UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 |
For the quarterly period ended
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number:
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| Securities registered pursuant to Section 12(b) of the Act: | ||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | - |
|
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provide pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: Common stock .01 par value as of May 3, 2024:
TEXAS REPUBLIC CAPITAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTERLY PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
Exhibit No. 31.1
Exhibit No. 31.2
Exhibit No. 32.1
Exhibit No. 32.2
Exhibit No. 101.INS
Exhibit No. 101.SCH
Exhibit No. 101.CAL
Exhibit No. 101.DEF
Exhibit No. 101.LAB
Exhibit No. 101.PRE
Exhibit No. 104. FIL
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Texas Republic Capital Corporation and Subsidiaries
Consolidated Statements of Financial Position
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March 31, 2024 (Unaudited) |
December 31, 2023 |
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Assets |
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| Available-for-sale fixed maturity securities at fair value (Amortized cost: $ March 31, 2024 and December 31, 2023, respectively) |
$ | $ | ||||||
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Mortgage loans, net of allowance |
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Policy loans |
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Other long-term investments |
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Total investments |
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Cash and cash equivalents |
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Accrued investment income |
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Due premium |
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Reinsurance recoverable |
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Deferred policy acquisition costs |
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Deferred sales inducement costs |
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Advances and notes receivable, net of allowance |
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Leased property - right to use |
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Prepaid assets |
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Intangible assets, net of accumulated amortization |
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Furniture and equipment, net |
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Other assets |
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Total assets |
$ | $ | ||||||
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Liabilities and Shareholders’ Equity |
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Policy liabilities |
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Policyholders’ account balances |
$ | $ | ||||||
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Future policy benefits |
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Policy claims and other benefits |
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Liability for deposit-type contracts |
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Other policyholder liabilities |
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Total policy liabilities |
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Lease liability |
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Other liabilities |
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Total liabilities |
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Shareholders’ equity |
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| Common stock, par value $ |
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Additional paid-in capital |
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| Treasury stock, at cost ( |
( |
) | ( |
) | ||||
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ | $ | ||||||
See notes to consolidated financial statements (unaudited).
Texas Republic Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended March 31, |
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2024 |
2023 |
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Revenues |
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Premiums and other considerations |
$ | $ | ||||||
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Net investment income |
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Commission income |
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Total revenues |
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Benefits, claims and expenses |
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Increase in future policy benefits |
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Death and other benefits |
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Interest credited to policyholders |
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Total benefits and claims |
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Policy acquisition costs deferred |
( |
) | ( |
) | ||||
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Policy acquisition costs amortized |
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Commissions |
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Salaries and employee benefits |
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Office rent |
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Third-party administration fees |
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Travel, meals and entertainment |
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Professional fees |
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Other general and administrative expenses |
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Total benefits, claims and expenses |
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|
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Net loss per common share outstanding |
$ | $ | ( |
) | ||||
See notes to consolidated financial statements (unaudited).
Texas Republic Capital Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Unaudited)
|
Three Months Ended March 31, |
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2024 |
2023 |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Other comprehensive gain (loss) |
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Total net unrealized gains (losses) arising during the period |
( |
) | ||||||
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Less net realized investment gains |
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Net unrealized investment gains (losses) |
( |
) | ||||||
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Total other comprehensive gain (loss) |
( |
) | ||||||
|
Total comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
See notes to consolidated financial statements (unaudited).
Texas Republic Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
Three Months Ended March 31, 2024 and 2023
(Unaudited)
|
Accumulated |
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Common |
Additional |
Other |
Total |
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Stock $.01 Par Value |
Paid-in Capital |
Treasury Stock |
Comprehensive Income (Loss) |
Accumulated Deficit |
Shareholders’ Equity |
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|
Balance as of January 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Common stock shares subscribed |
- | - | - | |||||||||||||||||||||
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Other comprehensive gain |
- | - | - | - | ||||||||||||||||||||
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Net loss |
- | - | - | - | ( |
) | ( |
) | ||||||||||||||||
|
Balance as of March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Balance as of January 1, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Common stock shares subscribed |
- | - | - | |||||||||||||||||||||
|
Other comprehensive loss |
- | - | - | ( |
) | - | ( |
) | ||||||||||||||||
|
Net loss |
- | - | - | - | ( |
) | ( |
) | ||||||||||||||||
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Balance as of March 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
See notes to consolidated financial statements (unaudited).
Texas Republic Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
Three Months Ended March 31, |
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2024 |
2023 |
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Operating activities |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
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Net accretion of discount and amortization of premium on investments |
( |
) | ( |
) | ||||
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Provision for depreciation and amortization |
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Policy acquisition costs deferred |
( |
) | ( |
) | ||||
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Policy acquisition costs amortized |
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Mortgage loan origination fees deferred |
( |
) | ||||||
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Amortization of mortgage loan origination fees |
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Provision for estimated mortgage loan losses |
( |
) | ( |
) | ||||
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Provision for estimated uncollectible advances and notes receivable |
( |
) | ( |
) | ||||
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Interest credited to policyholders |
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Change in assets and liabilities: |
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Accrued investment income |
( |
) | ||||||
|
Due premium |
( |
) | ( |
) | ||||
|
Reinsurance recoverable |
( |
) | ( |
) | ||||
|
Advances and notes receivable |
( |
) | ( |
) | ||||
|
Prepaid assets |
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|
Other assets |
( |
) | ||||||
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Future policy benefits |
( |
) | ||||||
|
Policy claims |
( |
) | ||||||
|
Other policy liabilities |
( |
) | ||||||
|
Other liabilities |
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Net cash provided by (used in) operating activities |
( |
) | ||||||
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Investing activities |
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Purchases of furniture and equipment |
( |
) | ||||||
|
Sales of available for sale securities |
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Purchases of mortgage loans |
( |
) | ||||||
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Payments on mortgage loans |
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Policy loans |
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Payments on other long-term investments |
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Net cash provided by investing activities |
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Financing activities |
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Proceeds from the subscription of common stock |
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Policyholder deposits |
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Policyholder withdrawals |
( |
) | ( |
) | ||||
|
Deposit-type contracts - deposits |
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|
Deposit-type contracts - withdrawals |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) financing activities |
( |
) | ||||||
|
Increase in cash and cash equivalents |
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|
Cash and cash equivalents, beginning of period |
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|
Cash and cash equivalents, end of period |
$ | $ | ||||||
See notes to consolidated financial statements (unaudited).
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Organization and Significant Accounting Policies
Nature of Operations
Texas Republic Capital Corporation (the “Company”) is the parent holding company of Texas Republic Life Insurance Company (“TRLIC”), Texas Republic Life Solutions, Inc. (“TRLS”), and Axis Insurance Solutions, LLC (“AIS”). The Company was incorporated in Texas on May 15, 2012, for the primary purpose of forming and capitalizing a life insurance company subsidiary.
The Texas Department of Insurance approved TRLIC’s life insurance charter on August 1, 2016. The Company capitalized TRLIC with $
TRLS, a life and health insurance agency, was incorporated February 1, 2017. The Company capitalized TRLS with $
AIS, a property & casualty insurance agency, was formed on April 6, 2021. The Company capitalized AIS with $
From incorporation through April 2, 2017, the Company was involved in the sale of common stock to provide working capital. During this time, the Company completed an organizational offering,
On January 1, 2023, the Company began a six-million-dollar private placement offering with a possible 10% oversubscription. This offering was extended for an additional year and will end on January 1, 2025, unless all of the shares are sold before then or the offering is terminated earlier. These shares will be sold in reliance on the exemption from the registration requirements of the Securities Act of 1933 (the “1933 Act”) contained in Securities and Exchange Commission (“SEC”) Regulation D, Rule 506. No underwriter will be involved in connection with the issuance of these shares, and we will not pay finder’s fees in this private placement. The Company has raised $
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.
The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s report on Form 10-K for the year ended December 31, 2023.
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
Principles of Consolidation
The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.
Reclassifications
Certain reclassifications have been made in the prior year financial statements to conform to current year classifications. These reclassifications had no effect on the previously reported net loss or shareholders’ equity.
Investments
Fixed maturity securities are comprised of bonds that are classified as available-for-sale and are carried at fair value net of any necessary valuation allowance for credit losses with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss). The amortized cost of fixed maturity securities available-for-sale is generally adjusted for amortization of premium and accretion of discount.
Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method.
The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit loss exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.
The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities, with the change in allowance reported in net loss on the consolidated statements of operations.
Purchases and sales of securities are recorded on a trade-date basis. Interest earned on investments is recorded on the accrual basis and is included in net investment income.
The Company’s mortgage loan portfolio is comprised entirely of residential properties with loan to appraised value ratios below
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.
The Company’s other long-term investments are comprised of lottery prize cash flows holdings held at amortized cost. Payments on these investments are made by state run lotteries. Since state run lotteries are unlikely to default even in the most dire economic situations, no allowance for credit losses are necessary. Interest income and the accretion of discount are included in net investment income.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and money market instruments.
Deferred Policy Acquisition Costs
Costs that relate to and vary with the successful production of new business are deferred over the life of the policy. Deferred acquisition costs (“DAC”) consist of commissions and policy issuance, underwriting and agency expenses. DAC expenses are amortized primarily over the premium-paying period of life policies and as profits emerge on annuity products. Amortization uses the same assumptions as were used in computing liabilities for future policy benefits. There was $
Deferred Sales Inducement Costs
Sales inducement costs (“SIC”) are related to policy bonuses issued on some of the Company’s annuity products. SIC is deferred at the issuance of the policy and amortized over the bonus period on a straight-line basis. The amount deferred is based on the difference between the fund value with the bonus and the fund value without the bonus. There was $
Advances and Notes Receivable
Advances and notes receivable are recorded at unpaid principal balances. Management evaluates the collectability of advances and notes receivable on the specific identification basis. Management had an allowance for possible uncollectable agent balances of $
Leased Property – Right to Use Asset
In February 2016, the FASB issued ASU 2016-02, Lease Accounting (Topic 842) (“ASU 2016-02”). Under ASU 2016-02, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. The Company’s home office lease had an original term greater than one year, and the Company recognizes on the balance sheet a right of use (“ROU”) operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The Company has a lease asset and liability of $
Intangible assets
Intangible assets are stated at cost less accumulated amortization and reflect amounts paid for the Company’s computer software costs during the application development stage. The software costs placed in service are amortized using the straight-line method over the seven-year estimated useful life of the software. The asset is tested for impairment at least annually. Subsequent modifications or upgrades to internal-use software are capitalized only to the extent that additional functionality is provided.
