Note 2 - Investments

3 Months Ended

Mar. 31, 2025

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 March 31, 2025 and December 31, 2024 is as follows:

	March 31, 2025
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(unaudited)
Available for sale:
Fixed maturities:
US Treasury securities	$	801,639	$	-	$	(70,870	)	$	730,769
Corporate bonds		22,353,128		148,954		(2,781,649	)		19,720,433
Municipal bonds		5,393,259		11		(587,431	)		4,805,839
Redeemable preferred stock		2,563,173		14		(168,153	)		2,395,034
Term loans		12,148,679		40,109		(210,723	)		11,978,065
Mortgage backed and asset backed securities		39,296,493		769,746		(817,690	)		39,248,549
Total available for sale	$	82,556,371	$	958,834	$	(4,636,516	)	$	78,878,689

	December 31, 2024
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
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

The amortized cost and fair value of debt securities as of March 31, 2025 and December 31, 2024, 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 March 31, 2025				As of December 31, 2024
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(unaudited)
Amounts maturing in:
One year or less	$	312,246	$	312,247	$	2,329,128	$	2,329,128
After one year through five years		17,862,816		17,764,445		18,590,198		18,410,081
After five years through ten years		3,141,352		3,069,474		2,032,061		1,967,540
More than 10 years		19,380,291		16,088,940		20,606,740		17,025,901
Redeemable preferred stocks		2,563,173		2,395,034		2,562,893		2,411,234
Mortgage backed and asset backed securities		39,296,493		39,248,549		37,664,287		37,434,295
Total amortized cost and fair value	$	82,556,371	$	78,878,689	$	83,785,307	$	79,578,179

Proceeds from the sale of securities, maturities, and asset paydowns for the three months ended March 31, 2025 and 2024 were $3,712,625 and $3,580,556, respectively. In June 2016, the FASB issued ASC 326 ("Current Expected Credit Loss (CECL)").  The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. mortgage loans and reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected. Changes in the allowance for credit losses are included in net 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 March 31,
	(unaudited)
	2025			2024
Gross gains	$	-		$	6,064
Gross losses		(476,146	)		(41,962	)
Realized losses	$	(476,146	)	$	(35,898	)
Mortgage loans on real estate		(432,975	)		-
(Increase) Decrease in allowance for credit losses	$	(432,975	)	$	-

Gross unrealized losses by duration are summarized as follows:

	Less than 12 months					12 months and Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
March 31, 2025
	(unaudited)
Available for sale:
Fixed maturities:
US Treasury securities	$	448,887	$	(2,391	)	$	281,883	$	(68,479	)	$	730,769	$	(70,870	)
Corporate bonds		1,834,482		(26,266	)		12,499,659		(2,755,383	)		14,334,141		(2,781,649	)
Municipal bonds		1,111,579		(38,983	)		3,614,469		(548,448	)		4,726,048		(587,431	)
Redeemable preferred stock		-		-			1,974,066		(168,153	)		1,974,066		(168,153	)
Term loans		3,815,563		(34,414	)		2,556,030		(176,309	)		6,371,593		(210,723	)
Mortgage backed and asset backed securities		9,623,974		(202,917	)		4,717,922		(614,773	)		14,341,896		(817,690	)
Total fixed maturities	$	16,834,485	$	(304,971	)	$	25,644,029	$	(4,331,545	)	$	42,478,514	$	(4,636,516	)

	Less than 12 months					12 months and Greater					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	)

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 March 31, 2025 was 200, which represented an unrealized loss

of $4,636,516 of the aggregate carrying value of those securities. The 200 securities breakdown as follows: 112 bonds, 71 mortgage and asset backed securities, 7 term loans, and 10 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.  Unrealized losses on fixed maturities are almost exclusively related to changes in interest rates and will be recovered if the securities are not sold prior to maturity.

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 March 31, 2025 and December 31, 2024 are summarized as follows:

	March 31, 2025			December 31, 2024
	(unaudited)
Commercial mortgage loans by property type
Mixed use	$	2,238,456		$	2,159,630
Lodging		2,478,285			2,486,961
Multi-property		1,707,210			2,188,704
Multi-family		3,052,730			3,202,740
Industrial		1,800,000			1,800,000
Retail/Office		13,406,546			13,410,399
Total commercial mortgages	$	24,683,227		$	25,248,434
Allowance for credit losses		(488,660	)		(55,685	)
Carrying value	$	24,194,567		$	25,192,749

The Company’s mortgage loans by loan-to-value ratio as of March 31, 2025 and December 31, 2024 are summarized as follows:

