XML 21 R9.htm IDEA: XBRL DOCUMENT

Investments

6 Months Ended

Jun. 30, 2021

Investments

3 - Investments

Note 3 - Investments

Fixed-Maturity Securities

The amortized cost, estimated fair value, and unrealized gains and losses on investments in fixed-maturity securities classified as available-for-sale as of June 30, 2021 and December 31, 2020 are summarized as follows:

		June 30, 2021

										Gross Unrealized Losses
		Cost or Amortized				Gross Unrealized				Less than 12				More than 12				Estimated Fair				Net Unrealized
Category		Cost				Gains				Months				Months				Value				Gains

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	2,008,936			$	11,844			$	-			$	-			$	2,020,780			$	11,844

Political subdivisions of States, Territories and Possessions			8,587,648				275,691				(32,208	)			-				8,831,131				243,483

Corporate and other bonds Industrial and miscellaneous			97,021,903				8,314,462				(16,838	)			-				105,319,527				8,297,624

Residential mortgage and other asset backed securities (1)			21,279,363				546,118				(2,560	)			(77,707	)			21,745,214				465,851
Total		$	128,897,850			$	9,148,115			$	(51,606	)		$	(77,707	)		$	137,916,652			$	9,018,802

(1)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York (“FHLBNY”) (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of June 30, 2021, the estimated fair value of the eligible investments was approximately $10,837,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2021, there was no outstanding balance on the FHLBNY credit line.

		December 31, 2020

										Gross Unrealized Losses
		Cost or Amortized				Gross Unrealized				Less than 12				More than 12				Estimated Fair				Net Unrealized
Category		Cost				Gains				Months				Months				Value				Gains

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	3,020,710			$	29,190			$	-			$	-			$	3,049,900			$	29,190

Political subdivisions of States, Territories and Possessions			5,287,561				355,541				-				-			$	5,643,102				355,541

Corporate and other bonds Industrial and miscellaneous			108,573,422				11,634,123				(13,216	)			-			$	120,194,329				11,620,907

Residential mortgage and other asset backed securities (1)			28,163,891				617,368				(7,371	)			(111,947	)		$	28,661,941				498,050
Total		$	145,045,584			$	12,636,222			$	(20,587	)		$	(111,947	)		$	157,549,272			$	12,503,688

(1)

KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York (“FHLBNY”) (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of December 31, 2020, the estimated fair value of the eligible investments was approximately $11,391,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2020, there was no outstanding balance on the FHLBNY credit line.

A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of June 30, 2021 and December 31, 2020 is shown below:

		June 30, 2021								December 31, 2020
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value

Less than one year		$	7,198,128			$	7,263,139			$	8,559,005			$	8,668,064
One to five years			43,761,291				47,227,835				44,137,567				47,745,430
Five to ten years			44,705,071				49,293,510				55,508,712				63,159,775
More than 10 years			11,953,997				12,386,954				8,676,409				9,314,062
Residential mortgage and other asset backed securities			21,279,363				21,745,214				28,163,891				28,661,941
Total		$	128,897,850			$	137,916,652			$	145,045,584			$	157,549,272

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

Equity Securities

The cost and estimated fair value of, and gross unrealized gains and losses on, investments in equity securities as of June 30, 2021 and December 31, 2020 are as follows:

		June 30, 2021
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value

Equity Securities:
Preferred stocks		$	18,344,078			$	1,626,038			$	(87,248	)		$	19,882,868
Common stocks, mutual funds, and exchange traded funds			14,335,646				2,120,909				(21,492	)			16,435,063
Total		$	32,679,724			$	3,746,947			$	(108,740	)		$	36,317,931

		December 31, 2020
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value

Equity Securities:
Preferred stocks		$	18,097,942			$	853,277			$	(426,942	)		$	18,524,277
Common stocks, mutual funds, and exchange traded funds			14,473,224				1,820,512				(404,700	)			15,889,036
Total		$	32,571,166			$	2,673,789			$	(831,642	)		$	34,413,313

