Note 2 - Investments

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Investment Holdings [Text Block]

Note 2. Investments

Fixed Maturity

The amortized cost and fair value of available for sale investments as of December 31 is as follows:

	December 31, 2024
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:	(unaudited)
Fixed maturities:
US Treasury securities	$	799,543	$	-	$	(88,166	)	$	711,377
Corporate bonds		24,370,244		111,868		(2,990,292	)		21,491,820
Municipal bonds		5,416,888		-		(675,739	)		4,741,149
Redeemable preferred stock		2,562,893		36		(151,695	)		2,411,234
Term loans		12,971,452		28,936		(212,084	)		12,788,304
Mortgage backed and asset backed securities		37,664,287		715,541		(945,533	)		37,434,295
Total available for sale	$	83,785,307	$	856,381	$	(5,063,509	)	$	79,578,179

	December 31, 2023
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		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 December 31, 2024 and 2023, by contractual maturity, is as follows. 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 December 31, 2024				As of December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	2,329,128	$	2,329,128	$	152,840	$	147,835
After one year through five years		18,590,098		18,590,098		16,397,124		16,461,777
After five years through ten years		2,032,061		1,967,540		6,371,607		6,112,389
More than 10 years		20,606,740		17,025,901		21,488,624		18,504,542
Redeemable preferred stocks		2,562,893		2,411,234		3,622,572		3,305,569
Mortgage backed and asset backed securities		37,664,287		37,434,295		30,621,025		29,977,408
Total amortized cost and fair value	$	83,785,307	$	79,578,179	$	78,653,792	$	74,509,520

Proceeds from the sale of securities, maturities, and asset paydowns in 2024 and 2023 were $29,657,388 and $21,419,454, 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:

	Years Ended December 31,
	2024			2023
Gross gains	$	201,481		$	14,399
Gross losses		(188,450	)		(772,000	)
Realized gains (losses)	$	13,031		$	(757,601	)
Fixed maturity securities		-			-
Mortgage loans on real estate		(34,041	)		128,729
(Increase) Decrease in allowance for credit losses	$	(34,041	)	$	128,729

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
December 31, 2024
Available for sale:
Fixed maturities:
US Treasury securities	$	444,105	$	(7,244	)	$	267,272	$	(80,922	)	$	711,377	$	(88,166	)
Corporate bonds		1,959,130		(52,671	)		12,336,095		(2,937,621	)		14,295,225		(2,990,292	)
Municipal bonds		1,190,019		(56,801	)		3,551,130		(618,938	)		4,741,149		(675,739	)
Redeemable preferred stock		-		-			2,337,770		(151,695	)		2,337,770		(151,695	)
Term loans		-		-			2,609,831		(212,084	)		2,609,831		(212,084	)
Mortgage backed and asset backed securities		10,201,273		(241,577	)		4,708,468		(703,956	)		14,909,741		(945,533	)
Total fixed maturities	$	13,794,527	$	(358,293	)	$	25,810,566	$	(4,705,216	)	$	39,605,093	$	(5,063,509	)

	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		-		-			3,182,131		(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 December 31, 2024 was 212, which represented an unrealized loss of $5,063,509 of the aggregate carrying value of those securities. The 212 securities breakdown as follows: 118 bonds, 77 mortgage and asset backed securities, 6 term loans, and 11 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 December 31, 2024 and December 31, 2023 are summarized as follows:

	December 31, 2024			December 31, 2023
Commercial mortgage loans by property type
Condominium	$	-		$	377,621
Mixed use		2,159,630			-
Lodging		2,486,961			-
Multi-property		2,188,704			8,923,604
Multi-family		3,202,740			2,855,008
Industrial		1,800,000			1,000,000
Retail/Office		13,410,399			6,482,664
Total commercial mortgages	$	25,248,434		$	19,638,897
Allowance for credit losses		(55,685	)		(21,644	)
Carrying value	$	25,192,749		$	19,617,253

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

	December 31, 2024			December 31, 2023
Loan to value ratio
Over 70 to 80%	$	892,800		$	7,123,604
Over 60 to 70%		6,399,210			3,137,953
Over 50 to 60%		10,215,293			2,322,273
Over 40 to 50%		1,820,562			2,327,436
Over 30 to 40%		3,231,865			377,621
Over 20 to 30%		2,188,704			2,689,619
Over 10 to 20%		500,000			1,660,391
Total	$	25,248,434		$	19,638,897
Allowance for credit losses		(55,685	)		(21,644	)
Carrying value	$	25,192,749		$	19,617,253

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

	December 31, 2024			December 31, 2023
Maturity Date
One year or less	$	6,566,055		$	14,599,568
After one year through five years		18,682,379			5,039,329
Total	$	25,248,434		$	19,638,897
Allowance for credit losses		(55,685	)		(21,644	)
Carrying value	$	25,192,749		$	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 one mortgage loan on non-accrued status and delinquent as of December 31, 2024 with a principal amount of $755,663 that is secured by real estate. The loan was originated on March 28, 2022 and has an original maturity date of April 10, 2024.  We no longer accrue interest on this asset.  It previously carried an interest rate of 6.95%.  As of the reporting date, the borrower is 265 days past due on payments. Specifically, the borrower has missed payments for the following periods:

- Payment due on April 10, 2024 - $755,663 Principal Amount

- Payment due on December 31, 2024 - $14,005 Accrued Interest Amount

The total amount of past due payments is $769,668, which includes principal and accrued interest. The Company has assessed the collectability of the loan, which requires an evaluation of the borrower’s payment history, current financial condition, and the underlying collateral value.  As part of this assessment, the Company has determined that the loan is potentially impaired. The fair value of the collateral is estimated to exceed the outstanding balance of the loan. Therefore, no allowance for credit losses has been recognized as of the reporting date.

The Company is in ongoing discussions with the borrower regarding a potential loan modification. The Company continues to monitor the situation closely and will reassess the loan’s classification and the need for an allowance for credit losses as new information becomes available.  There were no other mortgage loans with delinquent payments as of December 31, 2024.  The Company had no such loans as of 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 years ended December 31, 2024 and December 31, 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 general valuation allowances for our commercial mortgage loan portfolio:

	General Allowance
	December 31, 2024		December 31, 2023
Beginning allowance balance	$	21,644	$	-
Cumulative adjustment for changes in accounting principals		-		150,373
Charge-offs		-		-
Recoveries		-		-
Change in provision for credit losses		34,041		(128,729	)
Ending Allowance	$	55,685	$	21,644

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 years ended December 31, 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. As of December 31, 2024 and 2023, the Company did not have a valuation allowance for fixed maturity securities.

Investment Income, Net of Expenses

The components of net investment income for the years ended December 31, 2024 and 2023 are as follows:

	Years Ended December 31,
	2024			2023
Fixed maturities	$	5,985,869		$	4,712,515
Mortgages		1,680,515			1,678,623
Equity securities		313,416			686,999
Other invested assets		197,760			218,784
Cash and cash equivalents		322,841			129,188
		8,500,401			7,426,109
Less investment expenses		(902,639	)		(1,013,440	)
	$	7,597,762		$	6,412,669

Net Investment Gains (losses)

Net investment gains (losses) for the years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,
	2024			2023
Recognized gains (losses) on sale of investments	$	13,031		$	(757,601	)
Change in allowance for credit loss recognized in earnings		(34,041	)		128,729
Unrealized net gains (losses) recognized in earnings		8,414			1,711,411
Embedded Derivative		296,019			(65,978	)
Net investment gains (losses)	$	283,423		$	1,016,561