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Investments

9 Months Ended

Sep. 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 September 30, 2021 and December 31, 2020 are summarized as follows:

		September 30, 2021

		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

Fixed-Maturity Securities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies		$	2,002,935			$	3,945			$	-			$	-			$	2,006,880			$	3,945

Political subdivisions of States,
Territories and Possessions			14,384,428				259,721				(89,844	)			-				14,554,305				169,877

Corporate and other bonds
Industrial and miscellaneous			88,059,505				7,391,053				(27,577	)			-				95,422,981				7,363,476

Residential mortgage and other
asset backed securities			40,988,538				561,035				(243,639	)			(858	)			41,305,076				316,538
Total		$	145,435,406			$	8,215,754			$	(361,060	)		$	(858	)		$	153,289,242			$	7,853,836

		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

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 September 30, 2021 KICO did not have any securities pledged as collateral. 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 September 30, 2021 and December 31, 2020 is shown below:

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

Less than one year		$	4,161,386			$	4,184,568			$	8,559,005			$	8,668,064
One to five years			40,877,043				43,947,314				44,137,567				47,745,430
Five to ten years			42,375,537				46,545,324				55,508,712				63,159,775
More than 10 years			17,032,902				17,306,960				8,676,409				9,314,062
Residential mortgage and other asset backed securities			40,988,538				41,305,076				28,163,891				28,661,941
Total		$	145,435,406			$	153,289,242			$	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 September 30, 2021 and December 31, 2020 are as follows:

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

Equity Securities:
Preferred stocks		$	21,934,910			$	1,123,310			$	(157,431	)		$	22,900,789
Common stocks
and exchange traded funds			15,610,331				1,620,343				(70,591	)			17,160,083
Total		$	37,545,241			$	2,743,653			$	(228,022	)		$	40,060,872

		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
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 September 30, 2021 and December 31, 2020 are as follows:

		September 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			$	3,379,730			$	7,379,111			$	1,999,381			$	1,369,245			$	3,368,626

Real estate limited partnership			-				-				-				150,000				-				150,000
Total		$	3,999,381			$	3,379,730			$	7,379,111			$	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 September 30, 2021 and December 31, 2020 are summarized as follows:

		September 30, 2021
		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		$	729,630			$	210,466			$	-			$	-			$	940,096			$	210,466

Political subdivisions of States,
Territories and Possessions			998,296				29,744				-				-				1,028,040				29,744

Exchange traded debt			304,111				-				(16,611	)							287,500				(16,611	)

Corporate and other bonds
Industrial and miscellaneous			7,134,946				315,285				(6,363	)			-				7,443,868				308,922

Total		$	9,166,983			$	555,495			$	(22,974	)		$	-			$	9,699,504			$	532,521

		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 September 30, 2021 and December 31, 2020 is shown below:

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

Less than one year		$	1,394,102			$	1,420,414			$	-			$	-
One to five years			1,205,500				1,301,973				2,598,193				2,777,936
Five to ten years			1,511,072				1,686,289				1,502,603				1,727,316
More than 10 years			5,056,309				5,290,828				3,268,019				3,689,572
Total		$	9,166,983			$	9,699,504			$	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								Nine months ended
		September 30,								September 30,
		2021				2020				2021				2020

Income:
Fixed-maturity securities		$	1,288,277			$	1,264,633			$	4,238,746			$	4,106,404
Equity securities			436,833				290,834				1,145,244				787,702
Cash and cash equivalents			9,636				1,834				11,194				89,993
Other investments			42,908				-				-
Total			1,777,654				1,557,301				5,395,184				4,984,099
Expenses:
Investment expenses			101,058				63,215				257,317				212,163
Net investment income		$	1,676,596			$	1,494,086			$	5,137,867			$	4,771,936

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $1,312,500 for the nine months ended September 30, 2021 and $500,000 for the nine months ended September 30, 2020.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $33,335,036 and $29,666,158for the nine months ended September 30, 2021 and 2020, respectively.

Proceeds from the sale of equity securities were $14,507,384and $8,103,697for the nine months ended September 30, 2021 and 2020, respectively.

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2021				2020				2021				2020
Realized Gains (Losses)

Fixed-maturity securities:
Gross realized gains		$	343,773			$	714,162			$	1,121,068			$	864,814
Gross realized losses			(8,103	)			(107,193	)			(49,601	)			(304,118	)
			335,670				606,969				1,071,467				560,696

Equity securities:
Gross realized gains			639,626				199,439				2,015,574				644,111
Gross realized losses			(26,031	)			(209,069	)			(293,519	)			(449,916	)
			613,595				(9,630	)			1,722,055				194,195

Other investments:
Gross realized gains			83,798				-				83,798				-
Gross realized losses			-				-				-				-
			83,798				-				83,798				-

Net realized gains			1,033,063				597,339				2,877,320				754,891

Unrealized Gains (Losses)

Equity securities:
Gross gains			(1,331,675	)			1,223,779				592,397				-
Gross losses											-				(2,637,730	)
			(1,331,675	)			1,223,779				592,397				(2,637,730	)

Other investments:
Gross gains			503,146				286,758				2,010,485				244,165
Gross losses			-				-				-				-
			503,146				286,758				2,010,485				244,165

Net unrealized gains (losses)			(828,529	)			1,510,537				2,602,882				(2,393,565	)

Net gains (losses) on investments		$	204,534			$	2,107,876			$	5,480,202			$	(1,638,674	)

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 September 30, 2021 and December 31, 2020, there were 25 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 nine months ended September 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 September 30, 2021 as follows:

		September 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			9,106,494				(89,844	)			6				-				-				-				9,106,494				(89,844	)

Corporate and other
bonds industrial and
miscellaneous			1,071,100				(27,577	)			1				-				-				-				1,071,100				(27,577	)

Residential mortgage and other
asset backed securities			27,039,698				(243,639	)			17				12,436				(858	)			1				27,052,134				(244,497	)

Total fixed-maturity
securities		$	37,217,292			$	(361,060	)			24			$	12,436			$	(858	)			1			$	37,229,728			$	(361,918	)

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	)