Note 2 - Investments

9 Months Ended

Sep. 30, 2023

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)
2023
Fixed maturity securities	$	1,443,108	$	—	$	(6,863	)	$	(6,863	)
Common stocks		1,807,080		395,780		(188,989	)		206,791
Preferred stocks		—		—		—			—
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	)

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2023
Fixed maturity securities	$	9,785,891	$	—	$	(58,761	)	$	(58,761	)
Common stocks		3,831,416		800,571		(496,207	)		304,364
Preferred stocks		337,440		29,371		(6,599	)		22,772
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	)

The amortized cost and estimated fair value of fixed income securities at September 30, 2023, by contractual maturity, are shown as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	3,497,651	$	3,445,857
Due after one year through five years		14,248,234		13,369,458
Due after five years through 10 years		24,218,640		21,394,002
Due after 10 years		24,913,629		19,062,474
Asset and mortgage-backed securities without a specific due date		45,801,155		41,653,431
Redeemable preferred stocks		186,393		175,200
Total fixed maturity securities	$	112,865,702	$	99,100,422

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, 2023 and December 31, 2022:

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2023
Fixed maturity securities:
U.S. Treasury	$	1,352,015	$	1,265,703	$	—	$	(86,312	)
MBS/ABS/CMBS		45,801,155		41,653,431		56,434		(4,204,158	)
Corporate		44,540,438		39,523,491		2,882		(5,019,829	)
Municipal		20,985,701		16,482,597		15,585		(4,518,689	)
Redeemable preferred stock		186,393		175,200		—		(11,193	)
Total fixed maturity securities	$	112,865,702	$	99,100,422	$	74,901	$	(13,840,181	)

					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	)

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 $7,261,802 and $10,567,904, residential mortgage-backed securities of $28,268,594 and $19,288,540, and commercial mortgage-backed securities of $6,123,034 and $8,946,897 at September 30, 2023 and December 31, 2022, respectively. The Company has recorded no CECL allowances related to available for sale investments at September 30, 2023 and December 31, 2022, respectively.

ANALYSIS

The following tables display the total value of securities that were in an unrealized loss position as of September 30, 2023 and December 31, 2022. 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, 2023									December 31, 2022
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	—		$	1,265,703		$	1,265,703		$	615,367		$	637,594		$	1,252,961
Amortized cost		—			1,352,015			1,352,015			652,424			700,329			1,352,753
Unrealized loss		—			(86,312	)		(86,312	)		(37,057	)		(62,735	)		(99,792	)
MBS/ABS/CMBS
Fair value		14,212,477			24,654,698			38,867,175			21,199,819			12,833,310			34,033,129
Amortized cost		14,905,279			28,166,054			43,071,333			22,564,779			14,575,082			37,139,861
Unrealized loss		(692,802	)		(3,511,356	)		(4,204,158	)		(1,364,960	)		(1,741,772	)		(3,106,732	)
Corporate
Fair value		7,432,556			31,742,390			39,174,946			27,688,403			5,829,396			33,517,799
Amortized cost		7,772,987			36,421,788			44,194,775			30,584,890			7,085,860			37,670,750
Unrealized loss		(340,431	)		(4,679,398	)		(5,019,829	)		(2,896,487	)		(1,256,464	)		(4,152,951	)
Municipal
Fair value		5,123,048			11,123,964			16,247,012			11,502,050			2,079,831			13,581,881
Amortized cost		5,314,363			15,451,338			20,765,701			14,590,996			2,964,697			17,555,693
Unrealized loss		(191,315	)		(4,327,374	)		(4,518,689	)		(3,088,946	)		(884,866	)		(3,973,812	)
Redeemable preferred stock
Fair value		153,300			21,900			175,200			188,921			—			188,921
Amortized cost		161,549			24,844			186,393			215,805			—			215,805
Unrealized loss		(8,249	)		(2,944	)		(11,193	)		(26,884	)		—			(26,884	)
Total
Fair value		26,921,381			68,808,655			95,730,036			61,194,560			21,380,131			82,574,691
Amortized cost		28,154,178			81,416,039			109,570,217			68,608,894			25,325,968			93,934,862
Unrealized loss	$	(1,232,797	)	$	(12,607,384	)	$	(13,840,181	)	$	(7,414,334	)	$	(3,945,837	)	$	(11,360,171	)

The fixed income portfolio contained 260 securities in an unrealized loss position as of September 30, 2023. Of these 260 securities, 204 have been in an unrealized loss position for 12 consecutive months or longer and represent $12,607,384 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. Current unrealized losses are the result of rising interest rates. 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 CECL allowances recognized in net earnings during the nine months ended September 30, 2023 and no other-than-temporary impairments losses as of  September 30, 2022. 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.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

Net unrealized losses and gains recognized during the three and nine months ended September 30, 2023 on equity securities held as of September 30, 2023 were unrealized losses of $1,062,332 and unrealized gains of $279,100. 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.

Other Invested Assets

Other invested assets as of September 30, 2023 and December 31, 2022 were $7,512,170 and $4,722,137, respectively. Other invested assets as of  September 30, 2023 include privately held investments of $1,572,162, notes receivable of $5,515,009, and a $425,000 membership in the Federal Home Loan Bank of Chicago (FHLBC). As of  December 31, 2022, privately held investments were $214,630, notes receivable were $4,082,507, and the membership in FHLBC was $425,000.

As of  September 30, 2023, privately held investments are comprised of a $1,107,132 limited partnership carried at fair value, a $250,000 SAFE investment carried at cost, and $215,030 in stock carried at fair value. 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. On May 31, 2023, we received a call for $1.3 million for a limited partnership from the private investment fund. Our balance available for future endeavors with the private investment fund is $8.7 million as of  September 30, 2023. As of  December 31, 2022, no calls were received. As of  December 31, 2022, the privately held investments were entirely stock carried at fair value.

Notes receivable are carried at outstanding value plus accrued interest. As of  September 30, 2023, most of the notes receivable bear interest between 3.9% and 8.25%. One note has interest at prime minus 25 basis points with a floor of 4.0%. For the nine months ended September 30, 2023, $33,608 in note payments were received and $8,025 in accrued principal and interest receivable was recorded. Comparatively, as of December 31, 2022, $244,046 in note payments were received and $10,496 in accrued principal and interest receivable was recorded. The Company had $39,000 in CECL allowances recorded related to uncollectible note receivables at  September 30, 2023 and no CECL allowance at  December 31, 2022.

The membership in the FHLBC is carried at cost.