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Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair Value Measurements

4. Fair Value Measurements

Note 4 - Fair Value Measurements

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation technique used by the Company to estimate the fair value of its financial instruments is the market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during period of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Included are those investments traded on an active exchange, such as the Nasdaq Global Select Market, U.S. Treasury securities and obligations of U.S. government agencies, together with corporate debt securities that are generally investment grade.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Municipal and corporate bonds, and residential mortgage-backed securities, that are traded in less active markets are classified as Level 2. These securities are valued using market price quotations for recently executed transactions.

Level 3—Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Material assumptions and factors considered in pricing investment securities and other assets may include appraisals, projected cash flows, market clearing activity or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period.

The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, the Company considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels.

The following table presents information about the Company’s investments that are measured at fair value on a recurring basis at December 31, 2021 and 2020 indicating the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

		December 31, 2021
		Level 1				Level 2				Level 3				Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	-			$	-			$	-			$	-

Political subdivisions of States, Territories and Possessions			-				17,285,514				-				17,285,514

Corporate and other bonds industrial and miscellaneous			82,500,779				510,475				-				83,011,254

Residential mortgage and other asset backed securities			-				57,783,342				-				57,783,342
Total fixed maturities			82,500,779				75,579,331				-				158,080,110
Equity securities			39,687,002				-				-				39,687,002
Total investments		$	122,187,781			$	75,579,331			$	-			$	197,767,112

		December 31, 2020
		Level 1				Level 2				Level 3				Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	3,049,900			$	-			$	-			$	3,049,900

Political subdivisions of States, Territories and Possessions			-				5,643,102				-				5,643,102

Corporate and other bonds industrial and miscellaneous			118,123,890				2,070,439				-				120,194,329

Residential mortgage and other asset backed securities			-				28,661,941				-				28,661,941
Total fixed maturities			121,173,790				36,375,482				-				157,549,272
Equity securities			34,413,313				-				-				34,413,313
Total investments		$	155,587,103			$	36,375,482			$	-			$	191,962,585

The following table sets forth the Company’s investment in a hedge fund measured at Net Asset Value (“NAV”) per share as of December 31, 2021 and 2020. The Company measures this investment at fair value on a recurring basis. Fair value using NAV per share is as follows as of the dates indicated:

Category		December 31, 2021				December 31, 2020

Other Investments:
Hedge fund		$	7,561,415			$	3,368,626

Real estate limited partnership			-				150,000
Total		$	7,561,415			$	3,518,626

The hedge fund investment is generally redeemable with at least 45 days prior written notice. The hedge fund investment is accounted for as a limited partnership by the Company. Income is earned based upon the Company’s allocated share of the partnership's changes in unrealized gains and losses to its partners. Such amounts have been recorded in the accompanying consolidated statements of operations and comprehensive (loss) income within net gains (losses) on investments.

The estimated fair value and the level of the fair value hierarchy of the Company’s debt as of December 31, 2021 and 2020, which is not measured at fair value is as follows:

		December 31, 2021
		Level 1				Level 2				Level 3				Total
Debt

Senior Notes due 2022		$	-			$	28,436,019			$	-			$	28,436,019

		December 31, 2020
		Level 1				Level 2				Level 3				Total
Debt

Senior Notes due 2022		$	-			$	27,272,727			$	-			$	27,272,727

The fair value of debt is estimated based on observable market prices when available. When observable market prices are not available, the fair values of debt are based on observable market prices of comparable instruments adjusted for differences between the observed instruments and the instruments being valued or is estimated using discounted cash flow analyses, based on current incremental borrowing rates for similar types of borrowing arrangements.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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