Note 2 - Investments

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

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

2. INVESTMENTS

NET INVESTMENT INCOME

A summary of net investment income for the years ended December 31, 2022 and 2021 is as follows:

	2022			2021
AFS, fixed maturity securities	$	3,122,028		$	3,010,433
Investment property		904,533			802,071
Equity securities		778,707			488,562
Other Invested Assets		154,332			80,761
Cash and short-term investments		24,628			2,582
Investment revenue		4,984,228			4,384,408
Less investment expenses		(950,000	)		(970,000	)
Net investment income	$	4,034,228		$	3,414,408

INVESTMENT RELATED GAINS (LOSSES)

The following is a summary of the proceeds from sales, maturities, and calls of fixed maturity and equity securities and the related gross realized gains and losses for the years ended December 31, 2022 and 2021.

								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2022
Fixed maturity securities	$	17,820,507	$	107,368	$	(118,178	)	$	(10,810	)
Common stocks		4,402,327		1,213,519		(316,079	)		897,440
Preferred stocks		646,552		8,748		(20,909	)		(12,160	)
2021
Fixed maturity securities	$	18,590,418	$	247,913	$	(9,582	)	$	238,332
Common stocks		3,023,990		836,477		(129,972	)		706,504
Preferred stocks		340,523		37,711		—			37,711

The amortized cost and estimated fair value of fixed income securities at December 31, 2022, are shown as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	250,007	$	246,576
Due after one year through five years		16,293,720		15,551,096
Due after five years through 10 years		19,109,519		16,765,406
Due after 10 years		26,853,034		21,833,630
Asset and mortgage backed securities without a specific due date		41,858,596		38,803,342
Redeemable preferred stocks		215,805		188,921
Total fixed maturity securities	$	104,580,681	$	93,388,971

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 December 31, 2022 and 2021.

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2022
Fixed maturity securities:
U.S. Treasury	$	1,352,752	$	1,252,960	$	—	$	(99,792	)
MBS/ABS/CMBS		41,858,596		38,803,341		51,477		(3,106,732	)
Corporate		39,716,139		35,602,055		38,867		(4,152,951	)
Municipal		21,437,389		17,541,694		78,117		(3,973,812	)
Redeemable preferred stock		215,805		188,921		—		(26,884	)
Total fixed maturity securities	$	104,580,681	$	93,388,971	$	168,461	$	(11,360,171	)

					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	)

MORTGAGE-BACKED, COMMERCIAL MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

All the Company’s collateralized securities carry an average credit rating of AA+ by one or more major rating agency and continue to pay according to contractual terms. Included within MBS/ABS/CMBS are residential mortgage backed securities with fair values of $19,288,540 and $14,975,101 and commercial mortgage backed securities of $8,946,897 and $11,697,671 at December 31, 2022 and 2021, respectively.

UNREALIZED LOSSES ON AFS SECURITIES

The following table is also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of December 31, 2022 and 2021. The table segregates 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.

	December 31, 2022									December 31, 2021
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	615,367		$	637,594		$	1,252,961		$	391,250		$	291,891		$	683,141
Amortized cost		652,424			700,329			1,352,753			400,408			300,061			700,469
Unrealized loss		(37,057	)		(62,735	)		(99,792	)		(9,158	)		(8,170	)		(17,328	)
MBS/ABS/CMBS
Fair value		21,199,819			12,833,310			34,033,129			20,403,757			1,124,095			21,527,852
Amortized cost		22,564,779			14,575,082			37,139,861			20,647,568			1,176,171			21,823,739
Unrealized loss		(1,364,960	)		(1,741,772	)		(3,106,732	)		(243,811	)		(52,076	)		(295,887	)
Corporate
Fair value		27,688,403			5,829,396			33,517,799			6,428,166			995,235			7,423,401
Amortized cost		30,584,890			7,085,860			37,670,750			6,590,227			1,020,853			7,611,080
Unrealized loss		(2,896,487	)		(1,256,464	)		(4,152,951	)		(162,061	)		(25,618	)		(187,679	)
Municipal
Fair value		11,502,050			2,079,831			13,581,881			2,676,052			269,247			2,945,299
Amortized cost		14,590,996			2,964,697			17,555,693			2,695,269			273,391			2,968,660
Unrealized loss		(3,088,946	)		(884,866	)		(3,973,812	)		(19,217	)		(4,144	)		(23,361	)
Redeemable preferred stock
Fair value		188,921			—			188,921			—			—			—
Amortized cost		215,805			—			215,805			—			—			—
Unrealized loss		(26,884	)		—			(26,884	)		—			—			—
Total
Fair value		61,194,560			21,380,131			82,574,691			29,899,225			2,680,468			32,579,693
Amortized cost		68,608,894			25,325,968			93,934,862			30,333,472			2,770,476			33,103,948
Unrealized loss		(7,414,334	)	$	(3,945,837	)	$	(11,360,171	)	$	(434,247	)	$	(90,008	)	$	(524,255	)

The fixed income portfolio contained 236 securities in an unrealized loss position as of December 31, 2022. Of these 236 securities, 45 have been in an unrealized loss position for 12 consecutive months or longer and represent $3,945,837 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 year ended December 31, 2022 and 2021. For all fixed income securities at a loss at December 31, 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 maturity. The fixed income securities in an unrealized loss position were not other-than-temporarily impaired at December 31, 2022 and December 31, 2021.

As required by law, certain fixed maturity investments amounting to $3,290,386 and $3,823,752 at December 31, 2022 and 2021, respectively, were on deposit with either regulatory authorities or banks.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

Net unrealized (losses) gains for the twelve months ended December 31, 2022 and 2021 for equity securities held as of December 31, 2022 and  December 31, 2021 were $(4,706,405) and $2,801,991, respectively.

OTHER INVESTED ASSETS

Other invested assets as of December 31, 2022 and  December 31, 2021 were $4,722,137 and $3,086,568, respectively.

Other invested assets include membership in the Federal Home Loan Bank of Chicago (FHLBC), which occurred in February 2018. As of December 31, 2022 and 2021, our investment in FHLBC stock was carried at cost of $425,000 and $300,000, respectively. Due to the nature of our membership in the FHLBC, the carrying amount approximates fair value.

In addition, other invested assets as of December 31, 2022, include privately held investments of $214,630 and notes receivable of $4,082,507, compared to $104,200 and $2,682,368, respectively, at December 31, 2021. Most of the notes bear interest between 3.9% and 7.25%. One note has interest at prime minus 25 basis points with a floor of 4.0%. As of December 31, 2022, $244,046 in note payments were received and $10,496 in accrued escrow and interest receivable was recorded. Comparatively, as of December 31, 2021, $315,077 in note payments were received and $12,075 in accrued escrow and interest receivable were recorded. The Company had no allowance recorded related to uncollectible note receivables at December 31, 2022 and 2021.

During the fourth quarter of 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 December 31, 2022, no calls were received.

PROPERTY HELD FOR INVESTMENT

As of December 31, 2022, investment property comprised of one storage facility in Davenport, Iowa and 58 rental units consisting of single-family homes, duplexes, condominiums, senior living units, and a seven-plex property. These rentals are in Colona, Illinois; East Moline, Illinois; Kissimmee, Florida; Milan, Illinois; Moline, Illinois; Rock Island, Illinois; Silvis, Illinois; and Le Claire, Iowa. Property held for investment is net of accumulated depreciation of $609,282 and $464,713 as of December 31, 2022, and 2021, respectively. Related depreciation expense was $169,199 and $145,237 for the years ended December 31, 2022, and 2021, respectively.