Note 4 – Fair Value Measurements

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs:

Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Valuation methodologies include quoted prices for similar assets and liabilities in active markets or quoted prices for identical, quoted prices for identical or similar assets or liabilities in markets that are not active, or the Company may use various valuation techniques or pricing models that use observable inputs to measure fair value.

Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

September 30, 2020		Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	46,208,490	$	0	$	0	$	0	$	46,208,490
U.S. special revenue and assessments		0		15,844,680		0		0		15,844,680
Corporate securities		0		114,667,777		0		0		114,667,777
Total fixed maturities		46,208,490		130,512,457		0		0		176,720,947
Equity securities:
Common stocks		22,790,516		16,908,050		3,051,875		22,814,521		65,564,962
Preferred stocks		0		23,066		0		0		23,066
Total equity securities		22,790,516		16,931,116		3,051,875		22,814,521		65,588,028
Total financial assets	$	68,999,006	$	147,443,573	$	3,051,875	$	22,814,521	$	242,308,975

Liabilities
Trading Securities	$	(4,003)	$	0	$	0	$	0	$	(4,003)

December 31, 2019		Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	36,128,743	$	0	$	0	$	0	$	36,128,743
U.S. special revenue and assessments		0		15,203,363		0		0		15,203,363
Corporate securities		0		120,297,267		0		0		120,297,267
Total fixed maturities		36,128,743		135,500,630		0		0		171,629,373
Equity securities:
Common stocks		29,888,281		14,258,750		10,274,810		24,239,952		78,661,793
Total equity securities		29,888,281		14,258,750		10,274,810		24,239,952		78,661,793
Total financial assets	$	66,017,024	$	149,759,380	$	10,274,810	$	24,239,952	$	250,291,166

The following is a description of the valuation techniques used the by Company to measure assets reported at fair value on a recurring basis. There have been no significant changes in the valuation techniques utilized by the Company for the nine months ended September 30, 2020.

Available for Sale Securities

Securities classified as available for sale are recorded at fair value on a recurring basis. Securities classified as Level 1 utilized fair value measurements based upon quoted market prices, when available. If quoted market prices are not available, the Company obtains fair value measurements from recently executed transactions, market price quotations, benchmark yields and issuer spreads to value Level 2 securities. In certain instances where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standard generally accepted in the United States.

Equity Securities at Fair Value

Equity securities consist of common stocks mainly in private equity investments, financial institutions and publicly traded corporations. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy. For the equity securities in which quoted market prices are not available, the Company uses industry standard pricing methodologies, including discounted cash flow models that may incorporate various inputs such as payment expectations, risk of the investment, market data, and health of the underlying company. The inputs are based upon Management's assumptions and available market information. When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Equity Securities at Net Asset Value

Certain equity securities carried at fair value, which do not have readily determinable fair values, use net asset value (“NAV”) and are excluded from the fair value hierarchy. These investments are generally not readily redeemable by the investee. See Note 7 – Commitments and Contingencies for additional information regarding unfunded commitments.

Trading Securities

Trading securities are recorded at fair value. They are classified as Level 1 and utilize fair value measurements based upon quoted market prices.

Change in Level 3 Recurring Fair Value Measurements

The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities.

		Fixed Maturities, Available for Sale		Equity Securities at Fair Value		Equity Securities at Net Asset Value		Total
Balance at December 31, 2019	$	0	$	10,274,810	$	24,239,952	$	34,514,762
Realized gains (losses)		0		6,284,302		0		6,284,302
Unrealized gains (losses)		0		(3,850,560)		(2,809,324)		(6,659,884)
Purchases		0		1,797,500		1,415,757		3,213,257
Sales		0		(11,454,177)		(31,864)		(11,486,041)
Balance at September 30, 2020	$	0	$	3,051,875	$	22,814,521	$	25,866,396

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, 2020 and December 31, 2019 may include changes in fair value that were attributable to both observable and unobservable inputs.