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
Furniture and Equipment
Furniture and equipment are carried at cost less accumulated depreciation or amortization. Office furniture, equipment and EDP equipment are recorded at cost or fair value at acquisition less accumulated depreciation or amortization using the straight-line method over a period that approximates the estimated useful life of the respective assets of
Policyholders’ Account Balances
The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus applicable bonus and interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from
Future Policy Benefits
Future policy benefit reserves have been computed by the net level premium method with assumptions as to investment yields, mortality and withdrawals based upon the Company’s experience. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of policy liabilities and the increase in future policy benefit reserves. Management’s judgments and estimates for future policy benefit reserves provide for possible unfavorable deviation. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.
Common Stock
Common stock is fully paid, non-assessable and has a par value of $
Treasury Stock
Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, are recorded at cost.
Federal Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for cumulative temporary differences between balances of assets and liabilities determined under GAAP and balances determined using tax basis.
Net Loss Per Common Share Outstanding and Subscribed
Net loss per common share is calculated using the weighted average number of common shares outstanding and subscribed during the year. The weighted average common shares outstanding and subscribed were
Related Party Transactions
The Company entered into an agreement with First Trinity Financial Corporation (FTFC) where FTFC will use its resources to source mortgage loans on real estate and lottery bonds. FTFC will present to the Company investments based on criteria the Company has established. The Company has the option to purchase the presented investment assets directly from the seller or to decline the purchase based on the Company’s analysis of the investment. The Chairman of the Company is also the Chairman, President, and Chief Executive Officer of FTFC. The Company paid fees for this service to FTFC of $
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Organization and Significant Accounting Policies (continued)
The Company entered into a coinsurance reinsurance agreement with Family Benefit Life Insurance Company (FBLIC), which is a subsidiary of FTFC. The Company will cede a portion of new business from our TrueFlex product related to specific groups to FBLIC as mutually agreed upon in advance. This new agreement became effective on January 1, 2022, and as of March 31, 2024 there have been five groups covered under this agreement.
Subsequent Events
Management has evaluated subsequent events for recognition and disclosure in the financial statements through the date the financial statements were available to be issued. The Company did not identify any subsequent events requiring recognition or disclosure.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including, among others, held-to-maturity debt securities, mortgage loans, lottery prize receivables, trade receivables, and reinsurance recoverables. ASU 2016-13 requires a valuation allowance to be calculated on these financial assets and that they be presented on the financial statements net of the valuation allowance. This methodology is referred to as the current expected credit loss model. ASU 2016-13 had an original effective date for fiscal years beginning after December 15, 2019. The FASB recently delayed the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s financial condition and results of operations.
In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgate that an entity must apply specific loan refinancing and restructuring guidance to determine whether a modification results in a new loan or the continuation of an existing loan. The amendments also require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this guidance are effective for fiscal years beginning after December 15, 2022, and should be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or liquidity.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification related to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. These updates were originally required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020. The FASB has delayed the effective date of ASU 2018-12 to periods beginning after December 15, 2024 for smaller reporting companies, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations.
In December 2022, the FASB issued amendments (Accounting Standards Update 2022-5) to Accounting Standards Update 2018-12 (Targeted Improvements for Long-Duration Contracts) that originally required an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application was elected. This updated guidance reduces implementation costs and complexity associated with the adoption of targeted improvements in accounting for long-duration contracts that have been derecognized in accordance with Accounting Standards Update 2018-12 before the delayed effective date. Without the amendments in this Update, an insurance entity would be required to reclassify a portion of gains or losses previously recognized in the sale or disposal of insurance contracts or legal entities because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, this reclassification may not be useful to users of financial information. The amendments in this guidance are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations.
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
2. Investments
Fixed Maturity Securities Available-For-Sale
|
Gross |
Gross |
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|
Amortized |
Unrealized |
Unrealized |
Fair |
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|
March 31, 2024 (Unaudited) |
Cost |
Gains |
Losses |
Value |
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|
Fixed maturity securities |
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|
Corporate bonds |
$ | $ | $ | $ | ||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Gross |
Gross |
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|
Amortized |
Unrealized |
Unrealized |
Fair |
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|
December 31, 2023 |
Cost |
Gains |
Losses |
Value |
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|
Fixed maturity securities |
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|
Corporate bonds |
$ | $ | $ | $ | ||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Unrealized |
Number of |
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|
March 31, 2024 (Unaudited) |
Fair Value |
Loss |
Securities |
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|
Fixed maturity securities |
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|
Less than 12 months |
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|
Corporate bonds |
$ | $ | ||||||||||
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Greater than 12 months |
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|
Corporate bonds |
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|
Total fixed maturity securities |
$ | |||||||||||
|
Unrealized |
Number of |
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|
December 31, 2023 |
Fair Value |
Loss |
Securities |
|||||||||
|
Fixed maturity securities |
||||||||||||
|
Less than 12 months |
||||||||||||
|
Corporate bonds |
$ | $ | ||||||||||
|
Greater than 12 months |
||||||||||||
|
Corporate bonds |
||||||||||||
|
Total fixed maturity securities |
$ | $ | ||||||||||
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
2. Investments (continued)
As of March 31, 2024, the fixed maturity securities in a loss position had an average fair value to amortized cost ratio of
As of March 31, 2024 and December 31, 2023, there were no fixed maturity securities that were below investment grade as rated by taking the median of Fitch’s, Moody’s, and Standard and Poor’s ratings, respectively.
The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.
The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities.
As of March 31, 2024, the Company determined that no allowances for credit losses were necessary for the fixed maturity securities based on the current holdings, the respective economic factors, and the Company's historical experience.
The unrealized depreciation shown herein are primarily the result of the current interest rate environment rather than credit factors.
|
(Unaudited) |
||||||||
|
March 31, 2024 |
December 31, 2023 |
|||||||
|
Unrealized depreciation on available-for-sale securities |
$ | ( |
) | $ | ( |
) | ||
|
Net unrealized depreciation on available-for-sale securities |
$ | ( |
) | $ | ( |
) | ||
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
2. Investments (continued)
|
(Unaudited) |
||||||||
|
Amortized Cost |
Fair Value |
|||||||
|
Due in one year or less |
$ | $ | ||||||
|
Due after one year through five years |
||||||||
|
Due after five years through ten years |
||||||||
|
Due after ten years |
||||||||
|
Total fixed maturity securities |
$ | $ | ||||||
For the three months ended March 31, 2024, the Company received $
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The amortized cost and fair value of other long-term investments (which consists of lottery prize cash flows) as of March 31, 2024, by contractual maturity, are summarized as follows:
|
(Unaudited) |
||||||||
|
Amortized Cost |
Fair Value |
|||||||
|
Due in one year or less |
$ | $ | ||||||
|
Due after one year through five years |
||||||||
|
Due after five years through ten years |
||||||||
|
Total other long-term investments |
$ | $ | ||||||
|
(Unaudited) |
||||||||||||||||
|
March 31, 2024 |
% |
December 31, 2023 |
% |
|||||||||||||
|
California |
$ | % | $ | % | ||||||||||||
|
Florida |
||||||||||||||||
|
Georgia |
||||||||||||||||
|
Indiana |
||||||||||||||||
|
Massachusetts |
||||||||||||||||
|
New York |
||||||||||||||||
|
Ohio |
||||||||||||||||
|
Oregon |
||||||||||||||||
|
Pennsylvania |
||||||||||||||||
|
Total |
$ | % | $ | % | ||||||||||||
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
2. Investments (continued)
Mortgage Loans on Real Estate
|
Loan-To-Value-Ratio |
(Unaudited) March 31, 2024 |
December 31, 2023 |
||||||
|
80% to 90% |
$ | $ | ||||||
|
70% to 80% |
||||||||
|
60% to 70% |
||||||||
|
50% to 60% |
||||||||
|
Less than 50% |
||||||||
|
Total |
$ | $ | ||||||
Mortgage loans by geographic distribution:
|
State |
(Unaudited) March 31, 2024 |
% |
December 31, 2023 |
% |
||||||||||||
|
Alabama |
$ | % | $ | % | ||||||||||||
|
Arizona |
||||||||||||||||
|
California |
||||||||||||||||
|
Colorado |
||||||||||||||||
|
Florida |
||||||||||||||||
|
Georgia |
||||||||||||||||
|
Illinois |
||||||||||||||||
|
Indiana |
||||||||||||||||
|
Kentucky |
||||||||||||||||
|
Louisiana |
||||||||||||||||
|
Maryland |
||||||||||||||||
|
Missouri |
||||||||||||||||
|
North Carolina |
||||||||||||||||
|
New Jersey |
||||||||||||||||
|
Ohio |
||||||||||||||||
|
Pennsylvania |
||||||||||||||||
|
South Carolina |
||||||||||||||||
|
Tennessee |
||||||||||||||||
|
Texas |
||||||||||||||||
|
Wisconsin |
||||||||||||||||
|
Total |
$ | % | $ | % | ||||||||||||
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
2. Investments (continued)
|
(Unaudited) March 31, 2024 |
December 31, 2023 |
|||||||
|
Beginning of year: mortgage loan allowance balance |
$ | $ | ||||||
|
Current year change in provision of estimated mortgage loan losses |
( |
) | ( |
) | ||||
|
End of year: mortgage loan allowance balance |
$ | $ | ||||||
|
For the Three Months Ended March 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Fixed maturity securities |
$ | $ | ||||||
|
Other long-term assets |
||||||||
|
Mortgage loans |
||||||||
|
Short-term and other investments |
||||||||
|
Gross investment income |
||||||||
|
Investment expenses |
( |
) | ( |
) | ||||
|
Net investment income |
$ | $ | ||||||
3. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) on the measurement date. The Company also considers the impact on fair value of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity.
The Company holds fixed maturity securities that are measured and reported at fair market value on the statement of financial position. The Company determines the fair market values of its financial instruments based on the fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities. The Company has no Level 1 assets that would include securities traded in an active exchange market.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include fixed maturity securities with quoted prices that are traded less frequently than exchange-traded instruments or assets and liabilities whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government and agency mortgage-backed debt securities and corporate debt securities.
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
3. Fair Value Measurements (continued)
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes investments where independent pricing information was not able to be obtained for a significant portion of the underlying assets.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting the levels of the fair value hierarchy are reported as transfers in and out of the specific level category as of the beginning of the period in which the reclassifications occur.
|
March 31, 2024 (Unaudited) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Fixed maturity securities, available-for-sale |
||||||||||||||||
|
Corporate bonds |
$ | $ | $ | $ | ||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
December 31, 2023 |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Fixed maturity securities, available-for-sale |
||||||||||||||||
|
Corporate bonds |
$ | $ | $ | $ | ||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
Fair values for Level 2 assets for the Company’s fixed maturity securities available-for-sale are primarily based on prices supplied by a third-party investment service. The third-party investment service provides quoted prices which use observable inputs in developing such rates.
