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Investments

9 Months Ended

Sep. 30, 2022

Investments

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, 2022 and December 31, 2021 are summarized as follows:

		September 30, 2022
		Cost or				Gross				Gross Unrealized Losses								Estimated				Net
		Amortized				Unrealized				Less than 12				More than 12				Fair				Unrealized
Category		Cost				Gains				Months				Months				Value				Losses
Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	9,946,032			$	930			$	(123	)		$	-			$	9,946,839			$	807
Political subdivisions of States, Territories and Possessions			17,117,473				-				(3,250,196	)			(590,936	)			13,276,341				(3,841,132	)
Corporate and other bonds
Industrial and miscellaneous			84,163,055				-				(9,154,182	)			(269,694	)			74,739,179				(9,423,876	)
Residential mortgage and other asset backed securities (1)			54,307,907				68,159				(4,333,707	)			(2,699,011	)			47,343,348				(6,964,559	)
Total fixed-maturity securities		$	165,534,467			$	69,089			$	(16,738,208	)		$	(3,559,641	)		$	145,305,707			$	(20,228,760	)

(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 September 30, 2022, the estimated fair value of the eligible investments was approximately $12,393,000. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, 2022 there was no outstanding balance on the FHLBNY credit line.

		December 31, 2021
		Cost or				Gross				Gross Unrealized Losses												Net
		Amortized				Unrealized				Less than 12				More than 12				Estimated Fair				Unrealized Gains/
Category		Cost				Gains				Months				Months				Value				(Losses)
Fixed-Maturity Securities:
Political subdivisions of States, Territories and Possessions		$	17,236,750			$	246,748			$	(197,984	)		$	-			$	17,285,514			$	48,764
Corporate and other bonds
Industrial and miscellaneous			80,534,769				2,603,411				(126,926	)			-				83,011,254				2,476,485
Residential mortgage and other asset backed securities			58,036,959				355,985				(489,258	)			(120,344	)			57,783,342				(253,617	)
Total fixed-maturity securities		$	155,808,478			$	3,206,144			$	(814,168	)		$	(120,344	)		$	158,080,110			$	2,271,632

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, 2022 and December 31, 2021 is shown below:

		September 30, 2022								December 31, 2021
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value
Less than one year		$	14,852,441			$	14,824,136			$	1,153,099			$	1,156,636
One to five years			44,959,185				42,305,309				43,007,110				44,914,759
Five to ten years			30,271,976				24,680,308				26,808,853				27,332,581
More than 10 years			21,142,958				16,152,606				26,802,457				26,892,792
Residential mortgage and other asset backed securities			54,307,907				47,343,348				58,036,959				57,783,342
Total		$	165,534,467			$	145,305,707			$	155,808,478			$	158,080,110

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, 2022 and December 31, 2021 are as follows:

		September 30, 2022
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value
Equity Securities:
Preferred stocks		$	16,047,207			$	-			$	(3,488,481	)		$	12,558,726
Common stocks, mutual funds, and exchange traded funds			10,728,809				103,902				(1,922,991	)			8,909,720
Total		$	26,776,016			$	103,902			$	(5,411,472	)		$	21,468,446

		December 31, 2021
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value
Equity Securities:
Preferred stocks		$	22,019,509			$	1,007,009			$	(184,617	)		$	22,841,901
Common stocks, mutual funds, and exchange traded funds			15,451,160				1,573,653				(179,712	)			16,845,101
Total		$	37,470,669			$	2,580,662			$	(364,329	)		$	39,687,002

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of September 30, 2022 and December 31, 2021 are as follows:

		September 30, 2022												December 31, 2021
						Gross				Estimated								Gross				Estimated
Category		Cost				Gains				Fair Value				Cost				Gains				Fair Value
Other Investments:
Hedge fund		$	1,987,040			$	589,232			$	2,576,272			$	3,999,381			$	3,562,034			$	7,561,415

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, 2022 and December 31, 2021 are summarized as follows:

		September 30, 2022
		Cost or				Gross				Gross Unrealized Losses								Estimated				Net
		Amortized				Unrealized				Less than 12				More than 12				Fair				Unrealized Gains/
Category		Cost				Gains				Months				Months				Value				(Losses)
Held-to-Maturity Securities:
U.S. Treasury securities		$	1,228,485			$	73,468			$	(36,802	)		$	-			$	1,265,151			$	36,666
Political subdivisions of States, Territories and Possessions			498,508				-				(1,498	)			-				497,010				(1,498	)
Exchange traded debt			304,111				-				(43,361	)			-				260,750				(43,361	)
Corporate and other bonds
Industrial and miscellaneous			5,736,079				35,503				(1,182,635	)			-				4,588,947				(1,147,132	)
Total		$	7,767,183			$	108,971			$	(1,264,296	)		$	-			$	6,611,858			$	(1,155,325	)

