EDGAR 10-K Filing

Company CIK: 1395585
Filing Year: 2025
Filename: 1395585_10-K_2025_0001437749-25-007535.json

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ITEM 1. BUSINESS
Item 1. Business
Business Development
First Trinity Financial Corporation (the “Company” or “FTFC”) is the parent holding company of Trinity Life Insurance Company (“TLIC”), Family Benefit Life Insurance Company (“FBLIC”), Trinity Mortgage Corporation (“TMC”) and Trinity American, Inc. (“TAI”). The Company was incorporated in Oklahoma on April 19, 2004, for the primary purpose of organizing and operating a life insurance subsidiary.
The Company owns 100% of TLIC. TLIC owns 100% of FBLIC. TLIC and FBLIC are primarily engaged in the business of marketing, underwriting and distributing a broad range of individual life insurance products and annuity contracts to individuals.
TLIC’s and FBLIC’s current product portfolio consists of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term, final expense, accidental death and dismemberment policies and annuity contracts. The term products are both renewable and convertible and issued for 10, 15, 20 and 30 years. They can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense policies are issued as either a simplified issue or as a graded benefit, determined by underwriting. The TLIC and FBLIC products are sold through independent agents.
TLIC is licensed in the states of Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and West Virginia. FBLIC is licensed in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia.
The Company owns 100% of TMC that was incorporated in 2006 and began operations in January 2007. TMC’s primary focus changed during 2020 from premium financing loans to originating, brokering and administrating residential and commercial mortgage loans for third parties.
The Company owns 100% of TAI. TAI was incorporated in Barbados, West Indies on March 24, 2016 for the primary purpose of forming a life insurance company producing United States (U.S.) dollar denominated life insurance policies and annuity contracts outside of the United States and Barbados. TAI is licensed as an Exempt Insurance Company under the Exempt Insurance Act of Barbados. TAI was initially involved in developing life insurance contracts but is now issuing life insurance policies and annuity contracts through an association with distribution channels. The Company’s acquisition of TAI was formally approved by Barbados regulators and the certifications were received in 2019.
Company Capitalization
Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through December 31, 2024, we have received $27,119,480 from the sale of our shares. The Company raised $1,450,000 from two private placements during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012 and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.
The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital.
In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of Class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to Class A common stock and additional paid-in capital.
The Company has also purchased 247,580 shares of treasury stock at a cost of $893,947 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.
Acquisitions
On December 23, 2008, FTFC acquired 100% of the outstanding common stock of First Life America Corporation (“FLAC”) from an unaffiliated company. The acquisition of FLAC was accounted for as a purchase. The aggregate purchase price for FLAC was $2,695,234 including direct cost associated with the acquisition of $195,234. The acquisition of FLAC was financed with the working capital of FTFC.
On December 31, 2008, FTFC made FLAC a 15 year loan in the form of a surplus note in the amount of $250,000 with an interest rate of 6% payable monthly, that was approved by Oklahoma Insurance Department (“OID”). This surplus note is eliminated in consolidation.
On August 31, 2009, two of the Company’s subsidiaries, Trinity Life Insurance Company (“Old TLIC”) and FLAC, were merged, with FLAC being the surviving company. Immediately following the merger, FLAC changed its name to TLIC.
On December 28, 2011, TLIC acquired 100% of the outstanding common stock of FBLIC from FBLIC’s shareholders. The acquisition of FBLIC was accounted for as a purchase. The aggregate purchase price for the acquisition of FBLIC was $13,855,129. The acquisition of FBLIC was financed with the working capital of TLIC.
On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $3,644,839 (including cash), assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.
On April 3, 2018, FTFC acquired 100% of the outstanding stock of TAI domiciled in Barbados, West Indies. The Barbados regulators approved the acquisition and supplied certifications during 2019. The aggregate purchase price for the acquisition of TAI was $250,000. The acquisition of TAI was financed with the working capital of FTFC.
Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.
On January 4, 2022, FTFC acquired Royalty Capital Life Insurance Company (“RCLIC”) from Royalty Capital Corporation (“Royalty”) in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. The acquisition of RCLIC was accounted for as a purchase and the net acquisition consideration was recorded at $4,596,764. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance approved FTFC’s contribution and merger of RCLIC into FBLIC.
Financial Information about Segments
The Financial Accounting Standards Board (“FASB”) guidance requires a “management approach” in the presentation of business segments based on how management internally evaluates the operating performance of business units. The discussion of segment operating results that follows is being provided based on segment data prepared in accordance with this methodology.
Our business segments are as follows:
●
Life insurance operations, consisting of the life insurance operations of TLIC, FBLIC and TAI;
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Annuity operations, consisting of the annuity operations of TLIC, FBLIC and TAI and
●
Corporate operations, which includes the results of the parent company and TMC after the elimination of intercompany amounts.
Please see Item 8 below and Note 11 to the consolidated financial statements as of and for the years ended December 31, 2024 and 2023 for additional information regarding segment information.
Life Insurance and Annuity Operations
Our Life Insurance and Annuity Operations consists of issuing ordinary whole life insurance, endowments, modified premium whole life with an annuity rider, term, final expense and accidental death and dismemberment policies and annuity contracts. The policies can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense policies are issued as either a simplified issue or as a graded benefit, determined by underwriting. Our products are marketed through independent agents.
FBLIC renewed its administrative services agreement with Investors Heritage Life Insurance Company (“IHLIC”) on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include underwriting, policy issue, accounting, claims processing and other services incidental to the operations of FBLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.
FBLIC executed an actuarial consulting services agreement with IHLIC on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include actuarial services for the operations of FBLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.
TLIC renewed its administrative services agreement with IHLIC on November 1, 2022, after a written extension of the previous administrative services agreement. Under the terms of this agreement, the services provided by IHLIC include underwriting, policy issue, accounting, claims processing and other services incidental to the operations of TLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.
TLIC executed an actuarial consulting services agreement with IHLIC on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include actuarial services for the operations of TLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.
TLIC continues to seek to serve middle income households and markets its products through independent agents. TLIC was originally licensed in Oklahoma and with the acquisition of FLAC in late 2008, expanded into Illinois, Kansas, Kentucky, Nebraska, North Dakota, Ohio and Texas. With the acquisition of FBLIC in late 2011, we expanded into Arizona, Colorado, Missouri and New Mexico. FBLIC also had initial licenses in Kansas, Nebraska and Oklahoma where TLIC was also licensed. In late 2012, FBLIC was licensed in Arkansas, Indiana, Kentucky, North Dakota, South Dakota, Texas and West Virginia. In 2013, FBLIC was licensed in Illinois and Pennsylvania. In 2014, FBLIC was licensed in Georgia, Louisiana, Michigan, Mississippi, North Carolina, Ohio, Tennessee and Virginia. In 2015, FBLIC was licensed in Alabama and Utah. In 2018, FBLIC and TLIC were licensed in Montana. In 2019, TLIC was licensed in Tennessee. In 2020, TLIC was licensed in Alabama, Indiana, Louisiana, Mississippi, New Mexico, South Dakota and Utah. In 2021, TLIC was licensed in Georgia and West Virginia.
The following tables sets forth our direct collected life insurance premiums and annuity considerations by the policyholder’s state of residence at the time of premium collection and annuity consideration, for the most significant states in which we are licensed, for the years ended December 31, 2024 and 2023, in accordance with statutory accounting practices prescribed by the states of domicile of TLIC and FBLIC.
Year Ended December 31, 2024
Life
Annuity
State
Premiums
Percentage
Considerations
Percentage
Alabama
$ 940,009
2.93 %
$ 22,306
0.02 %
Arizona
555,660
1.73 %
1,209,314
0.86 %
Arkansas
703,355
2.19 %
190,258
0.14 %
Colorado
1,015,152
3.17 %
0.00 %
Florida
89,843
0.28 %
1,550,448
1.11 %
Georgia
1,711,581
5.34 %
3,185,002
2.27 %
Illinois
1,950,364
6.09 %
1,205,801
0.86 %
Indiana
1,318,628
4.11 %
6,494,206
4.64 %
Kansas
1,624,449
5.07 %
6,474,856
4.62 %
Kentucky
1,012,984
3.16 %
526,578
0.38 %
Louisiana
977,336
3.05 %
-
0.00 %
Michigan
723,454
2.26 %
2,302,557
1.64 %
Minnesota
5,344
0.02 %
1,018,473
0.73 %
Mississippi
527,418
1.65 %
707,675
0.51 %
Missouri
1,592,662
4.97 %
1,993,787
1.42 %
Nebraska
410,874
1.28 %
11,620,434
8.30 %
North Carolina
3,604,383
11.25 %
26,167,970
18.68 %
North Dakota
77,322
0.24 %
25,914,663
18.50 %
Ohio
3,332,358
10.40 %
2,196,163
1.57 %
Oklahoma
1,012,009
3.16 %
6,358,136
4.54 %
Pennsylvania
1,097,077
3.42 %
1,606,370
1.15 %
South Carolina
38,131
0.12 %
791,246
0.56 %
South Dakota
14,725
0.05 %
900,236
0.64 %
Tennessee
1,226,524
3.83 %
1,005,778
0.72 %
Texas
4,799,546
14.96 %
33,003,935
23.55 %
Virginia
1,044,554
3.26 %
2,458,685
1.76 %
All other states
645,640
2.01 %
1,163,091
0.83 %
Total direct collected premiums and considerations
$ 32,051,382
100.00 %
$ 140,068,877
100.00 %
Year Ended December 31, 2023
Life
Annuity
State
Premiums
Percentage
Considerations
Percentage
Alabama
$ 925,134
2.93 %
$ -
0.00 %
Arizona
535,611
1.69 %
824,122
1.22 %
Arkansas
631,492
2.00 %
5,002
0.01 %
Colorado
964,553
3.05 %
53,067
0.08 %
Florida
86,616
0.27 %
6,462
0.01 %
Georgia
1,708,051
5.40 %
1,046,986
1.54 %
Illinois
1,991,234
6.30 %
137,150
0.20 %
Indiana
1,286,901
4.07 %
3,380,944
4.99 %
Kansas
1,716,912
5.43 %
1,952,140
2.88 %
Kentucky
1,009,116
3.19 %
-
0.00 %
Louisiana
892,269
2.82 %
49,900
0.07 %
Michigan
677,515
2.14 %
255,029
0.38 %
Minnesota
6,906
0.02 %
235,977
0.35 %
Mississippi
454,247
1.44 %
11,650
0.02 %
Missouri
1,626,367
5.15 %
286,550
0.42 %
Nebraska
392,476
1.24 %
5,953,567
8.78 %
North Carolina
3,441,716
10.89 %
12,118,420
17.87 %
North Dakota
75,454
0.24 %
15,384,458
22.68 %
Ohio
3,419,283
10.82 %
1,725
0.00 %
Oklahoma
1,044,670
3.31 %
680,666
1.00 %
Pennsylvania
1,211,847
3.83 %
505,058
0.74 %
South Carolina
34,346
0.11 %
997,303
1.47 %
South Dakota
10,615
0.03 %
179,360
0.26 %
Tennessee
1,170,322
3.70 %
343,350
0.51 %
Texas
4,750,577
15.05 %
21,485,887
31.68 %
Virginia
933,283
2.95 %
1,166,022
1.72 %
All other states
609,880
1.93 %
758,074
1.12 %
Total direct collected premiums and considerations
$ 31,607,393
100.00 %
$ 67,818,869
100.00 %
Reinsurance
TLIC cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth and risk diversification. TLIC reinsures all amounts of risk on any one life in excess of $100,000 for individual life insurance with IHLIC, Optimum Re Insurance Company (“Optimum Re”), RGA Reinsurance Company and Wilton Reassurance Company (“Wilton Re”).
The Company also assumes reinsurance under various agreements allowing management to increase growth in assets and profitability. TLIC is a party to an Automatic Retrocession Pool Agreement (the “Reinsurance Pool”) with Optimum Re, Catholic Order of Foresters, American Home Life Insurance Company and Woodmen of the World. The agreement provides for automatic retrocession of coverage in excess of Optimum Re’s retention on business ceded to Optimum Re by the other parties to the Reinsurance Pool. TLIC’s maximum exposure on any one insured under the Reinsurance Pool is $100,000. As of January 1, 2008, the Reinsurance Pool stopped accepting new cessions.
Effective September 29, 2005, FLAC and Wilton Re executed a binding letter of intent whereby both parties agreed that FLAC would cede the simplified issue version of its Golden Eagle Whole Life (Final Expense) product to Wilton Re on a 50/50 quota share original term coinsurance basis. The letter of intent was executed on a retroactive basis to cover all applicable business issued by FLAC subsequent to January 1, 2005. Wilton Re agreed to provide various commission and expense allowances to FLAC in exchange for FLAC ceding 50% of the applicable premiums to Wilton Re as they were collected. As of June 24, 2006, Wilton Re terminated the reinsurance agreement for new business issued after the termination date.
FBLIC also participates in reinsurance in order to provide risk diversification, additional capacity for future growth and limit the maximum net loss potential arising from large amounts of risk. FBLIC reinsures initial amounts of risk on any one life in excess of $100,000 for individual life insurance with Optimum Re. TLIC and FBLIC also reinsure its accidental death benefit portion of their life policies under a bulk agreement with Optimum Re. To the extent that the reinsurance companies are unable to meet their obligations under the reinsurance agreements, TLIC and FBLIC remain primarily liable for the entire amount at risk.
Coinsurance
Effective January 1, 2018, TLIC entered into an annuity coinsurance agreement with an offshore annuity and life insurance company whereby 90% of TLIC’s annuity considerations originated after December 31, 2017 were ceded to the assuming company. The assuming company contractually reimburses TLIC for the related commissions, withdrawals, settlements, interest credited, submission costs, maintenance costs, marketing costs, excise taxes and other costs plus a placement fee. Effective April 1, 2020, the Company and an offshore annuity and life insurance company mutually agreed that the Quota Share under its existing reinsurance agreement shall be 0% for future business instead of the original contractual amount of 90%.
In accordance with this annuity coinsurance agreement, TLIC holds assets and recognizes a funds withheld liability for the benefit of the assuming company in an amount at least equal to the annuity reserves, in accordance with U.S. statutory accounting principles, generated by this ceded business. In addition, the assuming company maintains a trust related to this ceded business amounting to at least an additional 4% of assets above the annuity reserve required under U.S. statutory accounting principles. This coinsurance agreement may be terminated for new business by either party at any time upon 30 days prior written notice to the other party.
In 2019, TLIC entered into a life insurance coinsurance agreement with TAI, effective October 1, 2018, whereby 100% of TAI’s life insurance policies and annuity contracts issued after September 30, 2018 were ceded to TLIC. TLIC contractually reimburses TAI for the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of life insurance policies and annuity contracts.
In 2022, FBLIC entered into group life insurance coinsurance agreement with Texas Republic Life Insurance Company (“TRLIC”), whereby generally 50% of TRLIC group life insurance policies and premiums were ceded to FBLIC. FBLIC contractually reimburses TRLIC for generally 50% of the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of group life insurance policies.
Competition
The U.S. life insurance industry is a mature industry that has experienced little to no growth. Competition is intense because the life insurance industry is consolidating, with larger, more efficient and more effective organizations emerging from consolidation. In addition, legislation became effective in the United States that permits commercial banks, insurance companies and investment banks to combine. These factors have increased competitive pressures in general.
Many domestic life insurance companies have significantly greater financial, marketing and other resources, longer business histories and more diversified lines of insurance products than we do. We also face competition from companies marketing in person as well as with direct mail and internet sales campaigns. Although we may be at a competitive disadvantage to these entities, we believe that our premium rates, policy features, marketing approaches and policyholder services are generally competitive with those of other life insurance companies selling similar types of products and provide us with niche marketing opportunities not actively pursued by other life insurance companies.
Governmental Regulation
TLIC and FBLIC are subject to regulation and supervision by the OID. The insurance laws of Oklahoma give the OID broad regulatory authority, including powers to: (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct; (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus and (x) regulate the type and amount of permitted investments. TLIC and FBLIC can be required, under the solvency or guaranty laws of most states in which they do business, to pay assessments (up to prescribed limits) to fund policyholder losses or liabilities of other insurance companies that become insolvent. These assessments may be deferred or foregone under most guaranty laws if they would threaten an insurer’s financial strength and, in certain instances, may be offset against future premium taxes.
TLIC and FBLIC are subject to Oklahoma laws that limit the amount of dividends insurance companies can pay to stockholders without approval of the Departments of Insurance. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC.
There are certain factors particular to the life insurance business which may have an adverse effect on the statutory operating results of TLIC and FBLIC. One such factor is that the costs associated with issuing a new policy in force is usually greater than the first year’s policy premium. Accordingly, in the early years of a new life insurance company, these initial costs and the required provisions for reserves often have an adverse effect on statutory operating results.
Employees
As of March 10, 2025, the Company had nineteen full-time employees.

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ITEM 1A. RISK FACTORS

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
Item 2. Properties
TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $280,000. During 2024, the company recognized an impairment loss of $129,436 from a market value appraisal that resulted in fair value estimation less than the carrying value.
FBLIC owns approximately one-half acre of undeveloped land located in Jefferson City, Missouri with a carrying value of $131,000.
During 2024, the Company sold investment real estate property with an aggregate carrying value of $265,705. The Company recorded a gross realized investment gain on sale of $11,251 based on an aggregate sales price of $276,956.
During 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and transferred those properties to investment real estate held for sale. During 2023, the Company foreclosed on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in three pending lawsuits.
A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn (“Mr. Zahn”) styled First Trinity Financial Corporation and Gregg E. Zahn vs. C. Wayne Pettigrew and Group & Pension Planners was originally filed in 2013 in the District Court of Tulsa County, Oklahoma against former Company Board of Director, C. Wayne Pettigrew (“Mr. Pettigrew”). The Company and Mr. Zahn alleged that Mr. Pettigrew defamed Mr. Zahn and the Company and that Mr. Pettigrew breached his fiduciary duties to the Company by making untrue statements about the Company and Mr. Zahn to the press, state regulators and to certain shareholders.
In February 2017, the lawsuit resulted in a jury verdict in favor of the Company and Mr. Zahn, with the jury awarding damages of $800,000 to the Company and $3,500,000 to Mr. Zahn. In February 2020, the Oklahoma Court of Civil Appeals, upon an appeal by Mr. Pettigrew, reversed the judgment and remanded the case for a new trial. A Petition for Certiorari review with the Oklahoma Supreme Court by the Company and Mr. Zahn was declined in December, 2020. The case is now scheduled to be retried in the District Court once a trial date is set. The Company is vigorously prosecuting this case. The Company faces no exposure in connection with this action since there are no counterclaims or cross claims made against the Company. Management believes that this lawsuit is not material in relation to the Company’s financial position or results of operations.
The Company, through its life insurance subsidiary, TLIC, commenced two lawsuits as plaintiff, both in the New York Supreme Court, New York County, one on June 29, 2020 and another on March 4, 2022, for breach of contract against a company for failure to advance funding to lottery ticket winners to the detriment of TLIC and against various of that company’s associated persons for unjust enrichment and fraud perpetuated on TLIC. The cases are entitled “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, and Monica L. Ray, Index No. 652780/2020” (New York Supreme Court, New York County) and “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, Julie Casal, and Monica L. Ray, Index No. 651023/2022” (New York Supreme Court, New York County). The Company is vigorously prosecuting this case against the defendants. The Company faces no exposure in connection with either action since no counterclaims or cross claims have been made against the Company. Management believes that these lawsuits are not material in relation to the Company’s financial position or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
None
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
(a)
Market Information
Trading of the Company’s common stock is limited and an established public market does not exist.
(b)
Holders
As of March 7, 2025, there were approximately 7,800 shareholders of the Company’s outstanding common stock.
FTFC has authorized 40,000,000 shares of Class A common stock and 10,000,000 shares of Class B common stock. Class B shareholders are entitled to elect a majority of FTFC’s Board of Directors (one-half plus one) but will only receive, compared to FTFC’s Class A shareholders, 85% of cash dividends, stock dividends or amounts due upon any FTFC merger, sale or liquidation event. FTFC’s Class B shareholders may also convert one share of FTFC’s Class B common stock for a .85 share of FTFC’s Class A common stock. FTFC’s Class A shareholders will elect the remaining Board of Directors members and will receive 100% of cash dividends, stock dividends or amounts due upon any Company merger, sale or liquidation event.
(c)
Dividends
Prior to 2020, we had never declared or paid cash dividends on our common stock. In 2020, our Board of Directors declared and paid a $0.05 per share cash dividend (amounting to $393,178) on our Class A common stock.
The Board of Directors of the Company has not adopted a formal dividend payment policy. The timing, declaration and payment of future dividends to holders of our common stock fall within the discretion of our Board of Directors and will depend on our operating results, earnings, financial condition, the capital requirements of our business and other factors.
Provisions of the Oklahoma Insurance Code relating to insurance holding companies subject transactions between the Company and TLIC and the Company and FBLIC, including dividend payments, to certain standards generally intended to prevent such transactions from adversely affecting the adequacy of life insurance subsidiaries’ capital and surplus available to support policyholder obligations. In addition, under the Oklahoma General Corporation Act, the Company may not pay dividends if, after giving effect to a dividend, it would not be able to pay its debts as they become due in the usual course of business or if its total liabilities would exceed its total assets.
On January 10, 2011, the Company’s Board of Directors approved a 5% share dividend by which shareholders received a share of common stock for each 20 shares of common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of March 10, 2011. Fractional shares were rounded to the nearest whole number of shares. The Company issued 323,777 shares in connection with the stock dividend.
On January 11, 2012, the Company’s Board of Directors approved another 5% share dividend by which shareholders received a share of common stock for each 20 shares of common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of March 10, 2012. Fractional shares were rounded to the nearest whole number of shares. The Company issued 378,908 shares in connection with the stock dividend.
On November 12, 2020, the Company’s Board of Directors approved a 10% share dividend by which shareholders received a share of Class A common stock for each 10 shares of Class A common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of November 12, 2020. Fractional shares were rounded up to the nearest whole number of shares. The Company issued 791,339 shares in connection with the stock dividend.
(d)
Securities Authorized for Issuance Under Equity Compensation Plans
In March 2020, our Board formally adopted the 2019 Equity Incentive Plan which had been previously approved by our shareholders in 2019. Under the Plan, up to 1,000,000 shares of Class A Common Stock are authorized for issuance. No awards have been granted or shares issued pursuant to the Plan.
(e)
Performance Graph - Not Required
(f)
Purchases of Equity Securities by Issuer
The Company did not repurchase any of its shares of common stock during 2024 or 2023.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
First Trinity Financial Corporation (“we” “us”, “our”, “FTFC” or the “Company”) conducts operations as an insurance holding company emphasizing ordinary life insurance products and annuity contracts in niche markets.
As an insurance provider, we collect premiums in the current period to pay future benefits to our policy and contract holders. Our core TLIC and FBLIC operations include issuing modified premium whole life insurance with a flexible premium deferred annuity, ordinary whole life, final expense, term and annuity products to predominately middle income households in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia through independent agents.
We also realize revenues from our investment portfolio, which is a key component of our operations. The revenues we collect as premiums 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 paid to the insurer between the time of receipt and the time benefits are paid out under policies. 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.
Our profitability in the life insurance and annuity segments is a function of our ability to accurately price the policies that we write, adequately value life insurance business acquired, administer life insurance company acquisitions at an expense level that validates the acquisition cost and invest the premiums and annuity considerations in assets that earn investment income with a positive spread.
Acquisitions
The Company expects to facilitate growth through acquisitions of other life insurance companies and/or blocks of life insurance and annuity business. In late December 2008, the Company completed its acquisition of 100% of the outstanding stock of FLAC for $2,500,000 and had additional acquisition related expenses of $195,234.
In late December 2011, the Company completed its acquisition of 100% of the outstanding stock of FBLIC for $13,855,129.
On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement and assumed liabilities of $3,055,916.
In 2019, FTFC’s acquisition of TAI for $250,000 was approved by the Barbados, West Indies regulators.
Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The aggregate purchase price of K-TENN was $1,746,240.
On January 4, 2022, FTFC acquired RCLIC from Royalty in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance approved FTFC’s contribution and merger of RCLIC into FBLIC.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition, results of operations and liquidity and capital resources is based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We evaluate our estimates and assumptions continually, including those related to investments, deferred acquisition costs, value of insurance business acquired and policy liabilities. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances, the results of which 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.
The Company considers its most critical accounting estimates to be those applied to investments in fixed maturities securities, mortgage loans on real estate, deferred policy acquisition costs, value of insurance business acquired and future policy benefits.
In first quarter 2023, the Company adopted Accounting Standards Update 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments and all related guidance dealing with the FASB’s pronouncements dealing with changes in accounting for and recognizing credit losses.
Investments in Fixed Maturity Securities
Fixed maturity securities comprised of bonds and redeemable preferred securities 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. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity.
Interest income on fixed maturity securities, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. Dividend income on redeemable preferred securities are recognized in net investment income when declared. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline in value is considered to be other-than-temporary.
The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings.
The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency ratings, the financial condition of the issuer or underlying obligors, payment history, payment structure of the security, industry and market conditions, underlying collateral, and other factors that may be relevant based on the facts and circumstances pertaining to individual securities.
If the Company intends to sell the fixed maturity security or will be more likely than not be required to sell the fixed maturity security before recovery of its amortized cost basis, then any allowance for credit losses, if previously recorded is written off and the fixed maturity security’s amortized cost is written down to the security’s fair value as of the reporting date with any incremental impairment recorded as a charge to noninterest income.
Mortgage Loans on Real Estate
Mortgage loans are carried at unpaid balances, net of unamortized premium or discounts. This measurement of mortgage loans on an amortized cost basis is reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized costs basis of mortgage loans to present the net carrying value at the amount expected to be collected on the mortgage loans.
Interest income and the amortization of premiums or discounts are included in net investment income. Mortgage loan fees, certain direct loan origination costs, and purchase premiums and discounts on loans are recognized as an adjustment of yield by the interest method based on the contractual terms of the loan. In certain circumstances, prepayments may be anticipated.
The statement of operations reflects the measurement of credit losses for newly recognized mortgage loans as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported mortgage loan balances. The Company uses judgment in determining the relevant information and estimation methods that are appropriate in establishing the valuation allowance for credit losses. The allowance for credit losses for mortgage loans with a more-than-insignificant amount of credit determination since origination is determined and the initial allowance for credit losses should be added to the purchase price of mortgage loans rather than being reported as a credit loss expenses.
The Company, however, has established and will continue to establish a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow based on historical patterns. The Company’s foreclosed properties have not resulted in accumulated losses and due to the low loan-to-value the Company holds with respect to its mortgage loans, the Company has not recorded and does not expect to record the addition to the purchase price of mortgage loans an initial allowance for credit losses to be amortized over the life of the mortgage loans. The Company will continue to record credit losses for mortgage loans not supported by funds held in escrow in accordance with its valuation policy for mortgage loans on real estate followed before 2023.
While the Company utilizes its 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 and commercial mortgage loan portfolio, the economy and changes in interest rates. The 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 but not specifically identified loans.
The Company considers mortgage loans on real estate impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the mortgage loan agreement. Impairment is measured on a loan-by-loan basis. Factors that the Company considers in determining impairment include payment status, collateral value of the real estate subject to the mortgage loan and the probability of collecting scheduled principal and interest payments when due. Mortgage loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the mortgage loan on real estate and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.
Deferred Policy Acquisition Costs
Commissions and other acquisition costs which vary with and are primarily related to the successful production of new and renewal insurance contracts are deferred and amortized in a systematic manner based on the related contract revenues or gross profits as appropriate. The recovery of deferred acquisition costs is dependent on the future profitability of the underlying business for which acquisition costs were incurred. Each reporting period, we evaluate the recoverability of the unamortized balance of deferred acquisition costs. We consider estimated future gross profits or future premiums; expected mortality or morbidity; interest earned and credited rates; persistency and expenses in determining whether the balance is recoverable.
If we determine a portion of the unamortized balance is not recoverable, it is immediately charged to amortization expense. The assumptions we use to amortize and evaluate the recoverability of the deferred acquisition costs involve significant judgment. A revision to these assumptions may impact future financial results. Deferred acquisition costs related to the successful production of new and renewal insurance business for traditional life insurance contracts are deferred to the extent deemed recoverable and amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities.
Deferred acquisition costs related to the successful production of new and renewal insurance and annuity products that subject us to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies. To the extent that realized gains and losses on securities result in adjustments to deferred acquisition costs related to insurance and annuity products, such adjustments are reflected as a component of the amortization of deferred acquisition costs.
Deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.
Value of Insurance Business Acquired
As a result of our purchases of FLAC and FBLIC, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under FASB guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. The recovery of the value of insurance business acquired is dependent on the future profitability of the underlying business that was initially recorded in the purchases of FLAC and FBLIC. Each reporting period, we evaluate the recoverability of the unamortized balance of the value of insurance business acquired.
For the amortization of the value of acquired insurance in force, the Company reviews its estimates of gross profits each reporting period. The most significant assumptions involved in the estimation of gross profits include interest rate spreads; future financial market performance; business surrender and lapse rates; mortality and morbidity; expenses and the impact of realized investment gains and losses. In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company is required to record a charge or credit to amortization expense for the period in which an adjustment is made.
Future Policy Benefits
Our liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For life insurance and annuity products, expected mortality and morbidity is generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation.
Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality and morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses on a product by establishing premium deficiency reserves.
Estimating liabilities for our long-duration insurance contracts requires management to make various assumptions, including policyholder persistency, mortality rates, investment yields, discretionary benefit increases, new business pricing and operating expense levels.
Since many of these factors are interdependent and subject to short-term volatility during the long-duration contract period, substantial judgment is required. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.
Adopted Accounting Standards
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued updated guidance (Accounting Standards Update 2016-13) for the accounting for credit losses for financial instruments. The updated guidance applied a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables, including structured settlements that are recorded as part of reinsurance recoverables) and required an entity to estimate the credit losses expected over the life of an exposure or pool of exposures.
The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.
The updated guidance also amended the current other-than-temporary impairment model for available-for-sale debt securities and requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted this standard in first quarter 2023 on a modified retrospective basis. The cumulative effect adjustment to January 1, 2023 accumulated earnings for the adoption of this standard was a charge of $230,036.
Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduced new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgated 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 required that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The Company adopted the amendments in this standard in first quarter 2023. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued amendments (Accounting Standards Update 2023-07) to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The amendments require public entities to follow the significant expense principle and disclose on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) with additional disclosure of the CODM’s title, position and how the reported measure(s) of segment profit or loss are used in assessing segment performance and allocating resources. In addition, amounts for other segment items are required to be disclosed including a description of its composition. If the COMD uses more than one measure in assessing segment performance and allocating resources, at least one of the measures should be consistent with the corresponding amounts utilized in the public entity’s consolidated financial statements.
The amendments in this guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted this Update for year-end reporting in 2024 and will adopt for interim periods beginning in 2025.
Cybersecurity Risk Management, Strategy, Governance and Incident Disclosures by Public Companies
On July 26, 2023, the U.S. Securities and Exchange Commission adopted this Final Rule (the “Cybersecurity Final Rule”) enhancing disclosure requirements for registered companies covering cybersecurity risk and management. The Cybersecurity Final Rule requires registrants to disclose material cybersecurity incidents on Form 8-K within four business days of a determination that a cybersecurity incident is material, and such materiality determination must be made without unreasonable delay.
The rule also requires periodic disclosures of, among other things, details on the company’s processes to assess, identify, and manage cybersecurity risks, cybersecurity governance, and management’s role in overseeing such a compliance program, including the board of directors’ oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule became effective in December 2023.
The Company has never had a material cyber security incident but will follow the Cybersecurity Final Rule regarding timely disclosure of a material cyber security incident. The Company has also disclosed its strategy and governance with respect to its cybersecurity risk management program in this December 31, 2024 Form 10-K.
Recent Accounting Pronouncements
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued updated guidance (Accounting Standards Update 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. This update improves the timeliness of recognizing changes in the liability for future policy benefits, modifies the rate used to discount future cash flows, simplifies and improves accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplifies the amortization of deferred acquisitions costs and expands required disclosures. The expanded disclosure requires an insurance entity to provide disaggregated roll forwards of beginning to ending balances of the following: liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs including disclosure about, changes to and effect of changes for significant inputs, judgments, assumptions and methods used in measurements.
The updated guidance was effective for reporting periods beginning after December 15, 2020. As a Smaller Reporting Company, the effective date has been changed twice and the delayed effective date is now for reporting periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted but not likely to be elected by the Company. With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, an insurance entity may elect to apply the amendments retrospectively as of the beginning of the earliest period presented. With respect to the market risk benefits, an insurance entity should apply the amendments retrospectively as of the beginning of the earliest period presented. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.
Transition for Sold Contracts
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. Early adoption is permitted but not likely to be elected by the Company. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued amendments (Accounting Standards Update 2023-09) to enhance the transparency and decision usefulness of income tax disclosures. The amendments require that public business entities on an annual basis disclose information about taxes paid and a tabular reconciliation using both percentages and amounts of specific categories in the rate reconciliation. In addition, separate disclosure is required for any reconciling item equal to or greater than five (5) percent of the amount computed by multiplying the income or loss from continuing operations before income taxes by the statutory income tax rate. If not otherwise evident, a public business entity is required to provide an explanation of the individual reconciling items such as the nature, effect and causes of the reconciling items.
The amendments in this guidance are effective for public companies for fiscal years beginning after December 15, 2024. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2025.
Expense Disaggregation Disclosures
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-03) to disclose more granular information about costs of sales and general and administrative expenses including employee compensation to improve the disclosure about a public enterprise’s expenses by providing more detailed information about the types of expenses commonly presented in expense captions such as costs of sales and general and administrative expenses.
The amendments in this Update require disclosing, in the notes to the financial statements, the following specified information about costs and expenses included in general captions on the face of the financial statements at each interim and annual reporting period of the entity: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil and gas producing activities or other amounts of depletion expenses.
An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In addition, the amendments in this Update do not change or remove current expense disclosure requirements including those of specialized industries.
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2027 and interim reporting beginning in first quarter 2028.
Debt With Conversion and Other Options
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-04) to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted as an induced conversion. Under this Update, an inducement offer is required to provide the debt holder with, at a minimum, the consideration in form and amount issuable under the conversion privileges provided in the instrument. If the convertible debt instrument has been exchanged, modified or deemed not substantially different within the one-year period before the settlement date, the current inducement offer should be compared to the inducement offer that existed one-year before the settlement date.
In addition, the incorporation, elimination or modification of a volume weighted average price formula does not automatically cause a settlement to be accounted for as an extinguishment; there is instead a need to assess whether the form and amount of the conversion consideration is preserves using the fair value of the shares as of the settlement date. This induced conversion guidance applies to convertible debt instruments that are not currently convertible as long as there was a substantive conversion feature as of its issuance date or settlement date.
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within that annual reporting period. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company does not have or anticipate having any debt instruments and anticipates never being required to adopt the information required by this Update.
FINANCIAL HIGHLIGHTS
Consolidated Condensed Results of Operations for the Years Ended December 31, 2024 and 2023
Years Ended December 31,
Amount Change
2024 less 2023
Premiums
$ 41,878,896
$ 38,912,934
$ 2,965,962
Net investment income
30,522,580
31,655,321
(1,132,741 )
Net realized investment gains (losses)
264,821
(180,152 )
444,973
Loss on impairments
(129,436 )
-
(129,436 )
Service fees
3,161,535
4,701,960
(1,540,425 )
Other income
652,793
666,409
(13,616 )
Total revenues
76,351,189
75,756,472
594,717
Benefits and claims
46,482,298
46,141,488
340,810
Expenses
21,792,600
19,552,536
2,240,064
Total benefits, claims and expenses
68,274,898
65,694,024
2,580,874
Income before federal income tax expense
8,076,291
10,062,448
(1,986,157 )
Federal income tax expense
1,659,500
2,147,087
(487,587 )
Net income
$ 6,416,791
$ 7,915,361
$ (1,498,570 )
Net income per common share
Class A common stock
$ 0.6776
$ 0.8358
$ (0.1582 )
Class B common stock
$ 0.5759
$ 0.7104
$ (0.1345 )
Consolidated Condensed Financial Position as of December 31, 2024 and 2023
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Investment assets
$ 493,388,984
$ 456,517,640
$ 36,871,344
Assets held in trust under coinsurance agreement
31,176,310
79,940,459
(48,764,149 )
Other assets
161,883,604
135,563,436
26,320,168
Total assets
$ 686,448,898
$ 672,021,535
$ 14,427,363
Policy liabilities
$ 571,922,942
$ 517,637,743
$ 54,285,199
Funds withheld under coinsurance agreement
31,032,174
77,257,253
(46,225,079 )
Deferred federal income taxes
4,023,492
4,228,189
(204,697 )
Other liabilities
10,420,062
8,882,142
1,537,920
Total liabilities
617,398,670
608,005,327
9,393,343
Shareholders' equity
69,050,228
64,016,208
5,034,020
Total liabilities and shareholders' equity
$ 686,448,898
$ 672,021,535
$ 14,427,363
Shareholders' equity per common share
Class A common stock
$ 7.2913
$ 6.7597
$ 0.5316
Class B common stock
$ 6.1976
$ 5.7457
$ 0.4519
Results of Operations - Years Ended December 31, 2024 and 2023
Revenues
Our primary sources of revenue are life insurance premium income and investment income. Premium payments are classified as first-year, renewal and single. In addition, realized gains and losses on investment holdings can significantly impact revenues from period to period.
Our revenues for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Premiums
$ 41,878,896
$ 38,912,934
$ 2,965,962
Net investment income
30,522,580
31,655,321
(1,132,741 )
Net realized investment gains (losses)
264,821
(180,152 )
444,973
Loss on impairments
(129,436 )
-
(129,436 )
Service fees
3,161,535
4,701,960
(1,540,425 )
Other income
652,793
666,409
(13,616 )
Total revenues
$ 76,351,189
$ 75,756,472
$ 594,717
The $594,717 increase in total revenues for the year ended December 31, 2024 is discussed below.
Premiums
Our premiums for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Ordinary life first year
$ 3,742,607
$ 3,074,078
$ 668,529
Ordinary life renewal
8,874,166
7,130,477
1,743,689
Final expense first year
3,423,413
3,498,043
(74,630 )
Final expense renewal
25,838,710
25,210,336
628,374
Total premiums
$ 41,878,896
$ 38,912,934
$ 2,965,962
The $2,965,962 increase in premiums for the year ended December 31, 2024 is primarily due to the $1,743,689 increase in ordinary life renewal premiums, $668,529 increase in ordinary life first year premiums and $628,374 increase in final expense renewal premiums that exceeded a $74,630 decrease in final expense first year premiums.
The increase in ordinary life renewal premiums and ordinary life first year premiums primarily reflects ordinary dollar denominated life insurance policies sold in the international market by TAI. The increase in final expense renewal premiums reflects the persistency of prior years’ final expense production. The decrease in final expense first year premiums reflects changes in competitor underwriting guidelines that are relaxed compared to our restricted underwriting standards.
Net Investment Income
The major components of our net investment income for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Fixed maturity securities
$ 8,534,951
$ 6,550,360
$ 1,984,591
Equity securities
135,911
118,780
17,131
Other long-term investments
4,444,639
4,948,734
(504,095 )
Mortgage loans
17,079,731
19,678,014
(2,598,283 )
Policy loans
291,170
240,385
50,785
Short-term and other investments
2,531,767
2,600,099
(68,332 )
Gross investment income
33,018,169
34,136,372
(1,118,203 )
Investment expenses
(2,495,589 )
(2,481,051 )
14,538
Net investment income
$ 30,522,580
$ 31,655,321
$ (1,132,741 )
The $1,118,203 decrease in gross investment income for the year ended December 31, 2024 is primarily due to $2,598,283 decrease in mortgage loans and a $504,095 decrease in other long-term investments that exceeded a $1,984,591 increase in fixed maturity securities.
The decrease in mortgage loans investment income is primarily due to decreased mortgage loans investments of $30.5 million since December 31, 2023. The decrease in other long-term investment is primarily due to decreased other long-term investment of $3.3 million since December 31, 2023. The increase in fixed maturity securities investment income is primarily due to increased fixed maturity securities investments of $64.0 million since December 31, 2023.
Net Realized Investment Gains (Losses)
Our net realized investment gains (losses) result from sales of fixed maturity securities available-for-sale, equity securities, mortgage loans on real estate, other long-term investments, investment real estate, changes in fair value of equity securities and changes in estimate of credit losses.
Our net realized investment gains (losses) for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Fixed maturity securities available-for-sale:
Sale proceeds and maturities
$ 15,179,021
$ 5,287,601
$ 9,891,420
Amortized cost at sale date
15,278,204
5,339,617
9,938,587
Net realized losses
$ (99,183 )
$ (52,016 )
$ (47,167 )
Equity securities at fair value:
Sale proceeds
$
$ -
$
Cost at sale date
-
Net realized losses
$ (4 )
$ -
$ (4 )
Mortgage loans on real estate:
Payment and sale proceeds on mortgage loans
$ 173,048,603
$ 132,634,814
$ 40,413,789
Cost at sale date
172,348,722
132,632,318
39,716,404
Net realized gains
$ 699,881
$ 2,496
$ 697,385
Other long-term investments:
Sales proceeds
$ 17,288,490
$ -
$ 17,288,490
Cost at sale date
17,242,840
-
17,242,840
Net realized gains
$ 45,650
$ -
$ 45,650
Investment real estate:
Sale proceeds
$ 276,956
$ -
$ 276,956
Carrying value at sale date
265,705
-
265,705
Net realized gains
$ 11,251
$ -
$ 11,251
Equity securities, changes in fair value
$ (97,284 )
$ 8,653
$ (105,937 )
Changes in current estimate of credit losses
$ (295,490 )
$ (139,285 )
$ (156,205 )
Net realized investment gains (losses)
$ 264,821
$ (180,152 )
$ 444,973
Loss on Impairments
During 2024, management impaired TLIC’s three acres of undeveloped land located in Topeka, Kansas by $129,436 from its carrying value to its net realizable value expected at the time of ultimate resale based on a third party appraisal.
Service Fees
The $1,540,425 decrease in service fees for the year ended December 31, 2024 is primarily due to a decrease in fees from Trinity Mortgage Corporation brokering mortgage loans for a fee to third parties.
Total Benefits, Claims and Expenses
Our benefits, claims and expenses are primarily generated from benefit payments, surrenders, interest credited to policyholders, change in reserves, commissions and other underwriting, insurance and acquisition expenses. Benefit payments can significantly impact expenses from period to period.
Our benefits, claims and expenses for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Benefits and claims
Increase in future policy benefits
$ 14,565,010
$ 14,212,615
$ 352,395
Death benefits
13,176,508
14,298,818
(1,122,310 )
Surrenders
2,471,376
2,173,694
297,682
Interest credited to policyholders
15,880,681
15,093,685
786,996
Dividend, endowment and supplementary life contract benefits
388,723
362,676
26,047
Total benefits and claims
46,482,298
46,141,488
340,810
Expenses
Policy acquisition costs deferred
(16,620,462 )
(13,476,834 )
(3,143,628 )
Amortization of deferred policy acquisition costs
10,775,374
8,863,514
1,911,860
Amortization of value of insurance business acquired
183,913
270,752
(86,839 )
Commissions
16,030,481
12,803,764
3,226,717
Other underwriting, insurance and acquisition expenses
11,423,294
11,091,340
331,954
Total expenses
21,792,600
19,552,536
2,240,064
Total benefits, claims and expenses
$ 68,274,898
$ 65,694,024
$ 2,580,874
The $2,580,874 increase in total benefits, claims and expenses for the year ended December 31, 2024 is discussed below.
Benefits and Claims
The $340,810 increase in total benefits and claims for the year ended December 31, 2024 is primarily due to the following:
●
$786,996 increase in interest credited to policyholders is primarily due to an increase in the crediting rate on new annuity contracts issued during 2024 compared to annuity contracts surrendered during 2024.
●
$352,395 increase in future policy benefits is primarily due to the increased number of life policies in force and the aging of existing life policies.
●
$297,682 increase in surrenders is based upon policyholder election.
●
$1,122,310 decrease in death benefits is primarily due to approximately $658,000 of decreased ordinary life benefits and $464,000 of decreased final expense benefits.
Deferral and Amortization of Deferred Acquisition Costs
Certain costs related to the successful acquisition of traditional life insurance policies are capitalized and amortized over the premium-paying period of the policies. Certain costs related to the successful acquisition of insurance and annuity policies that subject us to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are capitalized and amortized in relation to the present value of actual and expected gross profits on the policies.
These acquisition costs, which are referred to as deferred policy acquisition costs, include commissions and other successful costs of acquiring policies and contracts, which vary with, and are primarily related to, the successful production of new and renewal insurance and annuity contracts.
For the years ended December 31, 2024 and 2023, capitalized costs were $16,620,462 and $13,476,834, respectively. Amortization of deferred policy acquisition costs for the years ended December 31, 2024 and 2023 were $10,775,374 and $8,863,514.
The $3,143,628 increase in the 2024 acquisition costs deferred primarily relates to increased annuity production with a corresponding increase in deferral of eligible annuity commissions. There was a $1,911,860 increase in the 2024 amortization of deferred acquisition costs primarily due to 2024 annuity surrenders and withdrawal activity.
Amortization of Value of Insurance Business Acquired
The cost of acquiring insurance business is amortized over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. Amortization of the value of insurance business acquired was $183,913 and $270,752 for the years ended December 31, 2024 and 2023, respectively.
Commissions
Our commissions for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Annuity
$ 4,637,570
$ 2,204,946
$ 2,432,624
Ordinary life first year
3,977,122
3,224,247
752,875
Ordinary life renewal
999,372
750,566
248,806
Final expense first year
4,033,281
4,245,077
(211,796 )
Final expense renewal
2,383,136
2,378,928
4,208
Total commissions
$ 16,030,481
$ 12,803,764
$ 3,226,717
The $3,226,717 increase in commissions for the year ended December 31, 2024 is primarily due to a $2,432,624 increase annuity commissions (corresponding to $71,630,897 of increased annuity deposits retained) and a $752,875 increase in ordinary life first year commissions (corresponding to $668,529 increased ordinary life first year premiums) and a $248,806 increase in ordinary life renewal commissions (corresponding to $1,743,689 increased ordinary life renewal premiums).
