Introductory Note

Caution Concerning Forward-Looking Statements

Certain statements contained in this Form10-Q, or otherwise made by our officers, including statements related to our future performance, our outlook for our businesses and respective markets, projections, statements of our management’s plans or objectives, forecasts of market trends and other matters, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words “expect,” “believe,” “may,” “could,” “should,” “would,” “estimate,” “anticipate,” “intend,” “plan,” “target,” “goal” and similar expressions as they relate to us or our management are intended to identify forward-looking statements. Such statements reflect our management’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in any forward-looking statements. Our actual future results may differ materially from those set forth in our forward-looking statements. Factors that might cause such actual results to differ materially from those reflected in any forward-looking statements include, but are not limited to the factors discussed in detail in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form10-Q, as well as:

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s analysis only as of the date they are made. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Part I—FINANCIAL INFORMATION

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Part I—FINANCIAL INFORMATIONItem1.Financial Statements.

AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, expressed in U.S. dollars)

See the accompanying notes to the unaudited condensed consolidated financial statements.

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AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS, COMPREHENSIVE INCOME (LOSS)LOSS

AND RETAINED EARNINGS

(Unaudited, expressed in U.S. dollars)

See the accompanying notes to the unaudited condensed consolidated financial statements.

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AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited, expressed in U.S. dollars)

As of September 30, 2021

As of September30, 2020

See the accompanying notes to the unaudited condensed consolidated financial statements. 

AMERINST INSURANCE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, expressed in U.S. dollars)

See the accompanying notes to the unaudited condensed consolidated financial statements.

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AMERINST INSURANCE GROUP, LTD.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 20172021

1. BASIS OF PREPARATION AND CONSOLIDATION

The condensed consolidated financial statements included herein have been prepared by AmerInst Insurance Group, Ltd. (“AmerInst”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). These financial statements reflect all adjustments consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations as of the end of and for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions and balances have been eliminated on consolidation. These statements are condensed and do not incorporate all the information required under U.S. GAAP to be included in a full set of financial statements. In these notes, the terms “we”, “us”, “our” or the “Company” refer to AmerInst and its subsidiaries. These condensed statements should be read in conjunction with the audited consolidated financial statements at and for the year ended December 31, 20162020 and notes thereto, included in AmerInst’s Annual Report on Form10-K10-K for the year then ended.

Commutation and Release Activities

During the third quarter of 2021, AmerInst Insurance Company, Ltd. (“AMIC, Ltd.”), our subsidiary that conducts reinsurance business, entered into a Commutation and Release Agreement (“Commutation Agreement”), effective as of March 31, 2021, with The North River Insurance Company, United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, “C&F”), whereby C&F and AMIC, Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown, under the Reinsurance Agreement (as defined below).  In accordance with the Commutation Agreement, in full satisfaction of AMIC Ltd.’s past, present and future obligations and liabilities under the Reinsurance Agreement, an aggregate sum of $26,076,000 was paid by AMIC Ltd. to C&F in October 2021.  The entry into the Commutation Agreement by AMIC Ltd. resulted in a net gain of $147,333.

New Accounting Pronouncements

New Accounting Standards Adopted in 20172021

No new accounting standards adopted in 2021.

Revenue from Contracts with CustomersAccounting Standards Not Yet Adopted

Financial Instruments Credit Losses-Measurement of Credit Losses on Financial Instruments

In May 2014, June 2016, the FASB issued Accounting Standards Update2014-09, “Revenue from ContractsASU 2016-13, which amends the guidance on impairment of financial instruments and significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU will replace the existing “incurred loss” approach, with Customers” (“ASU2014-09”). ASU2014-09 provides a framework, through a five-step process,an “expected loss” model for recognizing revenue from customers, improves comparabilityinstruments measured at amortized cost and consistency of recognizing revenue acrossrequire entities industries, jurisdictionsto record allowances for available-for-sale debt securities rather than reduce the carrying amount under the existing other than temporary impairment model. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and capital markets, andloans. The guidance requires enhanced disclosures. Certain contracts with customers are specifically excluded fromfinancial assets to be presented at the scope of ASU2014-09, including; without limitation, insurance contracts accounted for under Accounting Standard Codification 944,Financial Services—Insurance. ASU2014-09 wasnet amount expected to be collected. The tentative effective on January 1, 2017 with retrospective adoption requireddate for the comparative periods. TheASU is January 1,2023. We do not expect the adoption of this ASU2014-09 did not to have a material impact on the Company’sour consolidated financial statements.

2. INVESTMENTS

6During September 2021, the Company liquidated its entire investment in fixed income securities and equity securities in order to fund its commitment under the Commutation Agreement, as discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2. INVESTMENTS

The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of the Company’s fixed maturity investments, by major security type, and equity securities as of September 30, 20172021 and December 31, 20162020 are as follows:

The following tables summarize the Company’s fixed maturity and equity securities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

As of September 30, 2017 2021 and December 31, 2016,2020, there were 21NaN and 273 fixed income securities in an unrealized loss position with an estimated fair value of $6,192,958$0 and $7,811,779,$789,106, respectively. As of September 30, 20172021 and December 31, 2016, three and six2020, NaN of these fixed income securities had been in an unrealized loss position for 12 months or greater, respectively. As of September 30, 2017 2021 and December 31, 2016, none2020, NaN of thesethe fixed income securities were considered to be other-than-temporarilyother than temporarily impaired. The Company hashad the intent to hold these fixed income securities for a sufficient period of time for the value to recover and it is was not more likely than not that the Company will bewould have been required to sell these fixed income securities before their fair values recoverrecovered above the adjusted cost. The unrealized losses from these fixed income securities were not as a result of credit, collateral or structural issues.

At September 30, 2017 and December 31, 2016, the Company had investments in certificates of deposit (“CD”) in the amount of $490,000 comprised of fully insured time deposits placed with Federal Deposit Insurance Corporation (“FDIC”) insured commercial banks and savings associations. The FDIC, an independent agency of the United States government, protects depositors up to an amount of $250,000 per depositor, per insured institution. FDIC insurance is backed by the full faith and credit of the United States government. The stated interest rate of an FDIC insured CD varies greatly among commercial banks and savings associations, depending on the term of the CD and the institution’s need for funding. The liquidity of “marketable” CDs is marginal, even though they are assigned an FDIC number, a CUSIP number and are held in book-entry form through the Depository Trust Company. Depending on market liquidity and conditions, the bid price for an FDIC insured CD would reflect the supply of and the demand for deposits of the particular bank or savings association, as well as prevailing interest rates, the remaining term of the deposit, specific features of the CD, and compensation of the broker arranging the sale of the CD. These time deposits mature in less than one year and are classified as other invested assets on the Company’s consolidated balance sheet.

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Other-Than-Temporary Impairment Process

The Company assessesassessed whether declines in the fair value of its fixed maturity investments classified asavailable-for-sale represent impairments that are other-than-temporary by reviewing each fixed maturity investment that is impaired and (1) determining(1) determined if the Company hashad the intent to sell the fixed maturity investment or if it iswas more likely than not that the Company will be required to sell the fixed maturity investment before its anticipated recovery; and (2) assessing(2) assessed whether a credit loss exists,existed, that is, where the Company expectsexpected that the present value of the cash flows expected to be collected from the fixed maturity investment are less than the amortized cost basis of the investment.

The Company had no planned sales of its fixed maturity investments classified asavailable-for-sale that were in an unrealized loss position at September 30, 2017. In assessing whether it is more likely than not that the Company will be required to sell a fixed maturity investment before its anticipated recovery, the Company considers various factors including its future cash flow requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term investments and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the nine months ended September 30, 2017, the Company did not recognize any other-than-temporary impairments due to sales.

In evaluating credit losses, the Company considersconsidered a variety of factors in the assessment of a fixed maturity investment including: (1)(1) the time period during which there has been a significant decline below cost; (2)(2) the extent of the decline below cost and par; (3)(3) the potential for the fixed maturity investment to recover in value; (4)(4) an analysis of the financial condition of the issuer; (5)(5) the rating of the issuer; and (6)(6) failure of the issuer of the fixed maturity investment to make scheduled interest or principal payments.

Equity securities are reviewed on a regular basis to determine if they have sustained an impairment of value that is considered to be other than temporary. Several factors are considered in the assessment of an investment, which include (i) the extent of the decline below cost, and (ii) the potential for the security to recover in value.

If we concludeconcluded a security isfixed income investment was other-than-temporarily impaired, we writewrote down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the investment portfolio as of September 30, 20172021 and December 31, 2016,2020, relating to 12none and 16three fixed maturity securities, amounted to $30,334$0 and $89,937, respectively, and nine and 22 equity securities, amounted to $71,603 and $128,395,$2,053, respectively. The unrealized losses on these available for sale fixed maturity securities were not as a result of credit, collateral or structural issues. During the nine months and three months ended and three months ended September 30, 2017, the Company recorded a total other-than-temporary impairment charge of $98,918 and $73,646 on two and one equity security, respectively, as a result of the decline in fair value below cost. No2021,no other-than-temporary impairment charges were recorded during the three months ended September 30, 2017. During the nine months ended and three months ended September 30, 2016, the Company recorded a total other-than-temporary impairment charge of $219,417 and $98,301 on four and two equity securities, respectively, as a result of the decline in fair value below cost.recorded.

Fair Value of Investments

Under existing U.S. GAAP, we arewere required to recognize certain assets at their fair value in our consolidated balance sheets. This includesincluded our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-levelthree-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1)1) and unobservable inputs being the lowest level (Level 3)3). A fair value measurement will fall within the level of the hierarchy based on the inputs that are significant to determining such measurement. The three levels are defined as follows:

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At each measurement date, we estimateestimated the fair value of the security using various valuation techniques. We utilize,utilized, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilizeutilized valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of September 30, 20172021 and December 31, 20162020 and what level within the fair value hierarchy each valuation technique resides: