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Investments

3 Months Ended

Mar. 31, 2023

Investments

Note 3 - Investments

Fixed-Maturity Securities

The amortized cost, estimated fair value, and gross unrealized gains and losses on investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of March 31, 2023 and December 31, 2022 are summarized as follows:

		March 31, 2023
																						Net
		Cost or				Gross				Gross Unrealized Losses								Estimated				Unrealized
		Amortized				Unrealized				Less than 12				More than 12				Fair				Gains
Category		Cost				Gains				Months				Months				Value				(Losses)

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)		$	21,988,099			$	36,038			$	(674	)		$	-			$	22,023,463			$	35,364

Political subdivisions of States, Territories and Possessions			17,098,969				-				(5,153	)			(3,338,913	)			13,754,903				(3,344,066	)

Corporate and other bonds Industrial and miscellaneous			80,264,856				-				(777,717	)			(6,479,111	)			73,008,028				(7,256,828	)

Residential mortgage and other asset backed securities (2)			53,022,594				67,556				(496,219	)			(6,739,006	)			45,854,925				(7,167,669	)
Total fixed-maturity securities		$	172,374,518			$	103,594			$	(1,279,763	)		$	(16,557,030	)		$	154,641,319			$	(17,733,199	)

		December 31, 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 (1)		$	23,874,545			$	1,479			$	(6,928	)		$	-			$	23,869,096			$	(5,449	)

Political subdivisions of States, Territories and Possessions			17,108,154				-				(2,195,273	)			(1,771,494	)			13,141,387				(3,966,767	)

Corporate and other bonds Industrial and miscellaneous			80,338,464				-				(5,796,994	)			(2,458,985	)			72,082,485				(8,255,979	)

Residential mortgage and other asset backed securities (2)			53,597,264				58,398				(882,664	)			(7,150,803	)			45,622,195				(7,975,069	)
Total fixed-maturity securities		$	174,918,427			$	59,877			$	(8,881,859	)		$	(11,381,282	)		$	154,715,163			$	(20,203,264	)

	(1)	In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of March 31, 2023 and December 31, 2022, the amount of required collateral was approximately $8,268,000 and $8,691,000, respectively. As of March 31, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $11,475,000 and $8,691,000, respectively.
	(2)	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 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of December 31, 2022, the estimated fair value of the eligible investments was approximately $12,199,000. KICO will retain all rights regarding all securities if pledged as collateral. As of March 31, 2023 and December 31, 2022 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 March 31, 2023 and December 31, 2022 is shown below:

		March 31, 2023								December 31, 2022
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value

Less than one year		$	15,731,448			$	15,650,264			$	16,359,100			$	16,307,991
One to five years			55,396,930				53,174,343				18,605,987				14,085,113
Five to ten years			30,202,432				25,759,376				54,559,158				52,230,283
More than 10 years			18,021,114				14,202,411				31,796,918				26,469,581
Residential mortgage and other asset backed securities			53,022,594				45,854,925				53,597,264				45,622,195
Total		$	172,374,518			$	154,641,319			$	174,918,427			$	154,715,163

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 March 31, 2023 and December 31, 2022 are as follows:

		March 31, 2023
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value

Equity Securities:
Preferred stocks		$	13,583,942			$	-			$	(2,906,623	)		$	10,677,319
Common stocks, mutual funds, and exchange traded funds			4,427,204				199,258				(681,232	)			3,945,230
Total		$	18,011,146			$	199,258			$	(3,587,855	)		$	14,622,549

		December 31, 2022
						Gross				Gross				Estimated
Category		Cost				Gains				Losses				Fair Value

Equity Securities:
Preferred stocks		$	13,583,942			$	-			$	(3,589,313	)		$	9,994,629
Common stocks, mutual funds, and exchange traded funds			4,502,758				158,635				(821,632	)			3,839,761
Total		$	18,086,700			$	158,635			$	(4,410,945	)		$	13,834,390

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of March 31, 2023 and December 31, 2022 are as follows:

		March 31, 2023												December 31, 2022
						Gross				Estimated								Gross				Estimated
Category		Cost				Gains				Fair Value				Cost				Gains				Fair Value

Other Investments:
Hedge fund		$	1,987,040			$	1,148,409			$	3,135,449			$	1,987,040			$	784,612			$	2,771,652

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 March 31, 2023 and December 31, 2022 are summarized as follows:

		March 31, 2023
																						Net
		Cost or				Gross				Gross Unrealized Losses								Estimated				Unrealized
		Amortized				Unrealized				Less than 12				More than 12				Fair				Gains/
Category		Cost				Gains				Months				Months				Value				(Losses)

Held-to-Maturity Securities:
U.S. Treasury securities		$	1,228,634			$	47,886			$	(24,108	)		$	-			$	1,252,412			$	23,778

Political subdivisions of States, Territories and Possessions			498,769				1,661				-				-				500,430				1,661

Exchange traded debt			304,111				-				(56,461	)			-				247,650				(56,461	)

Corporate and other bonds Industrial and miscellaneous			5,733,582				40,048				(57,910	)			(890,603	)			4,825,117				(908,465	)
Total		$	7,765,096			$	89,595			$	(138,479	)		$	(890,603	)		$	6,825,609			$	(939,487	)