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of June 30, 2021 and December 31, 2020 are as follows:

		June 30, 2021												December 31, 2020
						Gross				Estimated								Gross				Estimated
Category		Cost				Gains				Fair Value				Cost				Gains				Fair Value

Other Investments:
Hedge fund		$	3,999,381			$	2,876,584			$	6,875,965			$	1,999,381			$	1,369,245			$	3,368,626

Real estate limited partnership			107,092				-				107,092				150,000				-				150,000
Total		$	4,106,473			$	2,876,584			$	6,983,057			$	2,149,381			$	1,369,245			$	3,518,626

Held-to-Maturity Securities

The cost or amortized cost and estimated fair value of, and unrealized gross gains and losses on, investments in held-to-maturity fixed-maturity securities as of June 30, 2021 and December 31, 2020 are summarized as follows:

		June 30, 2021

										Gross Unrealized Losses
		Cost or Amortized				Gross Unrealized				Less than 12				More than 12				Estimated Fair				Net Unrealized
Category		Cost				Gains				Months				Months				Value				Gains

Held-to-Maturity Securities:
U.S. Treasury securities		$	729,618			$	211,439			$	-			$	-			$	941,057			$	211,439

Political subdivisions of States, Territories and Possessions			998,336				36,789				-				-				1,035,125				36,789

Exchange traded debt			949,142				35,289				(1,684	)			-				982,747				33,605

Corporate and other bonds Industrial and miscellaneous			7,145,703				358,265				(4,580	)			-				7,499,388				353,685

Total		$	9,822,799			$	641,782			$	(6,264	)		$	-			$	10,458,317			$	635,518

		December 31, 2020

		Cost or				Gross				Gross Unrealized Losses								Estimated				Net
		Amortized				Unrealized				Less than 12				More than 12				Fair				Unrealized
Category		Cost				Gains				Months				Months				Value				Gains

Held-to-Maturity Securities:
U.S. Treasury securities		$	729,595			$	319,714			$	-			$	-			$	1,049,309			$	319,714

Political subdivisions of States, Territories and Possessions			998,428				50,917				-				-				1,049,345				50,917

Corporate and other bonds Industrial and miscellaneous			5,640,792				455,378				-				-				6,096,170				455,378

Total		$	7,368,815			$	826,009			$	-			$	-			$	8,194,824			$	826,009

Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum funds requirements.

A summary of the amortized cost and estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of June 30, 2021 and December 31, 2020 is shown below:

		June 30, 2021								December 31, 2020
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value

Less than one year		$	899,352			$	916,678			$	-			$	-
One to five years			1,699,763				1,822,853				2,598,193				2,777,936
Five to ten years			1,508,198				1,701,590				1,502,603				1,727,316
More than 10 years			5,715,486				6,017,196				3,268,019				3,689,572
Total		$	9,822,799			$	10,458,317			$	7,368,815			$	8,194,824

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

Investment Income

Major categories of the Company’s net investment income are summarized as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2021				2020				2021				2020

Income:
Fixed-maturity securities		$	1,459,342			$	1,394,284			$	2,950,469			$	2,841,771
Equity securities			351,100				243,344				708,411				496,868
Cash and cash equivalents			634				43,936				1,558				88,159
Other investments			(42,908	)			-				(42,908	)			-
Total			1,768,168				1,681,564				3,617,530				3,426,798
Expenses:
Investment expenses			90,093				69,558				156,259				148,948
Net investment income		$	1,678,075			$	1,612,006			$	3,461,271			$	3,277,850

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $625,000 for the six month ended June 30, 2021 and $-0- for the six months ended June 30, 2020.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $22,276,142 and $19,174,048 for the six months ended June 30, 2021 and 2020, respectively.

Proceeds from the sale of equity securities were $9,569,363 and $6,479,813 for the six months ended June 30, 2021 and 2020, respectively.

