XML 20 R9.htm IDEA: XBRL DOCUMENT

Investments

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023

	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)	$	8,224,680	$	-	$	(56,835	)	$	-		$	8,167,845	$	(56,835	)

Political subdivisions of States,
Territories and Possessions		16,615,369		-		-			(4,201,015	)		12,414,354		(4,201,015	)

Corporate and other bonds
Industrial and miscellaneous		78,116,754		-		-			(8,651,516	)		69,465,238		(8,651,516	)

Residential mortgage and other asset backed securities (2)		51,503,046		63,626		(5,987	)		(8,821,223	)		42,739,462		(8,763,584	)
Total fixed-maturity securities	$	154,459,849	$	63,626	$	(62,822	)	$	(21,673,754	)	$	132,786,899	$	(21,672,950	)

	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 September 30, 2023 and December 31, 2022, the amount of required collateral was approximately $7,422,000 and $8,691,000, respectively. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $8,168,000 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 September 30, 2023 and December 31, 2022, the estimated fair value of the eligible investments was approximately $10,911,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, 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 September 30, 2023 and December 31, 2022 is shown below:

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	11,053,509	$	10,894,062	$	16,359,100	$	16,307,991
One to five years		44,834,816		42,323,786		18,605,987		14,085,113
Five to ten years		30,124,267		24,401,458		54,559,158		52,230,283
More than 10 years		16,944,211		12,428,131		31,796,918		26,469,581
Residential mortgage and other asset backed securities		51,503,046		42,739,462		53,597,264		45,622,195
Total	$	154,459,849	$	132,786,899	$	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 September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023
			Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(3,384,701	)	$	10,199,241
Common stocks, mutual funds, and exchange traded funds		4,402,841		225,001		(919,432	)		3,708,410
Total	$	17,986,783	$	225,001	$	(4,304,133	)	$	13,907,651

	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 September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023						December 31, 2022
			Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	1,987,040	$	1,226,278	$	3,213,318	$	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 September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023

	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

Held-to-Maturity Securities:
U.S. Treasury securities	$	1,228,783	$	-	$	(49,795	)	$	(31,495	)	$	1,147,493	$	(81,290	)

Political subdivisions of States, Territories and Possessions		499,036		-		(9,046	)		-			489,990		(9,046	)

Exchange traded debt		304,111		-		(51,611	)		-			252,500		(51,611	)

Corporate and other bonds
Industrial and miscellaneous		5,021,895		-		-			(1,212,380	)		3,809,515		(1,212,380	)
Total	$	7,053,825	$	-	$	(110,452	)	$	(1,243,875	)	$	5,699,498	$	(1,354,327	)

	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 September 30, 2023 and December 31, 2022 is shown below:

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	-	$	-	$	708,535	$	743,575
One to five years		1,121,091		1,069,974		1,120,507		1,088,522
Five to ten years		1,411,819		1,166,505		1,402,704		1,200,720
More than 10 years		4,520,915		3,463,019		4,534,394		3,567,571
Total	$	7,053,825	$	5,699,498	$	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				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022

Income:
Fixed-maturity securities	$	1,245,353	$	1,234,427	$	3,982,573	$	2,832,557
Equity securities		187,018		247,275		540,788		872,005
Cash and cash equivalents		98,763		26,630		171,015		29,796
Total		1,531,134		1,508,332		4,694,376		3,734,358
Expenses:
Investment expenses		86,774		89,811		257,168		322,412
Net investment income	$	1,444,360	$	1,418,521	$	4,437,208	$	3,411,946

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $750,000 and $1,000,000 for the nine months ended September 30, 2023 and 2022, respectively.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $33,453,349 and $14,213,435 for the nine months ended September 30, 2023 and 2022, respectively.

Proceeds from the sale of equity securities were $99,917 and $11,962,513 for the nine months ended September 30, 2023 and 2022, respectively.

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

	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Realized (Losses) Gains

Fixed-maturity securities:
Gross realized gains	$	263		$	363		$	1,207		$	102,774
Gross realized losses		(4,444	)		(4,610	)		(18,408	)		(158,701	)
		(4,181	)		(4,247	)		(17,201	)		(55,927	)

Equity securities:
Gross realized gains		-			907,079			-			1,384,432
Gross realized losses		-			(92,159	)		-			(728,732	)
		-			814,920			-			655,700

Other Investments:
Gross realized gains		-			589,233			-			589,233
Gross realized losses		-			-			-			-
		-			589,233			-			589,233

Net realized (losses) gains		(4,181	)		1,399,906			(17,201	)		1,189,006

Unrealized (Losses) Gains

Equity Securities:
Gross gains		-			-			173,178			-
Gross losses		(483,967	)		(1,132,595	)		-			(7,549,640	)
		(483,967	)		(1,132,595	)		173,178			(7,549,640	)

Other Investments:
Gross gains		-			-			441,666			-
Gross losses		(336,222	)		(664,969	)		-			(2,952,802	)
		(336,222	)		(664,969	)		441,666			(2,952,802	)

Net unrealized (losses) gains		(820,189	)		(1,797,564	)		614,844			(10,502,442	)

Net (losses) gains on investments	$	(824,370	)	$	(397,658	)	$	597,643		$	(9,313,436	)

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 (losses) gains on investments on the accompanying condensed consolidated statements of operations and comprehensive loss.

At September 30, 2023 and December 31, 2022, there were 150 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 nine months ended September 30, 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 September 30, 2023 as follows:

	September 30, 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	$	8,167,845	$	(56,835	)		2	$	-		-			-	$	8,167,845	$	(56,835	)

Political subdivisions of States, Territories and Possessions		-		-			-		12,414,354		(4,201,015	)		13		12,414,354		(4,201,015	)

Corporate and other bonds industrial and miscellaneous		-		-			-		69,465,238		(8,651,516	)		88		69,465,238		(8,651,516	)

Residential mortgage and other asset backed securities		204,418		(5,987	)		9		38,962,381		(8,821,223	)		38		39,166,799		(8,827,210	)

Total fixed-maturity securities	$	8,372,263	$	(62,822	)		11	$	120,841,973	$	(21,673,754	)		139	$	129,214,236	$	(21,736,576	)

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	)