Other Underwriting, Insurance and Acquisition Expenses
The $331,954 increase in other underwriting, insurance and acquisition expenses for the year ended December 31, 2024 was primarily related to an increase in guaranty fund assessment fees and third party administrative fees.
Federal Income Taxes
FTFC files a consolidated federal income tax return with TLIC, FBLIC and TMC. 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.
For the years ended December 31, 2024 and 2023, current income tax expense was $1,496,626 and $1,778,778, respectively. Deferred federal income tax expense was $162,874 and $368,309 for the years ended December 31, 2024 and 2023, respectively.
Net Income Per Common Share Basic
For the year ended December 31, 2024 and 2023, the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,470,277) of Class A shares (9,384,340) and Class B shares (85,937) as of the reporting date.
For the year ended December 31, 2024, the net income allocated to the Class A shareholders of $6,358,563 is the total net income $6,416,791 less the net income allocated to the Class B shareholders $58,228. For the year ended December 31, 2023, the net income allocated to the Class A shareholders of $7,843,534 is the total net income $7,915,361 less the net income allocated to the Class B shareholders $71,827.
The weighted average outstanding common shares basic for the year ended December 31, 2024 and 2023 were 9,384,340 for Class A shares and 101,102 for Class B shares.
Business Segments
The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment.
The revenues and income before federal income taxes from our business segments for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Revenues:
Life insurance operations
$ 49,727,760
$ 46,859,649
$ 2,868,111
Annuity operations
24,102,511
24,531,347
(428,836 )
Corporate operations
2,520,918
4,365,476
(1,844,558 )
Total
$ 76,351,189
$ 75,756,472
$ 594,717
Income before federal income taxes:
Life insurance operations
$ 5,897,565
$ 3,463,203
$ 2,434,362
Annuity operations
945,053
3,453,174
(2,508,121 )
Corporate operations
1,233,673
3,146,071
(1,912,398 )
Total
$ 8,076,291
$ 10,062,448
$ (1,986,157 )
The increases and decreases of revenues and profitability from our business segments for the years ended December 31, 2024 and 2023 are summarized as follows:
Life Insurance
Annuity
Corporate
Operations
Operations
Operations
Total
Revenues
Premiums
$ 2,965,962
$ -
$ -
$ 2,965,962
Net invesment income
(337,189 )
(1,135,787 )
340,235
(1,132,741 )
Net realized investment gains less impairments
80,881
234,656
-
315,537
Service fees and other income
158,457
472,295
(2,184,793 )
(1,554,041 )
Total revenue
2,868,111
(428,836 )
(1,844,558 )
594,717
Benefits and claims
Increase in future policy benefits
352,395
-
-
352,395
Death benefits
(1,122,310 )
-
-
(1,122,310 )
Surrenders
297,682
-
-
297,682
Interest credited to policyholders
-
786,996
-
786,996
Dividend, endowment and supplementary life contract benefits
26,047
-
-
26,047
Total benefits and claims
(446,186 )
786,996
-
340,810
Expenses
Policy acquisition costs deferred net of amortization
135,701
(1,367,469 )
-
(1,231,768 )
Amortization of value of insurance business acquired
(43,420 )
(43,419 )
-
(86,839 )
Commissions
794,093
2,432,624
-
3,226,717
Other underwriting, insurance and acquisition expenses
(6,439 )
270,553
67,840
331,954
Total expenses
879,935
1,292,289
67,840
2,240,064
Total benefits, claims and expenses
433,749
2,079,285
67,840
2,580,874
Income (loss) before federal income tax expense (benefit)
$ 2,434,362
$ (2,508,121 )
$ (1,912,398 )
$ (1,986,157 )
Consolidated Financial Condition
Our invested assets as of December 31, 2024 and 2023 are summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)
$ 213,745,821
$ 149,700,948
$ 64,044,873
Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)
5,336,062
419,530
4,916,532
Mortgage loans on real estate
209,364,504
239,831,447
(30,466,943 )
Investment real estate
2,351,549
1,305,403
1,046,146
Policy loans
4,367,534
3,474,116
893,418
Short-term investments
-
298,257
(298,257 )
Other long-term investments
58,223,514
61,487,939
(3,264,425 )
Total investments
$ 493,388,984
$ 456,517,640
$ 36,871,344
The increase in fixed maturity available-for-sale securities for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Fixed maturity securities, available-for-sale, beginning
$ 149,700,948
$ 126,612,890
Purchases
81,180,014
23,059,491
Unrealized appreciation (depreciation)
(1,750,599 )
5,632,801
Net realized investment losses
(394,673 )
(191,301 )
Sales proceeds
(11,744,021 )
(457,601 )
Maturities
(3,435,000 )
(4,830,000 )
Accretion of discounts (premium amortization)
189,152
(125,332 )
Increase
64,044,873
23,088,058
Fixed maturity securities, available-for-sale, ending
$ 213,745,821
$ 149,700,948
Fixed maturity securities available-for-sale are reported at fair value with unrealized gains and losses, net of applicable income taxes, reflected as a separate component in shareholders’ equity within accumulated other comprehensive loss. The available-for-sale fixed maturity securities portfolio is invested in U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
The increase in equity securities available-for-sale for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Equity securities, available-for-sale, beginning
$ 419,530
$ 399,633
Purchases
5,129,196
130,550
Sales proceeds
(5 )
-
Joint venture distribution
(115,371 )
(119,306 )
Net realized investment loss, sale of securities
(4 )
-
Net realized investment gains (losses), changes in fair value
(97,284 )
8,653
Increase
4,916,532
19,897
Equity securities, available-for-sale, ending
$ 5,336,062
$ 419,530
Equity securities are reported at fair value with the change in fair value reflected in net realized investment gains (losses) within the consolidated statements of operations.
The decrease in mortgage loans on real estate for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Mortgage loans on real estate, beginning
$ 239,831,447
$ 242,314,128
Purchases
143,991,455
130,956,402
Accretion of discounts (premium amortization)
(796,526 )
1,856
Net realized investment gains
699,881
2,496
Payments
(173,048,603 )
(132,634,814 )
Foreclosed - transferred to real estate
(1,441,287 )
(764,967 )
(Increase) decrese in allowance for bad debts
128,137
(43,654 )
Decrease
(30,466,943 )
(2,482,681 )
Mortgage loans on real estate, ending
$ 209,364,504
$ 239,831,447
The increase in investment real estate for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Investment real estate, beginning
$ 1,305,403
$ 540,436
Real estate acquired through mortgage loan foreclosure
1,441,287
764,967
Net realized investment gains
11,251
Sales proceeds
(276,956 )
-
Loss on impairments
(129,436 )
-
Increase
1,046,146
764,967
Investment real estate, ending
$ 2,351,549
$ 1,305,403
The decrease in other long-term investments (comprised of lottery receivables and co-op loans) for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Other long-term investments, beginning
$ 61,487,939
$ 67,500,783
Purchases
9,470,507
7,385,062
Discount accretion
4,507,908
4,948,951
Net realized investment gains
45,650
-
Payments
(17,288,490 )
(18,346,857 )
Decrease
(3,264,425 )
(6,012,844 )
Other long-term investments, ending
$ 58,223,514
$ 61,487,939
Our assets other than invested assets as of December 31, 2024 and 2023 are summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Cash and cash equivalents
$ 64,344,122
$ 33,839,741
$ 30,504,381
Accrued investment income
5,746,167
6,214,459
(468,292 )
Recoverable from reinsurers
9,845,838
10,353,674
(507,836 )
Assets held in trust under coinsurance agreement
31,176,310
79,940,459
(48,764,149 )
Agents' balances and due premiums
1,393,277
1,284,003
109,274
Deferred policy acquisition costs
66,640,453
60,795,108
5,845,345
Value of insurance business acquired
3,593,440
3,777,353
(183,913 )
Other assets
10,320,307
19,299,098
(8,978,791 )
Assets other than investment assets
$ 193,059,914
$ 215,503,895
$ (22,443,981 )
The $30,504,381 increase in cash and cash equivalents for the year ended December 31, 2024 and the corresponding increase of $297,016 for the year ended December 31, 2023 are summarized in the Company’s consolidated statements of cash flows.
The $48,764,149 decrease in assets held in trust under the coinsurance agreement is due to a reduction in assets from the significant surrenders of annuity contracts under TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company that is administered on a funds withheld basis.
The increase in deferred policy acquisition costs for the years ended December 31, 2024 and 2023, respectively, are summarized as follows:
Years Ended December 31,
Balance, beginning of year
$ 60,795,108
$ 56,183,785
Capitalization of commissions, sales and issue expenses
16,620,462
13,476,834
Amortization
(10,775,374 )
(8,863,514 )
Deferred acquisition costs allocated to investments
(1,997 )
Balance, end of year
$ 66,640,453
$ 60,795,108
Our other assets as of December 31, 2024 and December 31, 2023 are summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Federal and state income taxes recoverable
$ 4,708,718
$ 10,845,790
$ (6,137,072 )
Advances to mortgage loan originator
4,746,638
4,487,715
258,923
Accrued management fee
393,159
345,148
48,011
Lease asset - right to use
270,679
369,107
(98,428 )
Other receivables, prepaid assets and deposits
171,032
159,854
11,178
Notes receivable
30,081
44,319
(14,238 )
Receivables from lottery vendor
-
278,207
(278,207 )
Guaranty funds
-
723,767
(723,767 )
Advances to an independently owned investment firm
-
2,045,191
(2,045,191 )
Total other assets
$ 10,320,307
$ 19,299,098
$ (8,978,791 )
There was a $6,137,072 decrease in federal and state income taxes recoverable in 2024 primarily due to receiving a federal income tax refund of $8,087,076 for the tax years 2020, 2021 and 2022 that exceeded federal and state tax withholdings on lottery receivables.
There was a $2,045,191 decrease in advances to an independently owned investment firm due to the full repayment of a promissory note.
There was a $723,767 decrease in the guaranty fund primarily due to a reduction in the premium tax credit. A large portion of the guaranty fund assessment was derived from annuity products, however most states do not assess premium taxes on annuity business.
There was a $278,207 decrease in receivables from a lottery vendor.
There was a $258,923 increase in advances to one mortgage loan originator who acquires mortgage loans for our life companies.
Our liabilities as of December 31, 2024 and 2023 are summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Policy liabilities
Policyholders' account balances
$ 431,190,092
$ 391,247,676
$ 39,942,416
Future policy benefits
138,027,832
123,729,530
14,298,302
Policy claims
2,478,465
2,410,243
68,222
Other policy liabilities
226,553
250,294
(23,741 )
Total policy liabilities
571,922,942
517,637,743
54,285,199
Funds withheld under coinsurance agreement
31,032,174
77,257,253
(46,225,079 )
Deferred federal income taxes
4,023,492
4,228,189
(204,697 )
Other liabilities
10,420,062
8,882,142
1,537,920
Total liabilities
$ 617,398,670
$ 608,005,327
$ 9,393,343
The $14,298,302 increase in future policy benefits is primarily related to the production of new life insurance policies and the aging of existing policies an additional year.
The decrease and increase in policyholders’ account balances for the years ended December 31, 2024 and 2023, respectively, are summarized as follows:
Years Ended December 31,
Policyholders' account balances, beginning
$ 391,247,676
$ 391,359,944
Deposits
141,387,484
69,082,635
Withdrawals
(166,419,069 )
(104,579,076 )
Funds withheld under coinsurance agreement
49,093,320
20,290,488
Interest credited
15,880,681
15,093,685
Increase (decrease)
39,942,416
(112,268 )
Policyholders' account balances, ending
$ 431,190,092
$ 391,247,676
The $204,697 decrease in deferred federal income taxes was due to $367,571 of decreased deferred federal income taxes on the unrealized depreciation of fixed maturity securities available-for-sale and $162,874 of operating deferred federal tax expense.
The $46,225,079 decrease in funds withheld under coinsurance agreement is due to significant 2024 surrenders of coinsured annuity contracts under coinsurance agreement with an offshore annuity and life insurance company.
Our other liabilities as of December 31, 2024 and December 31, 2023 are summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Mortgage loans suspense
$ 5,910,871
$ 5,841,113
$ 69,758
Suspense accounts payable
2,695,069
800,262
1,894,807
Accrued expenses payable
611,000
696,000
(85,000 )
Unclaimed funds
582,040
488,492
93,548
Accounts payable
274,493
53,804
220,689
Lease liability
270,679
369,107
(98,428 )
Unearned investment income
148,233
115,166
33,067
Guaranty fund assessments
86,000
713,000
(627,000 )
Deferred revenue
30,250
41,250
(11,000 )
Payable for securities purchased
6,179
7,082
(903 )
Other payables, withholdings and escrows
(194,751 )
(243,134 )
48,383
Total other liabilities
$ 10,420,062
$ 8,882,142
$ 1,537,920
The $1,894,807 increase in suspense accounts payable is due to increased deposits on policy applications that had not been issued as of the financial reporting date.
The $220,689 increase in account payable is primarily amounts owed to a lottery vendor.
The $627,000 decrease in the guaranty fund assessments is primarily due to a reduction in potential assessments in the event insurance entities become insolvent or default on other insurance obligations.
Liquidity and Capital Resources
Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through December 31, 2024, we have received $27,119,480 from the sale of our shares.
The Company raised $1,450,000 from two private placements during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012; and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.
The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital.
In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to common stock and additional paid-in capital.
The Company has also purchased 247,580 shares of treasury stock at a cost of $893,947 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.
As of December 31, 2024, we had cash and cash equivalents totaling $64,344,122. As of December 31, 2024, cash and cash equivalents of $35,799,002 and $22,206,273, respectively, totaling $58,005,275 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the OID of any dividend or intercompany transaction to transfer funds to FTFC. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year.
Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC has paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC.
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 $50,995,135 and $26,017,084 as of December 31, 2024 and December 31, 2023, respectively. 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.
Our cash flows for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Net cash provided by operating activities
$ 90,007,676
$ 40,390,718
$ 49,616,958
Net cash used in investing activities
(34,471,710 )
(4,597,261 )
(29,874,449 )
Net cash used in financing activities
(25,031,585 )
(35,496,441 )
10,464,856
Increase in cash
30,504,381
297,016
30,207,365
Cash and cash equivalents, beginning of period
33,839,741
33,542,725
297,016
Cash and cash equivalents, end of period
$ 64,344,122
$ 33,839,741
$ 30,504,381
The cash provided by operating activities for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Amount Change
2024 less 2023
Premiums collected
$ 41,852,394
$ 38,693,776
$ 3,158,618
Net investment income collected
27,123,406
26,205,489
917,917
Service fees and other income collected
3,766,316
5,135,220
(1,368,904 )
Death benefits paid
(12,600,450 )
(13,680,462 )
1,080,012
Surrenders paid
(2,471,376 )
(2,173,694 )
(297,682 )
Dividends and endowments paid
(390,831 )
(365,276 )
(25,555 )
Commissions paid
(16,134,886 )
(12,744,748 )
(3,390,138 )
Other underwriting, insurance and acquisition expenses paid
(11,190,335 )
(11,217,061 )
26,726
Taxes received (paid)
4,640,446
(3,736,959 )
8,377,405
(Increased) decreased advances to a mortgage loan originator
(258,923 )
255,326
(514,249 )
Decreased advances to independently owned investment firm
2,045,191
2,954,809
(909,618 )
Decreased (increased) advances to an investment vendor
296,477
(296,477 )
592,954
Decreased funds under coinsurance agreement
51,632,390
17,340,015
34,292,375
Increased (decreased) deposits of pending policy applications
1,894,807
(8,905,801 )
10,800,608
Increased mortgage loan suspense
69,757
3,185,928
(3,116,171 )
Other
(266,707 )
(259,367 )
(7,340 )
Cash provided by operating activities
$ 90,007,676
$ 40,390,718
$ 49,616,958
Please see the consolidated statements of cash flows for the years ended December 31, 2024 and 2023 for a summary of the components of net cash used in investing activities and financing activities.
Our shareholders’ equity as of December 31, 2024 and 2023 is summarized as follows:
Amount Change
December 31, 2024
December 31, 2023
2024 less 2023
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)
$ 96,319
$ 96,319
$ -
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)
1,011
1,011
-
Additional paid-in capital
43,668,023
43,668,023
-
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)
(893,947 )
(893,947 )
-
Accumulated other comprehensive loss
(11,024,079 )
(9,641,308 )
(1,382,771 )
Accumulated earnings
37,202,901
30,786,110
6,416,791
Total shareholders' equity
$ 69,050,228
$ 64,016,208
$ 5,034,020
The increase in shareholders’ equity of $5,034,020 for the year ended December 31, 2024 is primarily due to $6,416,791 in net income and $1,382,771 increase in accumulated other comprehensive loss.
The liquidity requirements of our life insurance companies are met primarily by funds provided from operations. Premium and annuity consideration deposits, investment income and investment maturities are the primary sources of funds, while investment purchases, policy benefits, and operating expenses are the primary uses of funds. There were no liquidity issues in 2024 or 2023. Our investments include marketable debt securities that could be readily converted to cash for liquidity needs. We are subject to various market risks. The quality of our investment portfolio and the current level of shareholders’ equity continue to provide a sound financial base as we strive to expand our marketing to offer competitive products.
Our investment portfolio had unrealized depreciation on available-for-sale securities of ($13,957,881) and ($12,207,282) as of December 31, 2024 and 2023, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $1,849,782 in unrealized losses arising for year ended December 31, 2024 has been increased by 2024 net realized investment losses of $99,183 originating from the sale, calls and maturities for fixed maturity securities available-for-sale resulting in net unrealized losses on investments of $1,750,599.
A primary liquidity concern is the risk of an extraordinary level of early policyholder withdrawals. We include provisions within our insurance policies, such as surrender charges, that help limit and discourage early withdrawals. Individual life insurance policies are less susceptible to withdrawal than annuity reserves and deposit liabilities because policyholders may incur surrender charges and undergo a new underwriting process in order to obtain a new insurance policy. Cash flow projections and cash flow tests under various market interest rate scenarios are also performed annually to assist in evaluating liquidity needs and adequacy. We currently anticipate that available liquidity sources and future cash flows will be adequate to meet our needs for funds.
One of our significant risks relates to the fluctuations in interest rates. Regarding interest rates, the value of our available-for-sale fixed maturity securities investment portfolio will increase or decrease in an inverse relationship with fluctuations in interest rates, while net investment income earned on newly acquired available-for-sale fixed maturity securities increases or decreases in direct relationship with interest rate changes.
