Note 2 - Investments

9 Months Ended

Sep. 30, 2024

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)
2024
Fixed maturity securities	$	2,924,552	$	—	$	—		$	—
Common stocks		1,208,768		390,453		(70,800	)		319,653
Preferred stocks		309,756		334		(117	)		217
2023
Fixed maturity securities	$	1,443,108	$	—	$	(6,863	)	$	(6,863	)
Common stocks		1,807,080		395,780		(188,989	)		206,791
Preferred stocks		—		—		—			—

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2024
Fixed maturity securities	$	11,985,012	$	8,512	$	(30,092	)	$	(21,580	)
Common stocks		2,033,174		673,559		(154,234	)		519,325
Preferred stocks		679,644		1,743		(31,952	)		(30,209	)
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

The amortized cost and estimated fair value of fixed income securities at  September 30, 2024, by contractual maturity, are shown as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	3,251,814	$	3,203,143
Due after one year through five years		17,273,034		16,970,351
Due after five years through 10 years		25,337,861		24,748,130
Due after 10 years		26,050,171		22,497,708
Asset and mortgage-backed securities without a specific due date		48,349,132		47,141,221
Redeemable preferred stocks		186,393		183,280
Total fixed maturity securities	$	120,448,405	$	114,743,833

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, 2024 and December 31, 2023:

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2024
Fixed maturity securities:
U.S. Treasury	$	1,351,018	$	1,326,055	$	—	$	(24,963	)
MBS/ABS/CMBS		48,349,132		47,141,221		716,346		(1,924,257	)
Corporate		47,980,649		46,192,658		548,532		(2,336,523	)
Municipal		22,581,213		19,900,619		190,410		(2,871,004	)
Redeemable preferred stock		186,393		183,280		311		(3,424	)
Total fixed maturity securities	$	120,448,405	$	114,743,833	$	1,455,599	$	(7,160,171	)

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2023
Fixed maturity securities:
U.S. Treasury	$	1,351,768	$	1,289,774	$	—	$	(61,994	)
MBS/ABS/CMBS		49,400,028		47,020,328		283,957		(2,663,657	)
Corporate		45,764,492		42,981,718		287,412		(3,070,186	)
Municipal		22,633,360		19,493,317		153,103		(3,293,146	)
Redeemable preferred stock		186,393		170,560		—		(15,833	)
Total fixed maturity securities	$	119,336,041	$	110,955,697	$	724,472	$	(9,104,816	)

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 $8,266,499 and $8,462,540, residential mortgage-backed securities of $33,749,479 and $32,928,128, and commercial mortgage-backed securities of $5,125,243 and $5,629,659 at September 30, 2024 and December 31, 2023, respectively. The Company has recorded no current expected credit loss (CECL) allowances related to available for sale investments at September 30, 2024 and December 31, 2023, respectively.

ANALYSIS

The following tables display the total value of securities that were in an unrealized loss position as of September 30, 2024 and December 31, 2023. 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 tables further classifies the securities based on the length of time they have been in an unrealized loss position.

	September 30, 2024									December 31, 2023
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	—		$	1,326,055		$	1,326,055		$	—		$	1,289,774		$	1,289,774
Amortized cost		—			1,351,018			1,351,018			—			1,351,768			1,351,768
Unrealized loss		—			(24,963	)		(24,963	)		—			(61,994	)		(61,994	)
MBS/ABS/CMBS
Fair value		505,082			19,582,844			20,087,926			8,345,340			24,323,865			32,669,205
Amortized cost		505,315			21,506,868			22,012,183			8,462,010			26,870,852			35,332,862
Unrealized loss		(233	)		(1,924,024	)		(1,924,257	)		(116,670	)		(2,546,987	)		(2,663,657	)
Corporate
Fair value		—			28,991,279			28,991,279			477,051			33,352,754			33,829,805
Amortized cost		—			31,327,802			31,327,802			478,370			36,421,621			36,899,991
Unrealized loss		—			(2,336,523	)		(2,336,523	)		(1,319	)		(3,068,867	)		(3,070,186	)
Municipal
Fair value		776,030			12,544,802			13,320,832			—			12,149,238			12,149,238
Amortized cost		776,741			15,415,095			16,191,836			—			15,442,384			15,442,384
Unrealized loss		(711	)		(2,870,293	)		(2,871,004	)		—			(3,293,146	)		(3,293,146	)
Redeemable preferred stock
Fair value		22,910			106,096			129,006			149,240			21,320			170,560
Amortized cost		23,005			109,425			132,430			161,549			24,844			186,393
Unrealized loss		(95	)		(3,329	)		(3,424	)		(12,309	)		(3,524	)		(15,833	)
Total
Fair value		1,304,022			62,551,076			63,855,098			8,971,631			71,136,951			80,108,582
Amortized cost		1,305,061			69,710,208			71,015,269			9,101,929			80,111,469			89,213,398
Unrealized loss	$	(1,039	)	$	(7,159,132	)	$	(7,160,171	)	$	(130,298	)	$	(8,974,518	)	$	(9,104,816	)

The fixed income portfolio contained 184 securities in an unrealized loss position as of September 30, 2024. Of these 184 securities, 178 have been in an unrealized loss position for 12 consecutive months or longer and represent $7,159,132 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 from the fixed income portfolio recognized in net earnings during the nine months ended September 30, 2024 and 2023. 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 INVESTMENTS

Net unrealized gains recognized during the three and nine months ended September 30, 2024 on equity securities and limited partnership investments were $534,212 and $1,595,251. Net unrealized (losses) gains recognized during the three and nine months ended September 30, 2023 on investments held as of September 30, 2023 were losses of $837,147 and gains of $268,677.

Other Invested Assets

Other invested assets as of September 30, 2024 and December 31, 2023 were $13,958,375 and $8,898,409, respectively. These amounts were net of $310,000 and $39,000 in CECL allowances, respectively. Other invested assets as of  September 30, 2024 include privately held investments of $2,543,637, notes receivable of $10,480,540, Funds at Lloyd's of $819,198, and a $425,000 membership in the Federal Home Loan Bank of Chicago (FHLBC). As of  December 31, 2023, privately held investments were $2,197,232, notes receivable were $5,495,979, Funds at Lloyd's were $819,198, and the membership in FHLBC was $425,000.

As of  September 30, 2024, privately held investments are comprised of a $2,078,607 limited partnership accounted for under the equity method with a three month lag, 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. As of  September 30, 2024, the Company has received calls for $1,949,134 for a limited partnership from the private investment fund. Our balance available for future endeavors with the private investment fund is $8,050,866 as of  September 30, 2024. In June 2024, we agreed to commit up to $3.0 million to another private investment fund, subject to regulatory approval, which may also be callable from time to time by such fund. As of  September 30, 2024, the Company has received no calls related to this fund. As of  December 31, 2023, privately held investments are comprised of a $1,734,622 limited partnership accounted for under the equity method with a three month lag, a $250,000 SAFE investment carried at cost, and $212,610 in stock carried at fair value. As of  December 31, 2023, the Company received calls for $1,949,134 for the limited partnership.

Notes receivable are carried at outstanding value plus accrued interest. As of  September 30, 2024, most of the notes receivable bear interest between 2.0% and 9.0%. One note has interest at prime minus 25 basis points with a floor of 4.0%. The Company had $310,000 in CECL allowances recorded related to notes receivable at  September 30, 2024.

The Funds at Lloyd's and the membership in the FHLBC are carried at cost.