Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2023

Premium Finance Contracts Related Receivable And Allowance For Credit Losses

Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

4. Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

Premium Finance Contracts and Related Receivable represent monthly payments due on insurance premium finance contracts. The Company finances insurance policies over periods from three months to one year for businesses and consumers who make an initial down payment of, on average, 25 percent of the insurance policy amounts. The entire amount of the contract is recorded including amounts due for finance charges and services charges. These receivables are reported net of unearned interest for financial statements purposes. Amounts due from agents represent balances related to (1) an agent’s unearned commission due to a policy cancellation and (2) down payments collected by the agents on behalf of the insured, which are due to us. Receivables from insurance premium finance contracts cancelled are due from the insurance companies.

At June 30, 2023 and December 31, 2022, premium finance contract and agents’ receivable consists of the following:

Description	June 30, 2023			December 31, 2022
Insurance premium finance contracts outstanding	$	52,802,001		$	45,520,349
Insurance premium finance contracts cancelled		5,403,805			6,005,601
Insurance Premium finance contracts gross		58,205,806			51,525,950
Amounts due from agents		830,815			645,648
Less: Unearned interest		(2,027,384	)		(1,567,197	)
Insurance premium finance contracts net		57,009,237			50,604,401
Less: Allowance for credit losses		(1,230,263	)		(1,129,498	)
Total	$	55,778,974		$	49,474,903

The allowance for credit losses at June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023		December 31, 2022
Allowance for premium finance contracts	$	1,064,827	$	1,000,000
Allowance for amounts due from agents		165,436		129,498

Activity in the allowance for credit losses for the six months ended June 30, 2023 and the year ended December 31, 2022 are as follows:

	June 30, 2023			December 31, 2022
Balance at the beginning of the period	$	1,129,498		$	1,193,757
Current year additions to the allowance		719,000			1,347,475
Direct write-downs charged against the allowance		(775,478	)		(1,513,814	)
Recoveries of amounts previously charged off		157,243			102,080
Balance at the end of the period	$	1,230,263		$	1,129,498

The Company maintains its allowance at gross amounts, which includes allowances for write-offs of unearned revenues. Provisions and write-offs per this footnote are displayed at gross amounts, which include provisions and write-offs of unearned revenues. These write-offs are appropriately split between the principal (i.e. provision for credit losses) and interest/fee (i.e. contra-revenue) portions on the income statement. The following tables show a reconciliation between the total provision per the footnote and the provision for credit losses on the consolidated statement of operations:

	For the three months ended June 30,
	2023 (unaudited)			2022 (unaudited)
Current additions to the allowance	$	320,000		$	380,000
Less: Contra-revenues		(165,072	)		(108,856	)
Provision for credit losses	$	154,928		$	271,144

	For the six months ended June 30,
	2023 (unaudited)			2022 (unaudited)
Current additions to the allowance	$	719,000		$	715,000
Less: Contra-revenues		(372,219	)		(275,751	)
Provisions for credit losses	$	346,781		$	439,249

The aging analyses of past-due contract receivables as of June 30, 2023 and December 31, 2022 are as follows:

As of June 30, 2023	30–59 Days		60–89 Days		90-119 Days		Greater Than 120 Days		Total Past-Due		Current		Grand Total
Premium finance contracts:
Outstanding	$	96,131	$	48,459	$	3,459	$	8,443	$	156,492	$	52,645,509	$	52,802,001
Cancelled		733,876		926,829		377,334		1,657,399		3,695,438		1,708,367		5,403,805
Total	$	830,007	$	975,288	$	380,793	$	1,665,842	$	3,851,930	$	54,353,876	$	58,205,806

As of December 31, 2022	30–59 Days		60–89 Days		90-119 Days		Greater Than 120 Days		Total Past-Due		Current		Grand Total
Premium finance contracts:
Outstanding	$	175,972	$	61,678	$	22,360	$	11,270	$	271,280	$	45,249,069	$	45,520,349
Cancelled		1,363,841		850,939		340,619		720,429		3,275,828		2,729,773		6,005,601
Total	$	1,539,813	$	912,617	$	362,979	$	731,699	$	3,547,108	$	47,978,842	$	51,525,950