Quantitative Information About Level 3 Fair Value Measurements

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and include only those instrument for which information about the inputs is reasonably available to the Company, such as data from independent third-party valuation service providers and from internal valuation models.

Financial Assets		Fair Value at September 30, 2020		Fair Value at December 31, 2019	Valuation Technique
Common stocks	$	22,814,521	$	24,239,952	Net Asset Value
Common stocks		3,051,875		10,274,810	Pricing Model
Total	$	25,866,396	$	34,514,762

Uncertainty of Fair Value Measurements

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of these assets as of the reporting date.

Equity Securities at Fair Value

Fair market value for equity securities is derived based on unobservable inputs, such as projected normalized revenues and industry standard multiples of revenue for the equity securities valued using pricing model. Significant increases (decreases) in either of those inputs in isolation would result in a significantly higher (lower) fair value measurement.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share

Investment Company		Fair Value at September 30, 2020		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	18,482,622	$	0	Quarterly	45 days
Non-Reedemable		4,331,899		2,295,675	n/a	n/a
Total	$	22,814,521	$	2,295,675

Investment Company		Fair Value at September 30, 2019		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	21,270,734	$	0	Quarterly	45 days
Non-Reedemable		2,969,218		163,750	n/a	n/a
Total	$	24,239,952	$	163,750

Fair Value Measurements on a Nonrecurring Basis

Certain assets are not carried at fair value on a recurring basis. Accordingly, such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and the resulting re-measurement is reflected in the Consolidated Financial Statements. The Company did not recognize any re-measurements or impairments of financial instruments at September 30, 2020 or December 31, 2019.

Fair Value Information About Financial Instruments Not Measured at Fair Value

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

		Carrying	Estimated
September 30, 2020		Amount	Fair Value	Level 1	Level 2	Level 3
Common stock, at cost	$	5,860,000	5,860,000	0	0	5,860,000
Preferred stock, at cost		8,557,247	8,557,247	0	0	8,557,247
Mortgage loans on real estate		20,392,053	20,614,085	0	0	20,614,085
Investment real estate		36,421,627	81,351,608	0	0	81,351,608
Notes receivable		19,298,398	22,380,946	0	0	22,380,946
Policy loans		8,727,991	8,727,991	0	0	8,727,991

		Carrying	Estimated
December 31, 2019		Amount	Fair Value	Level 1	Level 2	Level 3
Common stock, at cost	$	7,875,145	7,875,145	0	0	7,875,145
Preferred stock, at cost		3,044,102	3,044,102	0	0	3,044,102
Mortgage loans on real estate		8,223,286	7,531,094	0	0	7,531,094
Investment real estate		44,344,236	88,483,424	0	0	88,483,424
Notes receivable		19,487,458	19,332,472	0	0	19,332,472
Policy loans		8,803,876	8,803,876	0	0	8,803,876

The above estimated fair value amounts have been determined based upon the following valuation methodologies. Considerable judgment was required to interpret market data in order 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 fair values of mortgage loans on real estate are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 3 within the fair value hierarchy.

A portion of the mortgage loans balance consists of discounted mortgage loans. The Company has historically purchased non-performing discounted mortgage loans at a deep discount through an auction process led by the Federal Government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price, which Management believes approximates fair value. The inputs used to measure the fair value of our discounted mortgage loans are classified as Level 3 within the fair value hierarchy.

Investment real estate is recorded at the lower of the net investment in the real estate or the fair value of the real estate less costs to sell. The determination of fair value assessments are performed on a periodic, non-recurring basis by external appraisal and assessment of property values by Management. The inputs used to measure the fair value of our investment real estate are classified as Level 3 within the fair value hierarchy.

The fair values of notes receivable are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs used to measure the fair value of the notes receivable are classified as Level 3 within the fair value hierarchy.

Policy loans are carried at the aggregate unpaid principal balances in the Condensed Consolidated Balance Sheets which approximate fair value, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances. The inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy.