Investments

3 Months Ended

Mar. 31, 2022

2. INVESTMENTS

The Company’s investments are primarily composed of fixed income debt securities and common and preferred stock 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 March 31,
							Net Realized
	Proceeds		Gains		Losses		Gains (Losses)
2022
Fixed maturity securities	$	2,445,125	$	9,727	$	—	$	9,727
Common stocks		636,104		204,190		(8,070)		196,120
Preferred stocks		365,508		7,745		(6,007)		1,738
2021
Fixed maturity securities	$	3,484,432	$	1,319	$	(29)	$	1,290
Common stocks		687,015		212,361		(32,397)		179,964
Preferred stocks		78,469		5,455		—		5,455

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



	Amortized Cost		Fair Value
Due in one year or less	$	2,096,646	$	2,126,660
Due after one year through five years		15,916,814		15,824,375
Due after five years through 10 years		17,443,937		16,883,168
Due after 10 years		28,207,144		27,379,734
Asset and mortgage backed securities without a specific due date		40,585,715		39,433,239
Redeemable preferred stocks		215,805		225,244
Total fixed maturity securities	$	104,466,061	$	101,872,420

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 March 31, 2022 and December 31, 2021:



					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2022
Fixed maturity securities:
U.S. Treasury	$	1,353,485	$	1,293,070	$	—	$	(60,415)
MBS/ABS/CMBS		40,585,715		39,433,239		69,792		(1,222,268)
Corporate		39,892,850		39,267,144		652,554		(1,278,260)
Municipal		22,418,206		21,653,723		321,137		(1,085,621)
Redeemable preferred stock		215,805		225,244		9,439		—
Total fixed maturity securities	$	104,466,061	$	101,872,420	$	1,052,922	$	(3,646,564)



					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 $13,743,581 and $14,351,099, residential mortgage backed securities of $14,488,268 and $14,975,101, and commercial mortgage backed securities of $11,201,390 and $11,697,671 at March 31, 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 March 31, 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.



	March 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	$	638,508	$	654,563	$	1,293,071	$	391,250	$	291,891	$	683,141
Amortized cost		653,051		700,435		1,353,486		400,408		300,061		700,469
Unrealized loss		(14,543)		(45,872)		(60,415)		(9,158)		(8,170)		(17,328)
MBS/ABS/CMBS
Fair value		27,475,180		6,371,179		33,846,359		20,403,757		1,124,095		21,527,852
Amortized cost		28,108,983		6,959,644		35,068,627		20,647,568		1,176,171		21,823,739
Unrealized loss		(633,803)		(588,465)		(1,222,268)		(243,811)		(52,076)		(295,887)
Corporate
Fair value		17,256,927		2,067,868		19,324,795		6,428,166		995,235		7,423,401
Amortized cost		18,335,521		2,267,534		20,603,055		6,590,227		1,020,853		7,611,080
Unrealized loss		(1,078,594)		(199,666)		(1,278,260)		(162,061)		(25,618)		(187,679)
Municipal
Fair value		12,131,067		231,406		12,362,473		2,676,052		269,247		2,945,299
Amortized cost		13,174,815		273,279		13,448,094		2,695,269		273,391		2,968,660
Unrealized loss		(1,043,748)		(41,873)		(1,085,621)		(19,217)		(4,144)		(23,361)
Total
Fair value		57,501,682		9,325,016		66,826,698		29,899,225		2,680,468		32,579,693
Amortized cost		60,272,370		10,200,892		70,473,262		30,333,472		2,770,476		33,103,948
Unrealized loss	$	(2,770,688)	$	(875,876)	$	(3,646,564)	$	(434,247)	$	(90,008)	$	(524,255)

The fixed income portfolio contained 146 securities in an unrealized loss position as of March 31, 2022. Of these 146 securities, 18 have been in an unrealized loss position for 12 consecutive months or longer and represent $875,876 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 first three months ended March 31, 2022. For all fixed income securities at a loss at March 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 at maturity. The fixed income securities in an unrealized loss position were not other-than-temporarily impaired at March 31, 2022 and December 31, 2021.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

Net unrealized (losses) for the three months ended March 31, 2022 for equity securities held as of March 31, 2022 were $(1,292,692). Net unrealized gains for the three months ended March 31, 2021 for equity securities held as of March 31, 2021 were $876,316.

Other Invested Assets

Other invested assets as of March 31, 2022 and December 31, 2021 were $3,175,674 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 March 31, 2022 and December 31, 2021, our investment in FHLBC stock was carried at cost of $300,000 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 March 31, 2022 include privately held investments of $1,816,228 and notes receivable of $1,059,446, compared to $1,720,502 and $1,066,066, respectively, at December 31, 2021. The notes bear interest

between 3.9% and 6.5%. As of March 31, 2022, $9,209 in note payments were received and $2,588 in accrued escrow and interest receivable was recorded. Comparatively, as of March 31, 2021, no note payments were received and $4,325 in accrued escrow and interest receivable was recorded. The Company had no allowance recorded related to uncollectible note receivables at March 31, 2022 and December 31, 2021.

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 March 31, 2022 and December 31, 2021, no calls were received.