		December 31, 2021
		Cost or				Gross				Gross Unrealized Losses								Estimated				Net
		Amortized				Unrealized				Less than 12				More than 12				Fair				Unrealized Gains/
Category		Cost				Gains				Months				Months				Value				(Losses)
Held-to-Maturity Securities:
U.S. Treasury securities		$	729,642			$	209,633			$	-			$	-			$	939,275			$	209,633
Political subdivisions of States, Territories and Possessions			998,239				22,856				-				-				1,021,095				22,856
Exchange traded debt			304,111				85				(13,921	)							290,275				(13,836	)
Corporate and other bonds
Industrial and miscellaneous			6,234,342				280,951				(12,779	)			-				6,502,514				268,172
Total		$	8,266,334			$	513,525			$	(26,700	)		$	-			$	8,753,159			$	486,825

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, 2022 and December 31, 2021 is shown below:

		September 30, 2022								December 31, 2021
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value
Less than one year		$	708,325			$	742,533			$	994,712			$	1,008,180
One to five years			1,120,315				1,082,015				1,205,829				1,290,465
Five to ten years			1,399,725				1,177,545				1,513,942				1,648,808
More than 10 years			4,538,818				3,609,765				4,551,851				4,805,706
Total		$	7,767,183			$	6,611,858			$	8,266,334			$	8,753,159

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
		2022				2021				2022				2021
Income:
Fixed-maturity securities		$	1,243,177			$	1,288,277			$	2,841,307			$	4,238,746
Equity securities			247,275				436,833				872,005				1,145,244
Cash and cash equivalents			26,630				9,636				29,796				11,194
Other investments			-				42,908				-				-
Total			1,517,082				1,777,654				3,743,108				5,395,184
Expenses:
Investment expenses			89,811				101,058				322,412				257,317
Net investment income		$	1,427,271			$	1,676,596			$	3,420,696			$	5,137,867

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $1,000,000 and $1,312,500 for the nine months ended September 30, 2022 and 2021, respectively.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $14,213,435 and $33,335,036 for the nine months ended September 30, 2022 and 2021, respectively.

Proceeds from the sale of equity securities were $11,962,513 and $14,507,384 for the nine months ended September 30, 2022 and 2021, respectively.

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2022				2021				2022				2021
Realized Gains (Losses)
Fixed-maturity securities:
Gross realized gains		$	364			$	343,773			$	102,774			$	1,121,068
Gross realized losses			(4,620	)			(8,103	)			(158,701	)			(49,601	)
			(4,256	)			335,670				(55,927	)			1,071,467
Equity securities:
Gross realized gains			907,089				639,626				1,384,432				2,015,574
Gross realized losses			(92,159	)			(26,031	)			(728,732	)			(293,519	)
			814,930				613,595				655,700				1,722,055
Other Investments:
Gross realized gains			589,233				83,798				589,233				83,798
Gross realized losses			-				-				-				-
			589,233				83,798				589,233				83,798
Net realized gains			1,399,907				1,033,063				1,189,006				2,877,320
Unrealized (Losses) Gains
Equity Securities:
Gross gains			-				(1,331,675	)			-				592,397
Gross losses			(1,132,596	)							(7,549,640	)			-
			(1,132,596	)			(1,331,675	)			(7,549,640	)			592,397
Other Investments:
Gross gains			-				503,146				-				2,010,485
Gross losses			(664,969	)			-				(2,952,802	)			-
			(664,969	)			503,146				(2,952,802	)			2,010,485
Net unrealized (losses) gains			(1,797,565	)			(828,529	)			(10,502,442	)			2,602,882
Net (losses) gains on investments		$	(397,658	)		$	204,534			$	(9,313,436	)		$	5,480,202

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, 2022 and December 31, 2021, there were 155 and 48 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 as of September 30, 2022 and December 31, 2021.  Significant factors influencing the Company’s determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, 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, 2022 as follows: 

		September 30, 2022
		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		$	5,975,160			$	(123	)			1			$	-			$	-				-			$	5,975,160			$	(123	)
Political subdivisions of States, Territories and Possessions			11,461,126				(3,250,196	)			12				1,815,216				(590,936	)			2				13,276,342				(3,841,132	)
Corporate and other bonds industrial and miscellaneous			73,921,209				(9,154,182	)			93				817,970				(269,694	)			1				74,739,179				(9,423,876	)
Residential mortgage and other asset backed securities			27,985,270				(4,333,707	)			31				18,593,599				(2,699,011	)			15				46,578,869				(7,032,718	)
Total fixed-maturity securities		$	119,342,765			$	(16,738,208	)			137			$	21,226,785			$	(3,559,641	)			18			$	140,569,550			$	(20,297,849	)

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2021 as follows:

		December 31, 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			6,768,123				(197,984	)			5				-				-				-				6,768,123				(197,984	)
Corporate and other bonds industrial and miscellaneous			17,593,707				(126,926	)			15				-				-				-				17,593,707				(126,926	)
Residential mortgage and other asset backed securities			45,399,451				(489,258	)			26				2,923,182				(120,344	)			2				48,322,633				(609,602	)
Total fixed-maturity securities		$	69,761,281			$	(814,168	)			46			$	2,923,182			$	(120,344	)			2			$	72,684,463			$	(934,512	)

X

- Definition

Tabular disclosure of investment income, including, but not limited to, interest and dividend income and amortization of discount (premium) derived from debt and equity securities. Excludes realized and unrealized gain (loss) on investments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03.9)
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04.2)
-URI https://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03.7(a),(b))
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03.8)
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

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- References

No definition available.

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