		December 31, 2022
																						Net
		Cost or				Gross				Gross Unrealized Losses								Estimated				Unrealized
		Amortized				Unrealized				Less than 12				More than 12				Fair				Gains/
Category		Cost				Gains				Months				Months				Value				(Losses)

Held-to-Maturity Securities:
U.S. Treasury securities		$	1,228,560			$	28,400			$	(34,077	)		$	-			$	1,222,883			$	(5,677	)

Political subdivisions of States, Territories and Possessions			498,638				2,092				-				-				500,730				2,092

Exchange traded debt			304,111				-				(29,111	)			-				275,000				(29,111	)

Corporate and other bonds Industrial and miscellaneous			5,734,831				36,968				(809,746	)			(360,278	)			4,601,775				(1,133,056	)
Total		$	7,766,140			$	67,460			$	(872,934	)		$	(360,278	)		$	6,600,388			$	(1,165,752	)

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 March 31, 2023 and December 31, 2022 is shown below:

		March 31, 2023								December 31, 2022
		Amortized				Estimated				Amortized				Estimated
Remaining Time to Maturity		Cost				Fair Value				Cost				Fair Value

Less than one year		$	708,744			$	747,483			$	708,535			$	743,575
One to five years			1,120,700				1,098,253				1,120,507				1,088,522
Five to ten years			1,405,680				1,215,945				1,402,704				1,200,720
More than 10 years			4,529,972				3,763,928				4,534,394				3,567,571
Total		$	7,765,096			$	6,825,609			$	7,766,140			$	6,600,388

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
		March 31,
		2023				2022

Income:
Fixed-maturity securities		$	1,417,709			$	1,140,189
Equity securities			176,877				345,168
Cash and cash equivalents			32,858				183
Total			1,627,444				1,485,540
Expenses:
Investment expenses			85,952				126,440
Net investment income		$	1,541,492			$	1,359,100

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $-0- and $500,000 for the three months ended March 31, 2023 and 2022, respectively.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $13,554,928 and $10,181,658 for the three months ended March 31, 2023 and 2022, respectively.

Proceeds from the sale of equity securities were $75,554 and $4,994,884 for the three months ended March 31, 2023 and 2022, respectively.

		Three months ended
		March 31,
		2023				2022
Realized Gains (Losses)

Fixed-maturity securities:
Gross realized gains		$	418			$	85,100
Gross realized losses			(3,057	)			(126,424	)
			(2,639	)			(41,324	)

Equity securities:
Gross realized gains			-				448,306
Gross realized losses			-				(329,221	)
			-				119,085

Other Investments:
Gross realized gains			-				-
Gross realized losses			-				-
			-				-
Net realized (losses) gains			(2,639	)			77,761

Unrealized Gains (Losses)

Equity Securities:
Gross gains			863,713				-
Gross losses			-				(3,560,634	)
			863,713				(3,560,634	)

Other Investments:
Gross gains			363,797				-
Gross losses			-				(915,532	)
			363,797				(915,532	)
Net unrealized gains (losses)			1,227,510				(4,476,166	)
Net gains (losses) on investments		$	1,224,871			$	(4,398,405	)

Allowance for Credit Loss

For available-for-sale fixed maturity securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis. The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and the amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis. The Company considers all available evidence when determining whether an investment requires a credit loss write-down or allowance to be recorded. Changes in the allowance are presented as a component of net gains (losses) on investments on the accompanying condensed consolidated statements of operations and comprehensive income (loss).

At March 31, 2023 and December 31, 2022, there were 152 and 155 fixed-maturity securities, respectively, that accounted for the gross unrealized losses. The Company determined that none of the unrealized losses were deemed to be credit losses for its portfolio of investments for the three months ended March 31, 2023 and 2022. 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 March 31, 2023 as follows:

		March 31, 2023
		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		$	5,542,768			$	(674	)			1			$	-				-				-			$	5,542,768			$	(674	)

Political subdivisions of States, Territories and Possessions			549,276				(5,153	)			2				13,205,628				(3,338,913	)			12				13,754,904				(3,344,066	)

Corporate and other bonds industrial and miscellaneous			24,592,198				(777,717	)			33				48,415,831				(6,479,111	)			57				73,008,029				(7,256,828	)

Residential mortgage and other asset backed securities			8,454,568				(496,219	)			15				36,667,595				(6,739,006	)			32				45,122,163				(7,235,225	)

Total fixed-maturity securities		$	39,138,810			$	(1,279,763	)			51			$	98,289,054			$	(16,557,030	)			101			$	137,427,864			$	(17,836,793	)

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2022 as follows:

		December 31, 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		$	18,918,196			$	(6,928	)			3			$	-				-				-			$	18,918,196			$	(6,928	)

Political subdivisions of States, Territories and Possessions			7,970,633				(2,195,273	)			9				5,170,753				(1,771,494	)			5				13,141,386				(3,966,767	)

Corporate and other bonds industrial and miscellaneous			56,910,104				(5,796,994	)			75				15,172,381				(2,458,985	)			15				72,082,485				(8,255,979	)

Residential mortgage and other asset backed securities			10,145,880				(882,664	)			22				34,753,178				(7,150,803	)			26				44,899,058				(8,033,467	)

Total fixed-maturity securities		$	93,944,813			$	(8,881,859	)			109			$	55,096,312			$	(11,381,282	)			46			$	149,041,125			$	(20,263,141	)