The Company’s net gains (losses) on investments are summarized as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2021				2020				2021				2020
Realized Gains (Losses)

Fixed-maturity securities:
Gross realized gains		$	367,756			$	16,087			$	777,296			$	252,577
Gross realized losses			(26,255	)			(164,582	)			(41,499	)			(196,925	)
			341,501				(148,495	)			735,797				55,652

Equity securities:
Gross realized gains			442,798				125,310				1,375,948				444,671
Gross realized losses			(67,276	)			(11,350	)			(267,488	)			(225,165	)
			375,522				113,960				1,108,460				219,506

Net realized gains (losses)			717,023				(34,535	)			1,844,257				275,158

Unrealized Gains (Losses)

Equity securities:
Gross gains			920,863				2,177,605				1,924,072				-
Gross losses							-				-				(3,979,115	)
			920,863				2,177,605				1,924,072				(3,979,115	)

Other investments:
Gross gains			677,375				554,798				1,507,339				-
Gross losses			-				-				-				(42,593	)
			677,375				554,798				1,507,339				(42,593	)

Net unrealized gains (losses)			1,598,238				2,732,403				3,431,411				(4,021,708	)

Net gains (losses) on investments		$	2,315,261			$	2,697,868			$	5,275,668			$	(3,746,550	)

Impairment Review

Impairment of investment securities results in a charge to operations when a market decline below cost is deemed to be other-than-temporary. The Company regularly reviews its fixed-maturity securities to evaluate the necessity of recording impairment losses for other-than-temporary declines in the estimated fair value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in comprehensive income (loss). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security based on cash flow projections. For held-to-maturity fixed-maturity securities, the amount of OTTI recorded in comprehensive income (loss) for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security based on timing of future estimated cash flows of the security.

OTTI losses are recorded in the consolidated statements of operations and comprehensive income (loss) as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. At June 30, 2021 and December 31, 2020, there were 15 and 16 fixed-maturity securities, respectively, that accounted for the gross unrealized losses. The Company determined that none of the unrealized losses were deemed to be OTTI for its portfolio of investments for the six months ended June 30, 2021 and 2020. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to hold the investment for a period of time sufficient to allow for an anticipated recovery of estimated fair value to the Company’s cost basis.

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at June 30, 2021 as follows:

		June 30, 2021
		Less than 12 months												12 months or more												Total
		Estimated								No. of				Estimated								No. of				Estimated
		Fair				Unrealized				Positions				Fair				Unrealized				Positions				Fair				Unrealized
Category		Value				Losses				Held				Value				Losses				Held				Value				Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	-			$	-				-			$	-			$	-				-			$	-			$	-

Political subdivisions of States, Territories and Possessions			1,073,200				(32,208	)			1				-				-				-				1,073,200				(32,208	)

Corporate and other bonds industrial and miscellaneous			1,084,560				(16,838	)			1				-				-				-				1,084,560				(16,838	)

Residential mortgage and other asset backed securities			3,083,104				(2,560	)			3				3,237,151				(77,707	)			10				6,320,255				(80,267	)

Total fixed-maturity securities		$	5,240,864			$	(51,606	)			5			$	3,237,151			$	(77,707	)			10			$	8,478,015			$	(129,313	)

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2020 as follows:

		December 31, 2020
		Less than 12 months												12 months or more												Total
		Estimated								No. of				Estimated								No. of				Estimated
		Fair				Unrealized				Positions				Fair				Unrealized				Positions				Fair				Unrealized
Category		Value				Losses				Held				Value				Losses				Held				Value				Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	-			$	-				-			$	-			$	-				-			$	-			$	-

Political subdivisions of States, Territories and Possessions			-				-				-				-				-				-				-				-

Corporate and other bonds industrial and miscellaneous			1,006,901				(13,216	)			1				-				-				-				1,006,901				(13,216	)

Residential mortgage and other asset backed securities			6,137,522				(7,371	)			5				3,735,732				(111,947	)			10				9,873,254				(119,318	)

Total fixed-maturity securities		$	7,144,423			$	(20,587	)			6			$	3,735,732			$	(111,947	)			10			$	10,880,155			$	(132,534	)