Note 2 - Investments

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

2. INVESTMENTS

The Company’s investments are primarily composed of fixed income debt securities and common and preferred equity securities. We carry our equity securities at fair value and categorize all our fixed maturity debt securities as available-for-sale (AFS), which are carried at fair value. When available, quoted market prices are obtained to determine fair value for the Company’s investments. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. The Company has no investment securities for which fair value is determined using Level 3 inputs as defined in Note 3 – Fair Value Disclosures. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date, which does not differ significantly from trade date accounting.

Available-for-Sale Fixed Maturity and Equity Securities

The following tables are a summary of the proceeds from sales, maturities, and calls of AFS fixed maturity and equity securities and the related gross realized gains and losses.

	For the Three-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2022
Fixed maturity securities	$	1,185,955	$	—	$	—		$	—
Common stocks		600,120		112,306		(59,628	)		52,678
Preferred stocks		242,844		1,004		(12,476	)		(11,472	)
2021
Fixed maturity securities	$	5,737,579	$	113,397	$	—		$	113,397
Common stocks		769,346		198,390		(24,333	)		174,057
Preferred stocks		—		—		—			—

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2022
Fixed maturity securities	$	13,800,029	$	105,918	$	(106,546	)	$	(628	)
Common stocks		3,976,938		1,052,648		(254,260	)		798,388
Preferred stocks		646,552		8,749		(20,909	)		(12,160	)
2021
Fixed maturity securities	$	11,921,877	$	132,853	$	(9,582	)	$	123,271
Common stocks		2,734,181		753,159		(90,072	)		663,087
Preferred stocks		340,523		37,711		—			37,711

The amortized cost and estimated fair value of fixed income securities at September 30, 2022, by contractual maturity, are shown as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	1,595,530	$	1,584,923
Due after one year through five years		15,569,947		14,762,906
Due after five years through 10 years		19,819,683		17,066,596
Due after 10 years		26,662,556		21,602,374
Asset and mortgage backed securities without a specific due date		39,826,320		36,504,808
Redeemable preferred stocks		215,805		206,152
Total fixed maturity securities	$	103,689,841	$	91,727,759

Expected maturities may differ from contractual maturities due to call provisions on some existing securities.

The following table is a schedule of amortized cost and estimated fair values of investments in securities classified as available for sale at September 30, 2022 and December 31, 2021

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2022
Fixed maturity securities:
U.S. Treasury	$	1,352,998	$	1,245,719	$	—	$	(107,279	)
MBS/ABS/CMBS		39,826,320		36,504,807		579		(3,322,092	)
Corporate		40,797,326		36,080,909		10,194		(4,726,611	)
Municipal		21,497,392		17,690,172		41,619		(3,848,839	)
Redeemable preferred stock		215,805		206,152		1,320		(10,973	)
Total fixed maturity securities	$	103,689,841	$	91,727,759	$	53,712	$	(12,015,794	)

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2021
Fixed maturity securities:
U.S. Treasury	$	1,352,044	$	1,345,992	$	11,276	$	(17,328	)
MBS/ABS/CMBS		40,712,275		41,023,871		607,483		(295,887	)
Corporate		38,959,905		41,206,964		2,434,738		(187,679	)
Municipal		20,905,194		22,031,831		1,149,998		(23,361	)
Redeemable preferred stock		215,805		232,885		17,080		—
Total fixed maturity securities	$	102,145,223	$	105,841,543	$	4,220,575	$	(524,255	)

All the Company’s collateralized securities carry an average credit rating of AA+ by one or more major rating agencies and continue to pay according to contractual terms. Included within MBS/ABS/CMBS, as defined in Note 3 – Fair Value Disclosures, are asset backed securities with fair values of $10,897,742 and $14,351,099, residential mortgage backed securities of $16,488,927 and $14,975,101, and commercial mortgage backed securities of $9,118,138 and $11,697,671 at September 30, 2022 and December 31, 2021, respectively.

ANALYSIS

The following tables are also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of September 30, 2022 and December 31, 2021. The tables segregate the securities based on type, noting the fair value, amortized cost, and unrealized loss on each category of investment as well as in total. The table further classifies the securities based on the length of time they have been in an unrealized loss position.

