(unaudited)
Loan to value ratio
Over 70 to 80%	$	1,648,463		$	7,123,604
Over 60 to 70%		3,800,000			3,137,953
Over 50 to 60%		5,321,270			2,322,273
Over 40 to 50%		2,324,083			2,327,436
Over 30 to 40%		5,584,780			377,621
Over 20 to 30%		-			2,689,619
Over 10 to 20%		2,495,815			1,660,391
Less than 10%		422,527			-
Total	$	21,596,938		$	19,638,897

Allowance for credit losses		(30,781	)		(21,644	)
Carrying value	$	21,566,157		$	19,617,253

The Company’s mortgage loans by maturity date as of June 30, 2024 and December 31, 2023 are summarized as follows:

	June 30, 2024			December 31, 2023
	(unaudited)
Maturity Date
One year or less	$	10,390,990		$	14,599,568
After one year through five years		11,205,948			5,039,329
Total	$	21,596,938		$	19,638,897

Allowance for credit losses		(30,781	)		(21,644	)
Carrying value	$	21,566,157		$	19,617,253

The Company individually evaluates its commercial mortgage loan portfolio for the establishment of a specific loan loss allowance. A mortgage loan requires a specific allowance 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 requires an allowance, 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 June 30, 2024 and December 31, 2023. The were no mortgage loans delinquent on payments due to the Company as of June 30, 2024 and December 31, 2023.

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 six months ended June 30, 2024 and June 30, 2023.

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:

	Six Months Ended June 30, 2024
	(unaudited)
	Specific Allowance		General Allowance
Beginning allowance balance	$	-	$	21,644
Cumulative adjustment for changes in accounting principals		-		-
Charge-offs		-		-
Recoveries		-		-
Change in provision for credit losses		-		9,137
Ending Allowance	$	-	$	30,781

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. The change in provision for credit losses is recorded in net investment gains (losses).

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 six months ended June 3, 2024 and 2023.

The Company will record an "intent-to-sell impairment" as a reduction to the amortized cost of fixed maturities, AFS in an unrealized loss position if the Company intends to sell or it is more likely than not that the Company will be required to sell the fixed maturity before a recovery in value. A corresponding charge is recorded in net realized losses equal to the difference between the fair value on the impairment date and the amortized cost basis of the fixed maturity before recognizing the impairment.

For fixed maturity securities where a credit loss has been identified and no intent-to-sell impairment has been recorded, the Company will record an allowance for credit loss ("ACL") for the portion of the unrealized loss related to a credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the non-credit amount is recorded in OCI. The ACL is the excess of the amortized cost over the greater of the Company's best estimate present value of the expected future cash flows or the security's fair value. Cash flows are discounted at the effective yield that is used to record interest income. The ACL cannot exceed the unrealized loss and, therefore, it may fluctuate with the changes in the fair value of the fixed maturity if the fair is greater than the Company's best estimate of the present value of expected future cash flows. The initial ACL and any subsequent changes are recorded in net realized gains and losses. The ACL is written off against amortized cost in the period in which all or a portion of the related fixed maturity is determined to be uncollectible.

Developing the Company's best estimate of expected future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions regarding the future performance. The Company's considerations include a) changes in the financial condition of the issuer and/or the underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) credit ratings, (d) payment structure of the security, and (e) the extent to which the fair value has been less than the amortized cost of the security. For non-structured securities, assumptions included, but are not limited to, economic and industry specific trends and fundamentals, instrument specific developments including changes in credit ratings, industry earnings multiples and the issuer's ability to restructure, access capital markets, and execute asset sales.

The following table presents a roll-forward of our valuation allowances for our fixed maturity securities:

	Six Months Ended June 30, 2024
	(unaudited)

Beginning allowance balance	$	-
Cumulative adjustment for changes in accounting principals		-
Charge-offs		-
Recoveries		-
Change in provision for credit losses		116,563
Ending Allowance	$	116,563

Investment Income, Net of Expenses

The components of net investment income for the six months ended June 30, 2024 and 2023 are as follows:

	Six Months Ended June 30,
	2024			2023
	(unaudited)
Fixed maturities	$	2,888,149		$	2,895,537
Mortgages		906,519			1,003,013
Equity securities		164,145			394,800
Other invested assets		58,814			100,865
Cash and cash equivalents		194,575			35,960
		4,212,202			4,430,175
Less investment expenses		(216,722	)		(1,140,681	)
	$	3,995,480		$	3,289,494

The components of net investment income for the three months ended June 30, 2024 and 2023 are as follows:

	Three Months Ended June 30,
	2024			2023
	(unaudited)
Fixed maturities	$	1,578,420		$	1,856,114
Mortgages		499,970		$	493,991
Equity securities		80,980			184,430
Funds withheld		-			-
Other invested assets		(1,241	)		54,925
Cash and cash equivalents		105,603			21,939
		2,263,731			2,611,399
Less investment expenses		61,792			(827,515	)
	$	2,325,523		$	1,783,884

Net Investment Gains (losses)

Net investment gains (losses) for the six and three months ended June 30, 2024 and 2023 are summarized in the following tables:

	Six Months Ended June 30,
	2024			2023
	(unaudited)
Realized gains (losses) on sales of investments	$	(44,954	)	$	(78,883	)
Change in allowance for credit losses recognized in earnings		(125,700	)		115,762
Unrealized net gains (losses) recognized in earnings		587,099			356,444
Change in value of embedded derivative		96,215			497,153
	$	512,660		$	890,476

	Three Months Ended June 30,
	2024			2023
	(unaudited)
Realized gains (losses) on sales of investments	$	(9,056	)	$	(263,968	)
Change in allowance for credit losses recognized in earnings		(125,700	)		102,537
Unrealized net gains (losses) recognized in earnings		490,778			110,318
Change in value of embedded derivative		16,286			594,487
	$	372,308		$	543,374