The Company analyzes market valuations received to verify reasonableness and to understand the key assumptions used and the sources. Since the fixed maturity securities owned by the Company do not trade on a daily basis, the third-party investment service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings, and matrix pricing. As the fair value estimates of the Company’s fixed maturity securities are based on observable market information rather than market quotes, the estimates of fair value on these fixed maturity securities are included in Level 2 of the hierarchy. The Company’s Level 2 investments include corporate bonds and U.S. Treasury securities.
The Company’s fixed maturity securities available-for-sale portfolio is highly liquid and allows for substantially all of the portfolio to be priced through pricing services.
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
3. Fair Value Measurements (continued)
Fair Value of Financial Instruments
The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of March 31, 2024 and December 31, 2023 and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:
|
March 31, 2024 (Unaudited) |
||||||||||||||||||||
|
Carrying |
Fair |
|||||||||||||||||||
|
Amount |
Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
|
Financial assets |
||||||||||||||||||||
|
Cash and cash equivalents |
$ | $ | $ | $ | $ | |||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Policy loans |
||||||||||||||||||||
|
Other long-term investments |
||||||||||||||||||||
|
Accrued investment income |
||||||||||||||||||||
|
Advances and notes receivable |
||||||||||||||||||||
|
Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
|
Financial liabilities |
||||||||||||||||||||
|
Policyholders’ account balances |
$ | $ | $ | $ | $ | |||||||||||||||
|
Policy claims and other benefits |
||||||||||||||||||||
|
Total financial liabilities |
$ | $ | $ | $ | $ | |||||||||||||||
|
December 31, 2023 |
||||||||||||||||||||
|
Carrying |
Fair |
|||||||||||||||||||
|
Amount |
Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
|
Financial assets |
||||||||||||||||||||
|
Cash and cash equivalents |
$ | $ | $ | $ | $ | |||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Policy loans |
||||||||||||||||||||
|
Other long-term investments |
||||||||||||||||||||
|
Accrued investment income |
||||||||||||||||||||
|
Advances and notes receivable |
||||||||||||||||||||
|
Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
|
Financial liabilities |
||||||||||||||||||||
|
Policyholders’ account balances |
$ | $ | $ | $ | $ | |||||||||||||||
|
Policy claims and other benefits |
||||||||||||||||||||
|
Total financial liabilities |
$ | $ | $ | $ | $ | |||||||||||||||
The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment was required to interpret market data to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.
The following methods and assumptions were used in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto:
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
3. Fair Value Measurements (continued)
Fixed Maturity Securities
The fair value of fixed maturity securities is based on the principles previously discussed as Level 1, Level 2 and Level 3.
Cash and Cash Equivalents, Policy loans, Accrued Investment Income and Advances and Notes Receivable
The carrying value of these financial instruments approximates their fair values due to the expected short-term nature until the cash settlement of these items. Cash and cash equivalents are included in Level 1 of the fair value hierarchy due to their highly liquid nature. Policy loans, accrued investment income, and advances and notes receivable are included in Level 3 of the fair value hierarchy due to little or no availability of market activity for these types of assets.
Mortgage loans on Real Estate
The Company’s mortgage loan portfolio is comprised of residential properties with loan to appraised value ratios at or below
Other Long-Term Investments
Other long-term investments are comprised of lottery prize receivables and fair value is derived by using a discounted cash flow approach. Projected cash flows are discounted using the average FTSE Pension Liability Index in effect at the end of each period.
Policyholders’ Account Balances
The fair value for liabilities under investment-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.
The fair values for insurance contracts other than investment-type contracts are not required to be disclosed.
Policy Claims and other benefits
The carrying amounts reported for these liabilities approximate their fair value.
4. Income Taxes
The Company files a consolidated return with its subsidiaries TRLS and AIS. The Company’s other subsidiary TRLIC files a separate federal return for life insurance companies. TRLIC is taxed as a life insurance company under the provisions of the Internal Revenue Code. Life insurance companies must file separate tax returns until they have been a member of the consolidated filing group for five years. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company cannot currently conclude that it is more likely than not that the remaining deferred tax assets will be utilized. Therefore, the Company’s deferred tax assets have been fully offset by a valuation allowance. As a result, our effective tax rate from continuing operations was
Texas Republic Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)
4. Income Taxes (continued)
The Company and its subsidiaries have no known uncertain tax benefits within its provision for income taxes. In addition, the Company does not believe it would be subject to any penalties or interest relative to any open tax years and, therefore, have not accrued any such amounts. The Company files U.S. federal income tax returns, income tax returns in various state jurisdictions, and franchise tax returns in the state of Texas. The 2020 through 2022 U.S. federal tax years are subject to income tax examination by tax authorities. The Company classifies any interest and penalties (if applicable) as income tax expense in the financial statements.
5. Concentrations of Credit Risk
The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures interest and non-interest-bearing accounts up to $
6. Stock Incentive Plan
The Company’s life insurance subsidiary, TRLIC had an Agent Stock Incentive Plan (“ASIP”). The plan was approved in August 2018 by the Texas State Securities Board. The plan was suspended by the Company in April 2022. The plan awarded shares of Texas Republic Capital Corporation common stock to agents based on certain production levels achieved in sales of life and annuity products. Calculation of awards are based on production for the previous year ended and issued in the subsequent year. There have been no shares issued in 2024. The Company granted
7. Lease Commitment
The Company rents office space for its administrative operations under an agreement that expires in 2027. In determining the present value of lease payments, the Company uses its incremental borrowing rate obtained from its main commercial bank.
|
2024 |
$ | |||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
Total operating lease payments, undiscounted |
$ | |||
|
Less: interest |
( |
) | ||
|
Lease liability, at present value |
$ |
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Texas Republic Capital Corporation (“we”, “us”, “our”, “TRCC” or the “Company”) was incorporated in May 2012 as a financial services holding company. We own and operate insurance subsidiaries: a life insurance company, a life insurance agency, and a property & casualty insurance agency. We sell and issue life insurance products and annuity contracts as part of the insurance company. As an insurance provider, we collect premiums and annuity considerations in the current period to pay future benefits to our policy and contract holders. Currently, we only issue our products in the state of Texas. As a life insurance agency and a property & casualty insurance agency, we sell and place insurance products for other insurance carriers. If our life insurance company does not offer products that suit our client’s needs, then we can meet their needs through other carrier products sold by our life agency. In addition, we have ability to cross-sell all current and prospective client’s property and casualty insurance through the other agency, or the possibility of driving growth for the Company in other markets where participants are not seeking life insurance. The agencies collect commissions on the sale of those products.
We also realize revenues from our investment portfolio, which is a key component of our operations. The revenues and funds we collect as premiums and annuity considerations from policyholders are invested to ensure future benefit payments under the policy contracts. Life insurance companies earn profits on the investment spread, which reflects the investment income earned on the premiums and annuity considerations paid to the insurer between the time of receipt and the time benefits are paid out under our policies and contracts. Changes in interest rates, changes in economic conditions and volatility in the capital markets can all impact the amount of earnings that we realize from our investment portfolio.
The Company continues to incur overall losses since inception. These losses were fully expected, planned for, and fell within an expected range when considering the necessary start-up, infrastructure, distribution, and policy issuance costs of a new life insurance company. These losses have resulted from the costs incurred while raising capital and starting a new company, which involves investing in people, technology, infrastructure, marketing, brand awareness, distribution channels, regulatory and filing fees, legal costs, and other overhead expenses related to our operations. We expect to continue to incur operating losses until we achieve a volume of in-force life insurance policies that provide premiums and the associated investment income which are sufficient to cover our operating costs.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. On a continuing basis, we evaluate our estimates and assumptions.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following accounting policies, judgments and estimates are the most critical to the preparation of our consolidated financial statements.
Investments
Fixed maturity securities are comprised of bonds that are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss). The amortized cost of fixed maturity securities available-for-sale is generally adjusted for amortization of premium and accretion of discount.
Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method.
The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.
The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities, with the change in allowance reported in net loss on the consolidated statements of operations.
Purchases and sales of securities are recorded on a trade-date basis. Interest earned on investments is recorded on the accrual basis and is included in net investment income.
The Company’s mortgage loan portfolio is comprised entirely of residential properties with loan to appraised value ratios below 90%. Mortgage loans are carried at amortized book value. A mortgage loan allowance has been established for any unforeseen losses using an industry approach. While we utilize our best judgment and information available, the ultimate adequacy of this allowance is dependent upon a variety of factors beyond our control, including the performance of the residential mortgage loan portfolio, the economy and changes in interest rates. Our allowance for possible mortgage loan losses consists of specific valuation allowances established for probable losses on specific loans and a portfolio reserve for probable incurred losses but not for specifically identified loans. The fair values for mortgage loans are estimated using discounted cash flow analysis. The discount rate used to calculate fair values was indexed to the SOFR yield curve adjusted for an appropriate credit spread.
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.
The Company’s other long-term investments are comprised of lottery prize cash flows holdings held at amortized cost. These investments are categorized as other long-term investments in the statement of financial position and are assignments of the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries. Since state run lotteries are unlikely to default even in the most dire economic situations, no allowance for credit losses are necessary.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and money market instruments.
Deferred Policy Acquisition Costs
Costs that relate to and vary with the successful production of new business are deferred over life of the policy. Deferred acquisition costs (DAC) consist of commissions and policy issuance, underwriting and agency expenses. DAC expenses are amortized primarily over the premium-paying period of life policies and as profits emerge on the annuity products, using the same assumptions as were used in computing liabilities for future policy benefits.
Deferred Sales Inducement Costs
Sales inducement costs (SIC) are related to policy bonuses issued on some of the Company’s annuity products. SIC is deferred at the issuance of the policy and amortized over the bonus period on a straight-line basis. The amount deferred is based on the difference between the fund value with the bonus and the fund value without the bonus.
Policyholders’ Account Balances
The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus applicable bonus and interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 1.55% to 5.50%.
Future Policy Benefits
Future policy benefit reserves have been computed by the net level premium method with assumptions as to investment yields, mortality and withdrawals based upon the Company’s experience. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of policy liabilities and the increase in future policy benefit reserves. Management’s judgments and estimates for future policy benefit reserves provide for possible unfavorable deviation. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.
Recently Adopted and Issued Accounting Pronouncements
Please refer to the applicable paragraphs in Note 1 of the Notes to Consolidated Financial Statements.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.
We recognize DTAs to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If we determine that we would be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the DTA valuation allowance, which would reduce the provision for income taxes.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Results of Operations – Three Months Ended March 31, 2024 and 2023
Revenues
Revenues are primarily from life insurance premium income and investment income. Realized gains and losses on investment holdings can significantly impact revenues from period to period.
|
March 31, 2024 |
March 31, 2023 |
|||||||
|
Premiums and other considerations |
$ | 976,358 | $ | 721,523 | ||||
|
Net investment income |
542,134 | 543,376 | ||||||
|
Commission income |
17,849 | 13,072 | ||||||
|
Total revenues |
$ | 1,536,341 | $ | 1,277,971 | ||||
Total revenues increased by $258,370 for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023. This increase was primarily a result of increased new policy sales and growth of the overall business. Commission income also increased slightly compared to the prior year. The Company also accepted annuity considerations during 2024 and 2023. Annuity considerations contribute to additional net investment income through increased investments but are not classified as premiums and other considerations under total revenues for GAAP reporting.
Expenses
Our expenses relate to operating a financial services holding company, a life insurance company, and two insurance agencies.
Expenses were $1,600,057 for the three months ended March 31, 2024, a decrease of $266,254 from $1,866,311 for the three months ended March 31, 2023. Significant expense categories are discussed below.
Total Benefits and Claims – Decreases to policyholder liabilities and death and other benefits decreased benefits and claims expense by $211,339 for the three months ended March 31, 2024 compared to the same period in the prior year. Expenses were $575,042 and $786,381 for the three months ended March 31, 2024 and 2023, respectively. The decrease is primarily due to decreases in interest credited to policyholders and benefit payments. Those two decreases are timing related for benefit payments and strategy related for the decrease in interest credited to policyholders as the Company has issued less annuities in the last couple of years. There was an increase to future policy benefits though, which is to be expected based on new sales production, increased insurance volume, number of insureds covered, and the passage of time since policy issuance. As mentioned, death and benefit payments can significantly impact expenses from period to period due to timing.
Commissions – Commission expenses were $681,971 and $463,661 for the three months ended March 31, 2024 and 2023, respectively. The increase of $218,310 is consistent with new business issued and renewal commissions paid on previously issued business, net of any applicable commission recaptured. The commission in the first year of policy issuance is typically significantly greater than the subsequent years. Conversely, in subsequent years with lower renewal commission rates, the Company should realize additional profits on previously issued business as premiums collected will significantly outweigh any renewal commissions paid.
Salaries and Employee Benefits – Salary and employee benefits expense decreased $45,332 for the three months ended March 31, 2024 compared to the same period in the prior year. The decrease is primarily related to a reduction in staff. The Company had a few employees leave the company since March 31, 2023. The Company decided to replace those employees with external consultants as opposed to hiring new employees for certain tasks and roles. This decision allows us to save on benefit costs, payroll taxes, other employee overhead expenses, and allows us to pay for their time as needed. This decision has helped to reduce the salaries and employee benefits expense.
Other Expenses – Professional fees continue to be one of the larger contributing expenses to the overall total expenses. The professional fees consist of public accounting firm fees, consulting actuarial fees, and the external consultants mentioned above in the salaries and employee benefits section.
Net Loss
The net loss was $63,716, or $0.00 per share, for the three months ended March 31, 2024 compared to a net loss of $588,340 or $(0.04) per share, for the three months ended March 31, 2023. The $524,624 improvement in the net loss was primarily attributable to the increases and decreases in revenues and expenses described above.
The weighted average common shares outstanding and subscribed were 15,932,498 and 15,621,501 for the three months ended March 31, 2024 and 2023, respectively.
Financial Position – As of March 31, 2024 and December 31, 2023
Total assets of the Company decreased from $42,557,399 as of December 31, 2023 to $41,960,931 as of March 31, 2024, a decrease of $596,468. Assets that increased or decreased materially in 2024 were invested assets, cash and cash equivalents, reinsurance recoverable, and deferred acquisition costs.
Total investments decreased by $1,488,415, or 6.3%. This decrease was primarily due to maturities and payoffs. As a result, cash and cash equivalents increased. All non-operating cash is held in interest bearing cash equivalent accounts.
We continue to diversify the investment portfolio by our allocation strategy which should provide meaningful risk-adjusted increases to net investment income over the upcoming years and maximize total revenues. In addition, we continue to invest our excess cash in higher yielding investments as suitable options become available.
The Company also recognized an increase in deferred policy acquisition costs and reinsurance recoverable as the Company continues to successfully sell more new business. Other assets that materially increased were federal income taxes recoverable on taxes withheld from cash receipts on other long-term investment payments which is included in the other assets line on the consolidated statements of financial position. The federal income taxes recoverable balance is 100% recoverable via tax refunds from the U.S. Government. Amounts recoverable from reinsurers represent the amounts due from our reinsurance partners. This balance continues to grow with the successful production of more and more business and our policy of using reinsurance partners to limit our exposure on any one individual policyholder.
Policyholder liabilities include benefit reserves for both life and annuity policies, claim reserves, deposit funds and advance premiums. Policyholder liabilities decreased by $906,208 at March 31, 2024 compared to December 31, 2023. That decrease is primarily due to a decrease in annuity policies as we focus more on life insurance production.
Total shareholders’ equity of the Company increased from $9,995,531 as of December 31, 2023 to $10,302,435 as of March 31, 2024, an increase of $306,904. The increase is mainly due to the additional capital raised during 2024. That increase was primarily offset by the net loss and change in accumulated other comprehensive loss due to interest rate movements in the market for the three months ended March 31, 2024.
Liquidity and Capital Resources
Since inception, our operations have been financed primarily through an organizational offering, four private placement offerings, an intrastate public stock offering, and a rights offering to existing shareholders only. Through March 31, 2024, we received $27,843,165 from the sale of 15,966,356 shares and incurred offering costs of $2,765,297. Since inception through December 31, 2018, the Company purchased 3,000 shares of the Company’s common stock for $15,000 held as treasury stock. Additionally, TRLIC has purchased another 111,000 shares of TRCC common stock at a cost of $118,210 since 2018. The shares were purchased to compensate agents under TRLIC’s Agent Stock Incentive Plan (“ASIP”). The Company has issued 16,080 treasury shares under the ASIP since inception of the plan and another 51,000 treasury shares as part of employment agreements and/or bonuses to employees. The remaining 43,920 shares held by TRLIC and the 3,000 shares held by TRCC total 46,920 shares. These shares are held as treasury shares in the consolidated financial statements.
We had cash and cash equivalents totaling $12,334,693 as of March 31, 2024. The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures interest and non-interest-bearing accounts up to $250,000. Uninsured balances aggregate $1,995,368 as of March 31, 2024. Other funds are invested in mutual funds that invest in U.S. government securities. We monitor the solvency of all financial institutions in which we have funds to minimize the exposure for loss. The Company has not experienced any losses in such accounts.
Capital provided from the previous offerings and current offering will provide a considerable amount of operating funds for current and future operations of TRCC. The operations of TRLIC should provide ample cash flows from premium income and investment income to meet operating requirements once a sufficient book of business has been established, or new policy sales are turned off, whichever happens first. Life insurance contract liabilities are generally long term in nature and are generally paid from future cash flows. The operations of TRLS and AIS should provide sufficient cash flows from commission income to meet their operating requirements. TRLS and AIS are also less capital intensive than TRLIC since it does not retain any of the policy risks or capital requirements.
We believe that our existing cash and cash equivalents will be sufficient to fund our anticipated operating expenses and capital expenditures for at least the next 12 months. We have based this estimate upon assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. We are not aware of any commitments or unusual events that could materially affect our capital resources. We are not aware of any current recommendations by any regulatory authority which, if implemented, would have a material adverse effect on our liquidity, capital resources or operations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein are forward-looking statements. The forward-looking statements are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, and include estimates and assumptions related to economic, competitive and legislative developments. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning; and include, but are not limited to, statements regarding the outlook of our business and financial performance. These forward-looking statements are subject to change and uncertainty, which are, in many instances, beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect upon us.
There can be no assurance that future developments will be in accordance with our expectations, or that the effect of future developments on us will be as anticipated. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements.
These factors include among others:
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general economic conditions and financial factors, including the performance and fluctuations of fixed income, equity, real estate, credit capital and other financial markets; |
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differences between actual experience regarding mortality, morbidity, persistency, surrenders, investment returns, and our pricing assumptions establishing liabilities and reserves or for other purposes; |
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the effect of increased claims activity from natural or man-made catastrophes, pandemic disease, or other events resulting in catastrophic loss of life; |
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inherent uncertainties in the determination of investment allowances and impairments and in the determination of the valuation allowance on the deferred income tax asset; |
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investment losses and defaults; |
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competition in our product lines; |
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attraction and retention of qualified employees and agents; |
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ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; |
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the availability, affordability and adequacy of reinsurance protection; |
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the effects of emerging claim and coverage issues; |
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the cyclical nature of the insurance business; |
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interest rate fluctuations; |
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changes in our experiences related to deferred policy acquisition costs; |
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the ability and willingness of counterparties to our reinsurance arrangements to pay balances due to us; |
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rating agencies’ actions; |
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domestic or international military actions; |
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the effects of extensive government regulation of the insurance industry; |
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changes in tax and securities law; |
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changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies; |
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regulatory or legislative changes or developments; |
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the effects of unanticipated events on our disaster recovery and business continuity planning; |
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failures or limitations of our computer, data security and administration systems; |
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risks of employee error or misconduct; |
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the assimilation of life insurance businesses we acquire and the sound management of these businesses; and |
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the availability of capital to expand our business. |
It is not our corporate policy to make specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. In addition, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable developments.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 as amended (“Exchange Act”) as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is made known to management, including our Certifying Officers, as appropriate, to allow timely decisions regarding disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operating, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes to Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the first quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The Company sold 4,375,000 common shares at $.02 per share to its organizing shareholders in May of 2012 for total proceeds of $87,500. Subsequently, the Company completed three private placement stock offerings which raised $10,249,000 through the issuance of 8,490,000 shares from the private placement offerings in 2012 and 2013, including a private placement of 2,000,000 shares for $5,000,000 between February and November 2013. The Company incurred $1,215,569 in offering costs to issue these shares. On May 31, 2022, the Company began a rights offering to existing shareholders only. The rights offering ended on September 30, 2022. Through this rights offering, the Company raised $4,400,652 and incurred $77,615 of offering costs through the sale of 733,442 shares of its common stock. At the beginning of 2023, the Company began another private placement stock offering which has raised $3,095,528 and incurred $27,986 of offering costs through the subscription of 412,737 shares of its common stock. These shares were sold in reliance on the exemption from the registration requirements of the Securities Act of 1933 (the “1933 Act”) contained in Securities and Exchange Commission (“SEC”) Regulation D, Rule 506. No underwriter was involved in connection with the issuance of these shares, and we paid no finder’s fees in the private placements.