	March 31, 2025			December 31, 2024
	(unaudited)
Loan to value ratio
Over 70 to 80%	$	892,800		$	892,800
Over 60 to 70%		10,332,347			6,399,210
Over 50 to 60%		7,300,000			10,215,293
Over 40 to 50%		1,818,737			1,820,562
Over 30 to 40%		3,839,343			3,231,865
Over 20 to 30%		-			2,188,704
Over 10 to 20%		500,000			500,000
Total	$	24,683,227		$	25,248,434
Allowance for credit losses		(488,660	)		(55,685	)
Carrying value	$	24,194,567		$	25,192,749

The Company’s mortgage loans by maturity date as of March 31, 2025 and December 31, 2024 are summarized as follows:

	March 31, 2025			December 31, 2024
	(unaudited)
Maturity Date
One year or less	$	9,963,932		$	6,566,055
After one year through five years		14,719,295			18,682,379
Total	$	24,683,227		$	25,248,434
Allowance for credit losses		(488,660	)		(55,685	)
Carrying value	$	24,194,567		$	25,192,749

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 took realized losses by writing down two mortgage loans during the three-month period ending March 31, 2025. The first mortgage loan has a principal amount of $755,663 that is secured by real estate. The loan 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 355 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 be $226,540 less than the outstanding balance of the loan. Therefore, a realized loss of $226,540 has been recognized as of the reporting date.

The second mortgage loan has a principal amount of $1,899,520 that is secured by real estate. This asset represents a pool of individual loans. The loan was originated on October 22, 2020 and has various maturity dates and interest rates.  We no longer accrue interest on this asset.  As of the reporting date, there are 24 loans. 12 out of the 24 loans are delinquent with total outstanding loan amount of $605,248, and 1 real estated owned property with outstanding loan amount of $122,764. Specifically, the borrower has missed payments totaling $728,012. No interest is being accrued on these loans.

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 be $193,473 less than the outstanding balance of the loan. Therefore, a realized loss of $193,473 has been recognized as of the reporting date.

Additionally, the Company had one mortgage loan participation with a specific allowance which is on non-accrued status and delinquent as of March 31, 2025. The mortgage loan has a principal amount of $1,000,000 that is secured by real estate. The loan was originated on November 4, 2022 and has an original maturity date of December 1, 2025.  We no longer accrue interest on this asset.  It previously carried an interest rate of 8%.  As of the reporting date, the borrower was not past due on payments. Payments due in the second quarter have been modified to a reduced interest rate of 5% with the lost interest capitalized into the principal of the loan. It is uncertain if the borrower will be able to continue to make payments.

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.   The fair value of the collateral is estimated to be $250,000 less than the outstanding balance of the loan and will be adjusted once a current appraisal is completed. Therefore, an allowance of $250,000 has been recognized as of the reporting date.

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 months ended March 31, 2025 and 2024. 

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 and specific valuation allowances for our commercial mortgage loan portfolio:

	Three Months Ended March 31, 2025					Three Months Ended March 31, 2024
	Specific Allowance			General Allowance		Specific Allowance		General Allowance
	(unaudited)					(unaudited)
Beginning allowance balance	$	-		$	55,685	$	-	$	21,644
Charge-offs		(420,013	)		-		-		-
Change in provision for credit losses		670,013			182,975		-		-
Ending Allowance	$	250,000		$	238,660	$	-	$	21,644

The following table presents a breakdown of our mortgage loans by aging category:

	As of March 31, 2025
	Outstanding Balance		Allowance for Credit Losses			Net Carrying Amount
	(unaudited)
Aging Category
Not past due (Current)	$	22,446,895	$	(258,684	)	$	22,188,211
1-30 days past due		-		-			-
31-60 days past due		-		-			-
61-90 day past due		-		-			-
Over 90 days past due		2,236,332		(229,976	)		2,006,356
Ending Allowance	$	24,683,227	$	(488,660	)	$	24,194,567

Investment Income, Net of Expenses

The components of net investment income for the three months ended March 31, 2025 and 2024 are as follows:

	Three Months Ended March 31,
	2025			2024
	(unaudited)
Fixed maturities	$	1,337,626		$	1,309,729
Mortgages		440,895			406,549
Equity securities		69,477			83,165
Other invested assets		29,511			60,055
Cash and cash equivalents		66,332			88,972
		1,943,841			1,948,471
Less investment expenses		(219,113	)		(278,514	)
	$	1,724,728		$	1,669,957

Net Investment Gains (losses)

Net investment gains (losses) for the three months ended March 31, 2025 and 2024 are summarized as follows:

	Three Months Ended March 31,
	(unaudited)
	2025			2024
Recognized gains (losses) on sale of investments	$	(56,133	)	$	(35,898	)
Realized loss on mortgage loan participation write downs		(420,013	)	$	-
Change in allowance for credit loss recognized in earnings		(432,975	)		-
Unrealized net gains (losses) recognized in earnings		(21,790	)		96,321
Embedded Derivative		(118,762	)		79,929
Net investment gains (losses)	$	(1,049,673	)	$	140,352