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 December 31, 2021 and 2020 are summarized as follows: December 31, 2021 Cost or Gross Gross Unrealized Losses Estimated Net Unrealized Amortized Unrealized Less than 12 More than 12 Fair 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 (1) 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 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) As of December 31, 2020, 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 9). As of December 31, 2021 KICO did not have any securities pledged to FHLBNY. The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. 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 December 31, 2021 and 2020 is shown below: December 31, 2021 December 31, 2020 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 1,153,099 $ 1,156,636 $ 8,559,005 $ 8,668,064 One to five years 43,007,110 44,914,759 44,137,567 47,745,430 Five to ten years 26,808,853 27,332,581 55,508,712 63,159,775 More than 10 years 26,802,457 26,892,792 8,676,409 9,314,062 Residential mortgage and other asset backed securities 58,036,959 57,783,342 28,163,891 28,661,941 Total $ 155,808,478 $ 158,080,110 $ 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 December 31, 2021 and 2020 are as follows: 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 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, mutual funds, 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 unrealized gains on, the Company’s other investments as of December 31, 2021 and 2020 are as follows: December 31, 2021 December 31, 2020 Gross Estimated Gross Estimated Category Cost Gains Fair Value Cost Gains Fair Value Other Investments: Hedge fund $ 3,999,381 $ 3,562,034 $ 7,561,415 $ 1,999,381 $ 1,369,245 $ 3,368,626 Real estate limited partnership - - - 150,000 - 150,000 Total $ 3,999,381 $ 3,562,034 $ 7,561,415 $ 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 December 31, 2021 and 2020 are summarized as follows: December 31, 2021 Cost or Gross Gross Unrealized Losses Estimated Net 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 $ 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 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 fund requirements. A summary of the amortized cost and the estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of December 31, 2021 and 2020 is shown below: December 31, 2021 December 31, 2020 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 994,712 $ 1,008,180 $ - $ - One to five years 1,205,829 1,290,465 2,598,193 2,777,936 Five to ten years 1,513,942 1,648,808 1,502,603 1,727,316 More than 10 years 4,551,851 4,805,706 3,268,019 3,689,572 Total $ 8,266,334 $ 8,753,159 $ 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: Years ended December 31, 2021 2020 Income: Fixed-maturity securities $ 5,446,795 $ 5,533,047 Equity securities 1,529,020 1,159,507 Cash and cash equivalents 11,511 91,603 Total 6,987,326 6,784,157 Expenses: Investment expenses 365,934 278,554 Net investment income $ 6,621,392 $ 6,505,603 Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity were $2,217,428 and $500,000 for the years ended December 31, 2021 and 2020, respectively. Proceeds from the sale and maturity of fixed-maturity securities available-for-sale were $85,347,589 and $35,845,934 for the years ended December 31, 2021 and 2020, respectively. Proceeds from the sale of equity securities were $16,333,946 and $11,096,028 for the years ended December 31, 2021 and 2020, respectively. The Company’s net gains (losses) on investments are summarized as follows: Years ended December 31, 2021 2020 Realized Gains (Losses) Fixed-maturity securities: Gross realized gains $ 5,189,810 $ 1,108,159 Gross realized losses (90,111 ) (327,890 ) 5,099,699 780,269 Equity securities: Gross realized gains 2,415,136 832,394 Gross realized losses (280,807 ) (780,245 ) 2,134,329 52,149 Other Investments: Gross realized gains 83,798 - Gross realized losses - - 83,798 - Net realized gains 7,317,826 832,418 Unrealized Gains (Losses) Equity Securities: Gross gains 276,340 41,517 Gross losses - (217,032 ) 276,340 (175,515 ) Other Investments: Gross gains 2,192,789 933,713 Gross losses - - 2,192,789 933,713 Net unrealized gains 2,469,129 758,198 Net gains on investments $ 9,786,955 $ 1,590,616 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 (loss) income. 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 (loss) income 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 December 31, 2021 and December 31, 2020, there were 48 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 years ended December 31, 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 December 31, 2021 and 2020 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 ) 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 ) |