On April 2, 2014, the Company commenced an offering of 5,000,000 shares of common stock at $5.00 per share ($25,000,000 maximum) with a 10% over sale provision, in an intrastate public offering registered with the Texas State Securities Board. This offering ended on April 2, 2017 and was sold only to Texas residents pursuant to an exemption from the 1933 Act contained in Section 3(a)(11) of the 1933 Act and Rule 147 promulgated by the SEC. It was sold by issuer agents registered with the Texas State Securities Board. The Company raised $10,010,485 and incurred offering costs of $1,444,127 from the sale of 2,002,097 shares in this offering.
Proceeds have been used for working capital and the capitalization of a life insurance company and other insurance agencies.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
Item 6. Exhibits
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31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
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31.2 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
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32.1 |
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32.2 |
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101.INS** |
Inline XBRL Instance |
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101.SCH** |
Inline XBRL Taxonomy Extension Schema |
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101.CAL** |
Inline XBRL Taxonomy Extension Calculation |
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101.DEF** |
Inline XBRL Taxonomy Extension Definition |
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101.LAB** |
Inline XBRL Taxonomy Extension Labels |
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101.PRE** |
Inline XBRL Taxonomy Extension Presentation |
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104.FIL** |
Inline XBRL Cover Page Interactive Data File |
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**XBRL |
Information is furnished and not filed as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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TEXAS REPUBLIC CAPITAL CORPORATION a Texas corporation |
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May 14, 2024 |
By: |
/s/ Timothy R. Miller |
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Timothy R. Miller, President and Chief Executive Officer |
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May 14, 2024 |
By: |
/s/ Shane S. Mitchell |
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Shane S. Mitchell, Chief Financial Officer |
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EXHIBIT NO. 31.1
CERTIFICATION
I, Timothy R. Miller, Chief Executive Officer, certify that:
1. I have reviewed this Quarterly report on Form 10-Q of Texas Republic Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant, and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter, the registrant’s fourth quarter in the case of an annual report, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 14, 2024
By: /s/ Timothy R. Miller
Timothy R. Miller, President and Chief Executive Officer
EXHIBIT NO. 31.2
CERTIFICATION
I, Shane S. Mitchell, Chief Financial Officer, certify that:
1. I have reviewed this Quarterly report on Form 10-Q of Texas Republic Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant, and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter, the registrant’s fourth quarter in the case of an annual report, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 14, 2024
By: /s/ Shane S. Mitchell
Shane S. Mitchell, Chief Financial Officer
EXHIBIT NO. 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. ss. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Texas Republic Capital Corporation, a Texas Corporation (the “Company”), hereby certifies that:
To my knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 14, 2024
By: /s/ Timothy R. Miller
Timothy R. Miller, President and Chief Executive Officer
EXHIBIT NO. 32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. ss. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Texas Republic Capital Corporation, a Texas Corporation (the “Company”), hereby certifies that:
To my knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 14, 2024
By: /s/ Shane S. Mitchell
Shane S. Mitchell, Chief Financial Officer
Consolidated Statements of Financial Position (Parentheticals) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Available-for-sale fixed maturity securities Amortized cost (in Dollars) | $ 5,871,563 | $ 5,878,911 |
| Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 25,000,000 | 25,000,000 |
| Common stock, shares issued | 15,600,539 | 15,600,539 |
| Common stock, shares outstanding | 15,553,619 | 15,553,619 |
| Common Stock, shares subscribed | 412,737 | 359,292 |
| Treasury stock, shares | 46,920 | 46,920 |
Consolidated Statements of Comprehensive Loss - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
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| Statement of Comprehensive Income [Abstract] | ||
| Net loss | $ (63,716) | $ (588,340) |
| Other comprehensive gain (loss) | ||
| Total net unrealized gains (losses) arising during the period | (28,335) | 121,856 |
| Less net realized investment gains | 0 | 0 |
| Net unrealized investment gains (losses) | (28,335) | 121,856 |
| Total other comprehensive gain (loss) | (28,335) | 121,856 |
| Total comprehensive loss | $ (92,051) | $ (466,484) |
Consolidated Statements of Changes in Shareholders' Equity - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Treasury Stock, Common [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Common Stock Subscribed [Member] |
Total |
|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2022 | $ 156,005 | $ 21,854,321 | $ (52,130) | $ (483,593) | $ (12,959,097) | $ 8,515,506 | |
| Common stock shares subscribed | 1,311 | 969,989 | $ 971,300 | ||||
| Other comprehensive gain (loss) | 121,856 | 121,856 | |||||
| Net loss | (588,340) | (588,340) | |||||
| Balance at Mar. 31, 2023 | 157,316 | 22,824,310 | (52,130) | (361,737) | (13,547,437) | 9,020,322 | |
| Balance at Dec. 31, 2023 | 159,598 | 24,519,315 | (47,720) | (287,271) | (14,348,391) | 9,995,531 | |
| Common stock shares subscribed | 535 | 398,420 | 398,955 | ||||
| Other comprehensive gain (loss) | (28,335) | (28,335) | |||||
| Net loss | (63,716) | (63,716) | |||||
| Balance at Mar. 31, 2024 | $ 160,133 | $ 24,917,735 | $ (47,720) | $ (315,606) | $ (14,412,107) | $ 10,302,435 |
Organization and Significant Accounting Policies |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | 1. Organization and Significant Accounting Policies
Nature of Operations
Texas Republic Capital Corporation (the “Company”) is the parent holding company of Texas Republic Life Insurance Company (“TRLIC”), Texas Republic Life Solutions, Inc. (“TRLS”), and Axis Insurance Solutions, LLC (“AIS”). The Company was incorporated in Texas on May 15, 2012, for the primary purpose of forming and capitalizing a life insurance company subsidiary.
The Texas Department of Insurance approved TRLIC’s life insurance charter on August 1, 2016. The Company capitalized TRLIC with $3,000,000 and owns 100% of TRLIC. TRLIC began insurance operations on April 3, 2017 and is currently selling life and annuity products in the state of Texas. In 2018, the Company made additional capital contributions totaling $2,750,000 for the entire year. In 2019, the Company made two more capital contributions to TRLIC. The first contribution consisted of mortgage loans valued at $857,133 and the second one was a $1,300,000 cash contribution. In 2021 and 2022, the Company made additional total capital contributions of $2,100,000 and $2,100,000, respectively. In 2023, the Company made $1,750,000 in total capital contributions. Total capitalization of TRLIC was $13,857,133 at March 31, 2024.
TRLS, a life and health insurance agency, was incorporated February 1, 2017. The Company capitalized TRLS with $50,000 and owns 100% of TRLS. In 2018 and 2020, the Company made additional capital contributions of $100,000 and $200,000, respectively. In 2021 and 2022, the Company made additional total capital contributions of $50,000 and $150,000, respectively. Total capitalization of TRLS was $550,000 at March 31, 2024.
AIS, a property & casualty insurance agency, was formed on April 6, 2021. The Company capitalized AIS with $25,000 and owns 100% of AIS.
From incorporation through April 2, 2017, the Company was involved in the sale of common stock to provide working capital. During this time, the Company completed an organizational offering, three private placement stock offerings and an intrastate public stock offering in the state of Texas. The Company raised $10,336,500 and incurred $1,215,569 of offering costs through the issuance of 12,865,000 shares from the organizational offering and three private placement offerings. The intrastate public stock offering was registered to raise $25,000,000 by offering 5,000,000 shares of its common stock and ended on April 2, 2017. Through this offering the Company raised an additional $10,010,485 and incurred another $1,444,127 of offering costs through the sale of 2,002,097 shares of common stock. On May 31, 2022, the Company began a rights offering to existing shareholders only. The rights offering ended on September 30, 2022. Through this rights offering, the Company raised $4,400,652 and incurred $77,615 of offering costs through the sale of 733,442 shares of its common stock.
On January 1, 2023, the Company began a six-million-dollar private placement offering with a possible 10% oversubscription. This offering was extended for an additional year and will end on January 1, 2025, unless all of the shares are sold before then or the offering is terminated earlier. These shares will be sold in reliance on the exemption from the registration requirements of the Securities Act of 1933 (the “1933 Act”) contained in Securities and Exchange Commission (“SEC”) Regulation D, Rule 506. No underwriter will be involved in connection with the issuance of these shares, and we will not pay finder’s fees in this private placement. The Company has raised $3,095,528 and incurred $27,986 of offering costs from the subscription of 412,737 shares through March 31, 2024 from this offering.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.
The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s report on Form 10-K for the year ended December 31, 2023.
Principles of Consolidation
The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.
Reclassifications
Certain reclassifications have been made in the prior year financial statements to conform to current year classifications. These reclassifications had no effect on the previously reported net loss or shareholders’ equity.
Investments
Fixed maturity securities are comprised of bonds that are classified as available-for-sale and are carried at fair value net of any necessary valuation allowance for credit losses with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss). The amortized cost of fixed maturity securities available-for-sale is generally adjusted for amortization of premium and accretion of discount.
Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method.
The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit loss exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.
The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities, with the change in allowance reported in net loss on the consolidated statements of operations.
Purchases and sales of securities are recorded on a trade-date basis. Interest earned on investments is recorded on the accrual basis and is included in net investment income.
The Company’s mortgage loan portfolio is comprised entirely of residential properties with loan to appraised value ratios below 90%. Mortgage loans are carried at current book value. A mortgage loan allowance has been established for any unforeseen losses using an industry approach, which establishes a reserve for possible loan losses charged to expense which represents, in the Company’s judgement, the known and estimated credit losses existing in the loan portfolio. This reserve reduces the carrying value of investment in mortgage loans on the consolidated statement of financial position. The fair values for mortgage loans are estimated using discounted cash flow analysis. The discount rate used to calculate fair values was indexed to the SOFR yield curve adjusted for an appropriate credit spread.
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.
The Company’s other long-term investments are comprised of lottery prize cash flows holdings held at amortized cost. Payments on these investments are made by state run lotteries. Since state run lotteries are unlikely to default even in the most dire economic situations, no allowance for credit losses are necessary. Interest income and the accretion of discount are included in net investment income.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and money market instruments.
Deferred Policy Acquisition Costs
Costs that relate to and vary with the successful production of new business are deferred over the life of the policy. Deferred acquisition costs (“DAC”) consist of commissions and policy issuance, underwriting and agency expenses. DAC expenses are amortized primarily over the premium-paying period of life policies and as profits emerge on annuity products. Amortization uses the same assumptions as were used in computing liabilities for future policy benefits. There was $525,333 of DAC deferred and $131,863 of DAC amortized for the three months ended March 31, 2024. There was $348,129 of DAC deferred and $84,994 of DAC amortized for the three months ended March 31, 2023.
Deferred Sales Inducement Costs
Sales inducement costs (“SIC”) are related to policy bonuses issued on some of the Company’s annuity products. SIC is deferred at the issuance of the policy and amortized over the bonus period on a straight-line basis. The amount deferred is based on the difference between the fund value with the bonus and the fund value without the bonus. There was $170,029 and $214,885 of SIC deferred at March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 there was $0 of SIC deferred and $44,856 of SIC amortized. There was $0 of SIC deferred and $59,254 of SIC amortized during the three months ended March 31, 2023.
Advances and Notes Receivable
Advances and notes receivable are recorded at unpaid principal balances. Management evaluates the collectability of advances and notes receivable on the specific identification basis. Management had an allowance for possible uncollectable agent balances of $0 and $7,650 as of March 31, 2024 and December 31, 2023, respectively.
Leased Property – Right to Use Asset
In February 2016, the FASB issued ASU 2016-02, Lease Accounting (Topic 842) (“ASU 2016-02”). Under ASU 2016-02, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. The Company’s home office lease had an original term greater than one year, and the Company recognizes on the balance sheet a right of use (“ROU”) operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The Company has a lease asset and liability of $320,045 as of March 31, 2024 compared to $341,866 as of December 31, 2023.
Intangible assets
Intangible assets are stated at cost less accumulated amortization and reflect amounts paid for the Company’s computer software costs during the application development stage. The software costs placed in service are amortized using the straight-line method over the seven-year estimated useful life of the software. The asset is tested for impairment at least annually. Subsequent modifications or upgrades to internal-use software are capitalized only to the extent that additional functionality is provided.
Furniture and Equipment
Furniture and equipment are carried at cost less accumulated depreciation or amortization. Office furniture, equipment and EDP equipment are recorded at cost or fair value at acquisition less accumulated depreciation or amortization using the straight-line method over a period that approximates the estimated useful life of the respective assets of three to seven years. Expenditures for improvements are capitalized, and expenditures for maintenance and repairs are expensed as incurred. Upon sale or retirement, the cost and related accumulated depreciation and amortization is removed from the related accounts, and the resulting gain or loss, if any, is reflected in income.
Policyholders’ Account Balances
The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus applicable bonus and interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 1.55% to 5.50%.
Future Policy Benefits
Future policy benefit reserves have been computed by the net level premium method with assumptions as to investment yields, mortality and withdrawals based upon the Company’s experience. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of policy liabilities and the increase in future policy benefit reserves. Management’s judgments and estimates for future policy benefit reserves provide for possible unfavorable deviation. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.
Common Stock
Common stock is fully paid, non-assessable and has a par value of $.01 per share.
Treasury Stock
Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, are recorded at cost.
Federal Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for cumulative temporary differences between balances of assets and liabilities determined under GAAP and balances determined using tax basis.
Net Loss Per Common Share Outstanding and Subscribed
Net loss per common share is calculated using the weighted average number of common shares outstanding and subscribed during the year. The weighted average common shares outstanding and subscribed were 15,932,498 and 15,621,501 for the three months ended March 31, 2024 and 2023, respectively.
Related Party Transactions
The Company entered into an agreement with First Trinity Financial Corporation (FTFC) where FTFC will use its resources to source mortgage loans on real estate and lottery bonds. FTFC will present to the Company investments based on criteria the Company has established. The Company has the option to purchase the presented investment assets directly from the seller or to decline the purchase based on the Company’s analysis of the investment. The Chairman of the Company is also the Chairman, President, and Chief Executive Officer of FTFC. The Company paid fees for this service to FTFC of $0 for the quarter ending March 31, 2024 and $93,806 for the year ending December 31, 2023.
The Company entered into a coinsurance reinsurance agreement with Family Benefit Life Insurance Company (FBLIC), which is a subsidiary of FTFC. The Company will cede a portion of new business from our TrueFlex product related to specific groups to FBLIC as mutually agreed upon in advance. This new agreement became effective on January 1, 2022, and as of March 31, 2024 there have been five groups covered under this agreement.
Subsequent Events
Management has evaluated subsequent events for recognition and disclosure in the financial statements through the date the financial statements were available to be issued. The Company did not identify any subsequent events requiring recognition or disclosure.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including, among others, held-to-maturity debt securities, mortgage loans, lottery prize receivables, trade receivables, and reinsurance recoverables. ASU 2016-13 requires a valuation allowance to be calculated on these financial assets and that they be presented on the financial statements net of the valuation allowance. This methodology is referred to as the current expected credit loss model. ASU 2016-13 had an original effective date for fiscal years beginning after December 15, 2019. The FASB recently delayed the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s financial condition and results of operations.
In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgate that an entity must apply specific loan refinancing and restructuring guidance to determine whether a modification results in a new loan or the continuation of an existing loan. The amendments also require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this guidance are effective for fiscal years beginning after December 15, 2022, and should be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or liquidity.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification related to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. These updates were originally required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020. The FASB has delayed the effective date of ASU 2018-12 to periods beginning after December 15, 2024 for smaller reporting companies, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations.
In December 2022, the FASB issued amendments (Accounting Standards Update 2022-5) to Accounting Standards Update 2018-12 (Targeted Improvements for Long-Duration Contracts) that originally required an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application was elected. This updated guidance reduces implementation costs and complexity associated with the adoption of targeted improvements in accounting for long-duration contracts that have been derecognized in accordance with Accounting Standards Update 2018-12 before the delayed effective date. Without the amendments in this Update, an insurance entity would be required to reclassify a portion of gains or losses previously recognized in the sale or disposal of insurance contracts or legal entities because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, this reclassification may not be useful to users of financial information. The amendments in this guidance are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations. |
Investments |
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| Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment [Text Block] | 2. Investments
Fixed Maturity Securities Available-For-Sale
Investments in fixed maturity securities available-for-sale as of March 31, 2024 and December 31, 2023 are summarized as follows:
For securities in an unrealized loss position as of the financial statement dates, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position as of March 31, 2024 and December 31, 2023 are summarized as follows:
As of March 31, 2024, the fixed maturity securities in a loss position had an average fair value to amortized cost ratio of 94.2%. As of December 31, 2023, the fixed maturity securities in a loss position had an average fair value to amortized cost ratio of 94.4%.
As of March 31, 2024 and December 31, 2023, there were no fixed maturity securities that were below investment grade as rated by taking the median of Fitch’s, Moody’s, and Standard and Poor’s ratings, respectively.
The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.
The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities.
As of March 31, 2024, the Company determined that no allowances for credit losses were necessary for the fixed maturity securities based on the current holdings, the respective economic factors, and the Company's historical experience.
The unrealized depreciation shown herein are primarily the result of the current interest rate environment rather than credit factors.
Net unrealized losses included in accumulated other comprehensive income for investments classified as available-for-sale are summarized as follows:
The amortized cost and fair value of fixed maturity available-for-sale securities as of March 31, 2024, by contractual maturity, are summarized as follows:
For the three months ended March 31, 2024, the Company received $5,432 of proceeds from sales and maturities of investments in available-for-sale securities and did not have any gross gains and gross losses realized, respectively. For the year ended December 31, 2023, the Company received $2,760,920 of proceeds from sales and maturities of investments in available-for-sale securities and had $3,027 of gross gains and $0 of gross losses realized, respectively.
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The amortized cost and fair value of other long-term investments (which consists of lottery prize cash flows) as of March 31, 2024, by contractual maturity, are summarized as follows:
Other long-term investments by geographic distribution:
Mortgage Loans on Real Estate
The Company utilizes the ratio of the carrying value of individual mortgage loans compared to the individual appraisal value to evaluate the credit quality of its mortgage loans on real estate (commonly referred to as the loan-to-value ratio). Currently, all of the Company’s mortgage loans are loans on residential properties. The Company’s mortgage loans on real estate by credit quality using this ratio as of March 31, 2024 and December 31, 2023 are summarized as follows:
Mortgage loans by geographic distribution:
There were 2 mortgage loans with a combined principal balance of $284,263 that were 90 days or more past due and still accruing interest as of March 31, 2024. Both of those mortgage loans were in the process of foreclosure as of March 31, 2024. The Company expects to fully recover the principal balance outstanding plus any accrued interest along with all fees and expenses. There were 2 mortgage loans with a combined principal balance of $284,185 that were 90 days or more past due and still accruing interest as of December 31, 2023. The Company had a mortgage loan allowance of $70,679 and $74,663 as of March 31, 2024 and December 31, 2023, respectively.
Major categories of net investment income for the three months ended March 31, 2024 and 2023 are summarized as follows:
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Text Block] | 3. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) on the measurement date. The Company also considers the impact on fair value of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity.
The Company holds fixed maturity securities that are measured and reported at fair market value on the statement of financial position. The Company determines the fair market values of its financial instruments based on the fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities. The Company has no Level 1 assets that would include securities traded in an active exchange market.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include fixed maturity securities with quoted prices that are traded less frequently than exchange-traded instruments or assets and liabilities whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government and agency mortgage-backed debt securities and corporate debt securities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes investments where independent pricing information was not able to be obtained for a significant portion of the underlying assets.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting the levels of the fair value hierarchy are reported as transfers in and out of the specific level category as of the beginning of the period in which the reclassifications occur.
The Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are summarized as follows:
Fair values for Level 2 assets for the Company’s fixed maturity securities available-for-sale are primarily based on prices supplied by a third-party investment service. The third-party investment service provides quoted prices which use observable inputs in developing such rates.
The Company analyzes market valuations received to verify reasonableness and to understand the key assumptions used and the sources. Since the fixed maturity securities owned by the Company do not trade on a daily basis, the third-party investment service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings, and matrix pricing. As the fair value estimates of the Company’s fixed maturity securities are based on observable market information rather than market quotes, the estimates of fair value on these fixed maturity securities are included in Level 2 of the hierarchy. The Company’s Level 2 investments include corporate bonds and U.S. Treasury securities.
The Company’s fixed maturity securities available-for-sale portfolio is highly liquid and allows for substantially all of the portfolio to be priced through pricing services.
Fair Value of Financial Instruments
The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of March 31, 2024 and December 31, 2023 and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:
Financial Instruments Disclosed, But Not Carried, at Fair Value:
The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment was required to interpret market data to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.
The following methods and assumptions were used in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto:
Fixed Maturity Securities
The fair value of fixed maturity securities is based on the principles previously discussed as Level 1, Level 2 and Level 3.
Cash and Cash Equivalents, Policy loans, Accrued Investment Income and Advances and Notes Receivable
The carrying value of these financial instruments approximates their fair values due to the expected short-term nature until the cash settlement of these items. Cash and cash equivalents are included in Level 1 of the fair value hierarchy due to their highly liquid nature. Policy loans, accrued investment income, and advances and notes receivable are included in Level 3 of the fair value hierarchy due to little or no availability of market activity for these types of assets.
Mortgage loans on Real Estate
The Company’s mortgage loan portfolio is comprised of residential properties with loan to appraised value ratios at or below 90%. The fair values for mortgage loans are estimated using discounted cash flow analyses. For residential mortgage loans, the discount rate used was indexed to the SOFR yield curve adjusted for an appropriate credit spread.
Other Long-Term Investments
Other long-term investments are comprised of lottery prize receivables and fair value is derived by using a discounted cash flow approach. Projected cash flows are discounted using the average FTSE Pension Liability Index in effect at the end of each period.
Policyholders’ Account Balances
The fair value for liabilities under investment-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.
The fair values for insurance contracts other than investment-type contracts are not required to be disclosed.
Policy Claims and other benefits
The carrying amounts reported for these liabilities approximate their fair value. |
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Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Income Tax Disclosure [Text Block] | 4. Income Taxes
The Company files a consolidated return with its subsidiaries TRLS and AIS. The Company’s other subsidiary TRLIC files a separate federal return for life insurance companies. TRLIC is taxed as a life insurance company under the provisions of the Internal Revenue Code. Life insurance companies must file separate tax returns until they have been a member of the consolidated filing group for five years. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company cannot currently conclude that it is more likely than not that the remaining deferred tax assets will be utilized. Therefore, the Company’s deferred tax assets have been fully offset by a valuation allowance. As a result, our effective tax rate from continuing operations was zero percent for the quarter ended March 31, 2024. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. For the purpose of federal income tax, the Company has net operating loss carryforwards as of March 31, 2024, which expire between 2031 and 2037. Net operating losses generated in 2018 and beyond do not expire and annual utilizations are limited to 80% of taxable income. The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020, repealed the 80 percent limitation for taxable years beginning before January 1, 2021.
The Company and its subsidiaries have no known uncertain tax benefits within its provision for income taxes. In addition, the Company does not believe it would be subject to any penalties or interest relative to any open tax years and, therefore, have not accrued any such amounts. The Company files U.S. federal income tax returns, income tax returns in various state jurisdictions, and franchise tax returns in the state of Texas. The 2020 through 2022 U.S. federal tax years are subject to income tax examination by tax authorities. The Company classifies any interest and penalties (if applicable) as income tax expense in the financial statements. |
Concentrations of Credit Risk |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Risks and Uncertainties [Abstract] | |
| Concentration Risk Disclosure [Text Block] | 5. Concentrations of Credit Risk
The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures interest and non-interest-bearing accounts up to $250,000. Uninsured balances aggregate $1,995,368 as of March 31, 2024. The Company monitors the solvency of all financial institutions in which it has funds to minimize the exposure for loss. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. |
Stock Incentive Plan |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Share-Based Payment Arrangement [Abstract] | |
| Share-Based Payment Arrangement [Text Block] | 6. Stock Incentive Plan
The Company’s life insurance subsidiary, TRLIC had an Agent Stock Incentive Plan (“ASIP”). The plan was approved in August 2018 by the Texas State Securities Board. The plan was suspended by the Company in April 2022. The plan awarded shares of Texas Republic Capital Corporation common stock to agents based on certain production levels achieved in sales of life and annuity products. Calculation of awards are based on production for the previous year ended and issued in the subsequent year. There have been no shares issued in 2024. The Company granted 7,000 shares as part of employment agreements and/or bonuses to employees in 2023. The Company issued stock options to one of its employees at the beginning of 2023. The Company granted a share option of up to 5,000 shares of common stock to this individual. This option award will vest over a 5-year period of continuous service at a rate of 20% per year, and the exercise price is equal to zero. |
Lease Commitment |
3 Months Ended | |||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||
| Commitments Disclosure [Text Block] | 7. Lease Commitment
The Company rents office space for its administrative operations under an agreement that expires in 2027. In determining the present value of lease payments, the Company uses its incremental borrowing rate obtained from its main commercial bank.
Future payments under operating lease arrangements accounted for under ASC Topic 842 as of March 31, 2024 are as follows:
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Pay vs Performance Disclosure - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
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| Pay vs Performance Disclosure | ||
| Net Income (Loss) | $ (63,716) | $ (588,340) |
Insider Trading Arrangements |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Trading Arrangements, by Individual | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
Accounting Policies, by Policy (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s report on Form 10-K for the year ended December 31, 2023.
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| Consolidation, Policy [Policy Text Block] | Principles of Consolidation The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. |
| Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. |
| Reclassification, Comparability Adjustment [Policy Text Block] | Reclassifications Certain reclassifications have been made in the prior year financial statements to conform to current year classifications. These reclassifications had no effect on the previously reported net loss or shareholders’ equity. |
| Investment, Policy [Policy Text Block] | Investments Fixed maturity securities are comprised of bonds that are classified as available-for-sale and are carried at fair value net of any necessary valuation allowance for credit losses with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss). The amortized cost of fixed maturity securities available-for-sale is generally adjusted for amortization of premium and accretion of discount. Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. The Company monitors all fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit loss exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost. The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down of available-for-sale fixed maturity securities, with the change in allowance reported in net loss on the consolidated statements of operations. Purchases and sales of securities are recorded on a trade-date basis. Interest earned on investments is recorded on the accrual basis and is included in net investment income. The Company’s mortgage loan portfolio is comprised entirely of residential properties with loan to appraised value ratios below 90%. Mortgage loans are carried at current book value. A mortgage loan allowance has been established for any unforeseen losses using an industry approach, which establishes a reserve for possible loan losses charged to expense which represents, in the Company’s judgement, the known and estimated credit losses existing in the loan portfolio. This reserve reduces the carrying value of investment in mortgage loans on the consolidated statement of financial position. The fair values for mortgage loans are estimated using discounted cash flow analysis. The discount rate used to calculate fair values was indexed to the SOFR yield curve adjusted for an appropriate credit spread.
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. The Company’s other long-term investments are comprised of lottery prize cash flows holdings held at amortized cost. Payments on these investments are made by state run lotteries. Since state run lotteries are unlikely to default even in the most dire economic situations, no allowance for credit losses are necessary. Interest income and the accretion of discount are included in net investment income. |
| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents Cash and cash equivalents include cash on hand and money market instruments. |
| Deferred Policy Acquisition Costs, Policy [Policy Text Block] | Deferred Policy Acquisition Costs Costs that relate to and vary with the successful production of new business are deferred over the life of the policy. Deferred acquisition costs (“DAC”) consist of commissions and policy issuance, underwriting and agency expenses. DAC expenses are amortized primarily over the premium-paying period of life policies and as profits emerge on annuity products. Amortization uses the same assumptions as were used in computing liabilities for future policy benefits. There was $525,333 of DAC deferred and $131,863 of DAC amortized for the three months ended March 31, 2024. There was $348,129 of DAC deferred and $84,994 of DAC amortized for the three months ended March 31, 2023. |
| Deferred Charges, Policy [Policy Text Block] | Deferred Sales Inducement Costs Sales inducement costs (“SIC”) are related to policy bonuses issued on some of the Company’s annuity products. SIC is deferred at the issuance of the policy and amortized over the bonus period on a straight-line basis. The amount deferred is based on the difference between the fund value with the bonus and the fund value without the bonus. There was $170,029 and $214,885 of SIC deferred at March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 there was $0 of SIC deferred and $44,856 of SIC amortized. There was $0 of SIC deferred and $59,254 of SIC amortized during the three months ended March 31, 2023. |
| Receivable [Policy Text Block] | Advances and Notes Receivable Advances and notes receivable are recorded at unpaid principal balances. Management evaluates the collectability of advances and notes receivable on the specific identification basis. Management had an allowance for possible uncollectable agent balances of $0 and $7,650 as of March 31, 2024 and December 31, 2023, respectively. |
| Lessee, Leases [Policy Text Block] | Leased Property – Right to Use Asset In February 2016, the FASB issued ASU 2016-02, Lease Accounting (Topic 842) (“ASU 2016-02”). Under ASU 2016-02, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. The Company’s home office lease had an original term greater than one year, and the Company recognizes on the balance sheet a right of use (“ROU”) operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The Company has a lease asset and liability of $320,045 as of March 31, 2024 compared to $341,866 as of December 31, 2023. |
| Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intangible assets Intangible assets are stated at cost less accumulated amortization and reflect amounts paid for the Company’s computer software costs during the application development stage. The software costs placed in service are amortized using the straight-line method over the seven-year estimated useful life of the software. The asset is tested for impairment at least annually. Subsequent modifications or upgrades to internal-use software are capitalized only to the extent that additional functionality is provided.
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| Property, Plant and Equipment, Policy [Policy Text Block] | Furniture and Equipment Furniture and equipment are carried at cost less accumulated depreciation or amortization. Office furniture, equipment and EDP equipment are recorded at cost or fair value at acquisition less accumulated depreciation or amortization using the straight-line method over a period that approximates the estimated useful life of the respective assets of three to seven years. Expenditures for improvements are capitalized, and expenditures for maintenance and repairs are expensed as incurred. Upon sale or retirement, the cost and related accumulated depreciation and amortization is removed from the related accounts, and the resulting gain or loss, if any, is reflected in income. |
| Policyholder Accounts, Policy [Policy Text Block] | Policyholders’ Account Balances The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus applicable bonus and interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 1.55% to 5.50%. |
| Liability for Future Policy Benefit [Policy Text Block] | Future Policy Benefits Future policy benefit reserves have been computed by the net level premium method with assumptions as to investment yields, mortality and withdrawals based upon the Company’s experience. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of policy liabilities and the increase in future policy benefit reserves. Management’s judgments and estimates for future policy benefit reserves provide for possible unfavorable deviation. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations. |
| Stockholders' Equity, Policy [Policy Text Block] | Common Stock Common stock is fully paid, non-assessable and has a par value of $.01 per share. |
| Treasury Stock, Policy [Policy Text Block] | Treasury Stock Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, are recorded at cost. |
| Income Tax, Policy [Policy Text Block] | Federal Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for cumulative temporary differences between balances of assets and liabilities determined under GAAP and balances determined using tax basis. |
| Earnings Per Share, Policy [Policy Text Block] | Net Loss Per Common Share Outstanding and Subscribed Net loss per common share is calculated using the weighted average number of common shares outstanding and subscribed during the year. The weighted average common shares outstanding and subscribed were 15,932,498 and 15,621,501 for the three months ended March 31, 2024 and 2023, respectively. |
| Related Party Transactions, Policy [Policy Text Block] | Related Party Transactions The Company entered into an agreement with First Trinity Financial Corporation (FTFC) where FTFC will use its resources to source mortgage loans on real estate and lottery bonds. FTFC will present to the Company investments based on criteria the Company has established. The Company has the option to purchase the presented investment assets directly from the seller or to decline the purchase based on the Company’s analysis of the investment. The Chairman of the Company is also the Chairman, President, and Chief Executive Officer of FTFC. The Company paid fees for this service to FTFC of $0 for the quarter ending March 31, 2024 and $93,806 for the year ending December 31, 2023.