	September 30, 2022									December 31, 2021
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	613,609		$	632,109		$	1,245,718		$	391,250		$	291,891		$	683,141
Amortized cost		652,633			700,364			1,352,997			400,408			300,061			700,469
Unrealized loss		(39,024	)		(68,255	)		(107,279	)		(9,158	)		(8,170	)		(17,328	)
MBS/ABS/CMBS
Fair value		27,169,391			9,308,869			36,478,260			20,403,757			1,124,095			21,527,852
Amortized cost		29,014,459			10,785,893			39,800,352			20,647,568			1,176,171			21,823,739
Unrealized loss		(1,845,068	)		(1,477,024	)		(3,322,092	)		(243,811	)		(52,076	)		(295,887	)
Corporate
Fair value		30,368,813			4,359,237			34,728,050			6,428,166			995,235			7,423,401
Amortized cost		33,917,388			5,537,273			39,454,661			6,590,227			1,020,853			7,611,080
Unrealized loss		(3,548,575	)		(1,178,036	)		(4,726,611	)		(162,061	)		(25,618	)		(187,679	)
Municipal
Fair value		14,034,490			581,522			14,616,012			2,676,052			269,247			2,945,299
Amortized cost		17,691,796			773,055			18,464,851			2,695,269			273,391			2,968,660
Unrealized loss		(3,657,306	)		(191,533	)		(3,848,839	)		(19,217	)		(4,144	)		(23,361	)
Redeemable preferred stock
Fair value		135,922			—			135,922			—			—			—
Cost		146,895			—			146,895			—			—			—
Unrealized loss		(10,973	)		—			(10,973	)		—			—			—
Total
Fair value		72,322,225			14,881,737			87,203,962			29,899,225			2,680,468			32,579,693
Amortized cost		81,423,171			17,796,585			99,219,756			30,333,472			2,770,476			33,103,948
Unrealized loss		(9,100,946	)	$	(2,914,848	)	$	(12,015,794	)	$	(434,247	)	$	(90,008	)	$	(524,255	)

The fixed income portfolio contained 242 securities in an unrealized loss position as of September 30, 2022. Of these 242 securities, 33 have been in an unrealized loss position for 12 consecutive months or longer and represent $2,914,848 in unrealized losses. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Credit-related impairments on fixed income securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net earnings. Any non-credit related impairment is recognized in comprehensive earnings. Based on management’s analysis, the fixed income portfolio is of a high credit quality, and it is believed it will recover the amortized cost basis of the fixed income securities. Management monitors the credit quality of the fixed income investments to assess if it is probable that the Company will receive its contractual or estimated cash flows in the form of principal and interest.

There were no other-than-temporary impairment losses recognized in net earnings during the nine months ended September 30, 2022 and September 30, 2021. For all fixed income securities at a loss at September 30, 2022, management believes it is probable that the Company will receive all contractual payments in the form of principal and interest. In addition, the Company is not required to, nor does it intend to sell these investments prior to recovering the entire amortized cost basis for each security, which may be at maturity. The fixed income securities in an unrealized loss position were not other-than-temporarily impaired at September 30, 2022 and December 31, 2021.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

Net unrealized (losses) recognized during the three and nine months ended September 30, 2022 on equity securities held as of September 30, 2022 were $(1,084,289) and $(6,181,492), respectively. Net unrealized (losses) gains recognized during the three and nine months ended September 30, 2021 on equity securities held as of September 30, 2021 were $(212,136) and $1,392,999, respectively.

Other Invested Assets

Other invested assets as of September 30, 2022 and December 31, 2021 were $4,556,769 and $3,086,568, respectively.

Other invested assets as of  September 30, 2022 include privately held investments of $3,287,891 and notes receivable of $843,878, compared to $1,720,502 and $1,066,066, respectively, at December 31, 2021. The notes bear interest between 3.9% and 6.5%. For the nine months ended September 30, 2022, $229,979 in note payments were received and $7,791 in accrued escrow and interest receivable was recorded. Comparatively, as of December 31, 2021, $317,529 in note payments were received and $12,075 in accrued escrow and interest receivable was recorded. The Company had no allowance recorded related to uncollectible note receivables at  September 30, 2022 and December 31, 2021.

In addition, other invested assets include a membership in the Federal Home Loan Bank of Chicago (FHLBC) with a carrying value of $425,000 and $300,000 as of September 30, 2022 and December 31, 2021, respectively.

In November 2021, we agreed to commit up to $10.0 million to a private investment fund, subject to regulatory approval, which may be callable from time to time by such fund. As of September 30, 2022 and December 31, 2021, no calls were received.