The Company entered into a coinsurance reinsurance agreement with Family Benefit Life Insurance Company (FBLIC), which is a subsidiary of FTFC. The Company will cede a portion of new business from our TrueFlex product related to specific groups to FBLIC as mutually agreed upon in advance. This new agreement became effective on January 1, 2022, and as of March 31, 2024 there have been five groups covered under this agreement. |
| Subsequent Events, Policy [Policy Text Block] | Subsequent Events Management has evaluated subsequent events for recognition and disclosure in the financial statements through the date the financial statements were available to be issued. The Company did not identify any subsequent events requiring recognition or disclosure. |
| New Accounting Pronouncements, Policy [Policy Text Block] | Recently Adopted Accounting Pronouncements In September 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including, among others, held-to-maturity debt securities, mortgage loans, lottery prize receivables, trade receivables, and reinsurance recoverables. ASU 2016-13 requires a valuation allowance to be calculated on these financial assets and that they be presented on the financial statements net of the valuation allowance. This methodology is referred to as the current expected credit loss model. ASU 2016-13 had an original effective date for fiscal years beginning after December 15, 2019. The FASB recently delayed the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s financial condition and results of operations. In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgate that an entity must apply specific loan refinancing and restructuring guidance to determine whether a modification results in a new loan or the continuation of an existing loan. The amendments also require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this guidance are effective for fiscal years beginning after December 15, 2022, and should be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or liquidity. Recently Issued Accounting Pronouncements In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification related to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. These updates were originally required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020. The FASB has delayed the effective date of ASU 2018-12 to periods beginning after December 15, 2024 for smaller reporting companies, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations. In December 2022, the FASB issued amendments (Accounting Standards Update 2022-5) to Accounting Standards Update 2018-12 (Targeted Improvements for Long-Duration Contracts) that originally required an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application was elected. This updated guidance reduces implementation costs and complexity associated with the adoption of targeted improvements in accounting for long-duration contracts that have been derecognized in accordance with Accounting Standards Update 2018-12 before the delayed effective date. Without the amendments in this Update, an insurance entity would be required to reclassify a portion of gains or losses previously recognized in the sale or disposal of insurance contracts or legal entities because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, this reclassification may not be useful to users of financial information. The amendments in this guidance are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial condition and results of operations. |
Investments (Tables) |
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| Debt Securities, Available-for-Sale [Table Text Block] | Investments in fixed maturity securities available-for-sale as of March 31, 2024 and December 31, 2023 are summarized as follows:
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| Unrealized Gain (Loss) on Investments [Table Text Block] | For securities in an unrealized loss position as of the financial statement dates, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position as of March 31, 2024 and December 31, 2023 are summarized as follows:
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| Gain (Loss) on Securities [Table Text Block] | Net unrealized losses included in accumulated other comprehensive income for investments classified as available-for-sale are summarized as follows:
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| Investments Classified by Contractual Maturity Date [Table Text Block] | The amortized cost and fair value of fixed maturity available-for-sale securities as of March 31, 2024, by contractual maturity, are summarized as follows:
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| Investment Holdings, Schedule of Investments [Table Text Block] | Other long-term investments by geographic distribution:
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| Mortgage Loan on Real Estate [Table Text Block] | The Company utilizes the ratio of the carrying value of individual mortgage loans compared to the individual appraisal value to evaluate the credit quality of its mortgage loans on real estate (commonly referred to as the loan-to-value ratio). Currently, all of the Company’s mortgage loans are loans on residential properties. The Company’s mortgage loans on real estate by credit quality using this ratio as of March 31, 2024 and December 31, 2023 are summarized as follows:
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| Financing Receivable, Past Due [Table Text Block] | There were 2 mortgage loans with a combined principal balance of $284,263 that were 90 days or more past due and still accruing interest as of March 31, 2024. Both of those mortgage loans were in the process of foreclosure as of March 31, 2024. The Company expects to fully recover the principal balance outstanding plus any accrued interest along with all fees and expenses. There were 2 mortgage loans with a combined principal balance of $284,185 that were 90 days or more past due and still accruing interest as of December 31, 2023. The Company had a mortgage loan allowance of $70,679 and $74,663 as of March 31, 2024 and December 31, 2023, respectively.
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| Investment Income [Table Text Block] | Major categories of net investment income for the three months ended March 31, 2024 and 2023 are summarized as follows:
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Fair Value Measurements (Tables) |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | The Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are summarized as follows:
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| Fair Value, by Balance Sheet Grouping [Table Text Block] | Financial Instruments Disclosed, But Not Carried, at Fair Value:
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Lease Commitment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||
| Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block] | Future payments under operating lease arrangements accounted for under ASC Topic 842 as of March 31, 2024 are as follows:
|
Investments (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Investments (Details) [Line Items] | |||
| Fixed Maturity Securities, Fair Value to Amortized Cost Ratio | 94.20% | 94.40% | |
| Proceeds from Sale and Maturity of Marketable Securities | $ 5,432 | $ 405,469 | $ 2,760,920 |
| Debt and Equity Securities, Realized Gain (Loss) | 3,027 | ||
| Debt and Equity Securities, Unrealized Gain (Loss) | 0 | ||
| Financing Receivable, Allowance for Credit Loss, Current | 70,679 | 74,663 | |
| Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | |||
| Investments (Details) [Line Items] | |||
| Financing Receivable, before Allowance for Credit Loss | $ 284,263 | $ 284,185 | |
Investments (Details) - Debt Securities, Available-for-sale - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Debt Securities, Available-for-Sale [Line Items] | ||
| Fixed Maturity Securities, Amortized Cost | $ 5,871,563 | $ 5,878,911 |
| Fixed Maturity Securities, Gross Unrealized Gains | 6,510 | 14,577 |
| Fixed Maturity Securities, Gross Unrealized Losses | 322,116 | 301,848 |
| Fixed Maturity Securities, Fair Value | 5,555,957 | 5,591,640 |
| Corporate Bond Securities [Member] | ||
| Debt Securities, Available-for-Sale [Line Items] | ||
| Fixed Maturity Securities, Amortized Cost | 5,871,563 | 5,878,911 |
| Fixed Maturity Securities, Gross Unrealized Gains | 6,510 | 14,577 |
| Fixed Maturity Securities, Gross Unrealized Losses | 322,116 | 301,848 |
| Fixed Maturity Securities, Fair Value | $ 5,555,957 | $ 5,591,640 |
Investments (Details) - Unrealized Gain (Loss) on Investments |
Mar. 31, 2024
USD ($)
|
Dec. 31, 2023
USD ($)
|
|---|---|---|
| Unrealized Gain Loss On Investments Abstract | ||
| Corporate bonds less than than 12 months, fair value | $ 202,070 | $ 500,000 |
| Corporate bonds less than 12 months, unrealized loss | $ 1,030 | $ 7,082 |
| Corporate bonds less than 12 months, number of securities | 1 | 3 |
| Corporate bonds greater than 12 months, fair value | $ 5,051,359 | $ 4,578,111 |
| Corporate bonds greater than 12 months, unrealized loss | $ 321,086 | $ 294,766 |
| Corporate bonds greater than 12 months, number of securities | 41 | 38 |
| Total fixed maturity securities, fair value | $ 5,253,429 | $ 5,078,111 |
| Total fixed maturity securities, unrealized loss | $ 322,116 | $ 301,848 |
| Total fixed maturity securities, number of securities | 42 | 41 |
Investments (Details) - Gain (Loss) on Securities - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Gain Loss On Securities Abstract | ||
| Unrealized depreciation on available-for-sale securities | $ (315,606) | $ (287,271) |
| Net unrealized depreciation on available-for-sale securities | $ (315,606) | $ (287,271) |
Investments (Details) - Financing Receivable, Past Due - Mortgages [Member] - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Financing Receivable, Past Due [Line Items] | ||
| Beginning of year: mortgage loan allowance balance | $ 74,663 | $ 92,777 |
| Current year change in provision of estimated mortgage loan losses | (3,984) | (18,114) |
| End of year: mortgage loan allowance balance | $ 70,679 | $ 74,663 |
Investments (Details) - Investment Income - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Net Investment Income [Line Items] | ||
| Gross investment income | $ 547,160 | $ 551,474 |
| Investment expenses | (5,026) | (8,098) |
| Net investment income | 542,134 | 543,376 |
| Fixed Maturities [Member] | ||
| Net Investment Income [Line Items] | ||
| Gross investment income | 62,790 | 85,430 |
| Other Long-Term Investments [Member] | ||
| Net Investment Income [Line Items] | ||
| Gross investment income | 74,251 | 105,241 |
| Mortgages [Member] | ||
| Net Investment Income [Line Items] | ||
| Gross investment income | 283,280 | 296,008 |
| Short-Term Investments [Member] | ||
| Net Investment Income [Line Items] | ||
| Gross investment income | $ 126,839 | $ 64,795 |
Fair Value Measurements (Details) |
Mar. 31, 2024 |
|---|---|
| Mortgages [Member] | |
| Fair Value Measurements (Details) [Line Items] | |
| Fixed Maturity Securities, Fair Value to Amortized Cost Ratio | 90.00% |
Income Taxes (Details) |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Effective Income Tax Rate Reconciliation, Percent | 0.00% |
Concentrations of Credit Risk (Details) |
Mar. 31, 2024
USD ($)
|
|---|---|
| Risks and Uncertainties [Abstract] | |
| Cash, FDIC Insured Amount | $ 250,000 |
| Cash, Uninsured Amount | $ 1,995,368 |
Stock Incentive Plan (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
$ / shares
shares
| |
| Stock Incentive Plan (Details) [Line Items] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 5,000 |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Other Increases (Decreases) in Period, Description | This option award will vest over a 5-year period of continuous service at a rate of 20% per year, and the exercise price is equal to zero. |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period | 5 years |
| Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares | $ 0 |
| Employment Contracts [Member] | |
| Stock Incentive Plan (Details) [Line Items] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Shares Issued in Period | 7,000 |
Lease Commitment (Details) - Lessee, Operating Lease, Liability, Maturity - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Lessee Operating Lease Liability Maturity Abstract | ||
| 2024 | $ 74,169 | |
| 2025 | 101,773 | |
| 2026 | 104,831 | |
| 2027 | 98,723 | |
| Total operating lease payments, undiscounted | 379,496 | |
| Less: interest | (59,451) | |
| Lease liability, at present value | $ 320,045 | $ 341,866 |