From an income perspective, we are exposed to rising interest rates which could be a significant risk, as TLIC’s and FBLIC’s annuity business is impacted by changes in interest rates. Life insurance company policy liabilities bear fixed rates. From a liquidity perspective, our fixed rate policy liabilities are relatively insensitive to interest rate fluctuations. We believe gradual increases in interest rates do not present a significant liquidity exposure for the life insurance policies and annuity contracts. We maintain conservative durations in our fixed maturity portfolio.
As of December 31, 2024, cash and cash equivalents, short-term investments, the fair value of fixed maturity available-for-sale securities with maturities of less than one year and the fair value of lottery receivables with maturities of less than one year equaled 14.5% of total policy liabilities. If interest rates rise significantly in a short time frame, there can be no assurance that the life insurance industry, including the Company, would not experience increased levels of surrenders and reduced sales, and thereby be materially adversely affected.
In addition to the measures described above, TLIC and FBLIC must comply with the National Association of Insurance Commissioners promulgated Standard Valuation Law (“SVL”) which specifies minimum reserve levels and prescribes methods for determining them, with the intent of enhancing solvency. Upon meeting certain tests, which TLIC and FBLIC met during 2024, the SVL also requires the Company to perform annual cash flow testing for TLIC and FBLIC. This testing is designed to ensure that statutory reserve levels will maintain adequate protection in a variety of potential interest rate scenarios. The Actuarial Standards Board of the American Academy of Actuaries also requires cash flow testing as a basis for the actuarial opinion on the adequacy of the reserves which is a required part of the annual statutory reporting process.
Our marketing plan could be modified to emphasize certain product types and reduce others. New business levels could be varied in order to find the optimum level. We believe that our current liquidity, current bond portfolio maturity distribution and cash position give us substantial resources to administer our existing business and fund growth generated by direct sales.
The operations of TLIC and FBLIC may require additional capital contributions to meet statutory capital and surplus requirements mandated by state insurance departments. Life insurance contract liabilities are generally long term in nature and are generally paid from future cash flows or existing assets and reserves. We will service other expenses and commitments by: (1) using available cash, (2) dividends from TLIC and FBLIC that are limited by law to the greater of prior year net operating income or 10% of prior year-end surplus unless specifically approved by the controlling insurance department, (3) public and private offerings of our common stock and (4) corporate borrowings, if necessary.
Effective January 1, 2019, the Company entered into a revised advance agreement with one loan originator. As of December 31, 2024, the Company has outstanding advances to this loan originator totaling $4,746,638. The advances are secured by $9,542,484 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $1,253,362 to the loan originator that would result in additional security in the form of residential mortgage loans on real estate to be assigned to the Company.
Effective January 1, 2019, the Company also entered into a revised escrow agreement with the same loan originator. According to the revised terms of the escrow agreement, as of December 31, 2024, $754,448 of additional and secured residential mortgage loan balances on real estate are held in escrow by the loan originator. As of December 31, 2024, $738,411 of that escrow amount is available to the Company as additional collateral on $4,746,638 of advances to the loan originator. The remaining December 31, 2024 escrow amount of $16,037 is available to the Company as additional collateral on its investment of $3,207,399 in mortgage loans on real estate.
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. We believe that our existing cash and cash equivalents as of December 31, 2024 will be sufficient to fund our anticipated operating expenses.
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:
●
general economic conditions and financial factors, including the performance and fluctuations of fixed income, equity, real estate, credit capital and other financial markets;
●
differences between actual experience regarding mortality, morbidity, persistency, surrenders, investment returns, and our pricing assumptions establishing liabilities and reserves or for other purposes;
●
the effect of increased claims activity from natural or man-made catastrophes, pandemic disease, or other events resulting in catastrophic loss of life;
●
adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities;
●
inherent uncertainties in the determination of investment allowances and impairments and in the determination of the valuation allowance on the deferred income tax asset;
●
investment losses and defaults;
●
competition in our product lines;
●
attraction and retention of qualified employees and agents;
●
ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks;
●
the availability, affordability and adequacy of reinsurance protection;
●
the effects of emerging claim and coverage issues;
●
the cyclical nature of the insurance business;
●
interest rate fluctuations;
●
changes in our experiences related to deferred policy acquisition costs;
●
the ability and willingness of counterparties to our reinsurance arrangements and derivative instruments to pay balances due to us;
●
impact of medical epidemics and viruses;
●
domestic or international military actions;
●
the effects of extensive government regulation of the insurance industry;
●
changes in tax and securities law;
●
changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies;
●
regulatory or legislative changes or developments;
●
the effects of unanticipated events on our disaster recovery and business continuity planning;
●
failures or limitations of our computer, data security and administration systems;
●
risks of employee error or misconduct;
●
the assimilation of life insurance businesses we acquire and the sound management of these businesses; and
●
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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements
FIRST TRINITY FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
Consolidated Financial Statements
Page
Numbers
Report of Independent Registered Public Accounting Firm (PCAOB ID 718)
Consolidated Statements of Financial Position
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of First Trinity Financial Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of First Trinity Financial Corporation and Subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Amortization of Deferred Policy Acquisition Costs - Refer to Notes 1 and 6
Critical Audit Matter Description
The Company’s products include traditional life insurance contracts and annuities in which certain acquisition costs are capitalized and the expenses are deferred into future periods. Management amortizes the capitalized costs of traditional life insurance products over the premium paying period of the products based on assumptions developed and consistent with assumptions used in determining the products future policy benefit liabilities. Amortization of annuity products and certain limited payment life insurance products are amortized based on actual and expected future gross profits. The unamortized deferred policy acquisition cost asset was $66.6 million as of December 31, 2024.
The recovery of the unamortized deferred policy acquisition cost asset is dependent on the future profitability of the related products. Management periodically reviews the recoverability by developing an actuarial study of the present value of future profits of the products, and reduces the asset when the asset is shown to not be recoverable.
As a result, the audit of this area requires a high degree of judgment due to the complex nature of determining the amortization for the period and creation of actuarial studies for recoverability.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the amortization of the unamortized deferred policy acquisition cost asset and consideration of the recoverability of the asset included, among others, the following:
●
We gained an understanding of the processes utilized and controls implemented in amortizing the deferred policy acquisition
●
We obtained previous actuarial recoverability studies, and any current updates to the studies
●
We tested data utilized by management for completeness and accuracy
●
We engaged an independent actuarial specialist to assist with the testing of amortization and the review and evaluation of the assumptions and methodologies used by management for the study of recoverability
Future Policy Benefits - Refer to Note 1
Critical Audit Matter Description
Liabilities for amounts payable under the Company’s life insurance products are recorded as future policy benefits liabilities. Such liabilities are established based on actuarial assumptions at the time policies are issued. Management applies considerable judgment in developing the actuarial assumptions based on expectations of future economic conditions and policyholder behavior. These assumptions are developed at the time the contracts are issued, or in the case of a business combination, at the time the contracts are purchased. If actual experience is adverse in nature when compared to the original assumptions in developing the future policy benefits liability, management may be required to establish premium deficiency reserves. The Company’s future policy benefits liability was $138.0 million as of December 31, 2024.
The audit of future policy benefits requires a high degree of auditor judgment when considering the complex actuarial assumptions and models management utilizes.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the liability for future policy benefits included the following procedures, among others:
●
We gained an understanding of the processes utilized and controls implemented in determining the valuation of future policy benefits
●
We tested the underlying data used by management in developing the valuation and the completeness and accuracy of the data
●
We obtained original assumption information and subsequent experience studies
●
We engaged an independent actuarial specialist to evaluate the actuarial assumptions and methodologies for reasonableness, to develop an independent estimate of future policy benefits on a sample basis and to evaluate management’s development of experience studies.
/s/ Kerber, Eck & Braeckel LLP
We have served as the Company’s auditor since 2004.
Springfield, Illinois
March 11, 2025
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Financial Position
December 31, 2024
December 31, 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)
$ 213,745,821
$ 149,700,948
Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)
5,336,062
419,530
Mortgage loans on real estate
209,364,504
239,831,447
Investment real estate
2,351,549
1,305,403
Policy loans
4,367,534
3,474,116
Short-term investments
-
298,257
Other long-term investments
58,223,514
61,487,939
Total investments
493,388,984
456,517,640
Cash and cash equivalents
64,344,122
33,839,741
Accrued investment income
5,746,167
6,214,459
Recoverable from reinsurers
9,845,838
10,353,674
Assets held in trust under coinsurance agreement
Available-for-sale fixed maturity securities at fair value (amortized cost: $22,559,107 and $56,824,160 as of December 31, 2024 and 2023, respectively)
17,932,297
51,651,259
Mortgage loans on real estate
12,660,117
27,581,881
Receivable for securities
674,405
-
Payable for securities
(783 )
(4,414 )
Cash and cash equivalents (overdraft)
(89,726 )
711,733
Total assets held in trust under coinsurance agreement
31,176,310
79,940,459
Agents' balances and due premiums
1,393,277
1,284,003
Deferred policy acquisition costs
66,640,453
60,795,108
Value of insurance business acquired
3,593,440
3,777,353
Other assets
10,320,307
19,299,098
Total assets
$ 686,448,898
$ 672,021,535
Liabilities and Shareholders' Equity
Policy liabilities
Policyholders' account balances
$ 431,190,092
$ 391,247,676
Future policy benefits
138,027,832
123,729,530
Policy claims
2,478,465
2,410,243
Other policy liabilities
226,553
250,294
Total policy liabilities
571,922,942
517,637,743
Funds withheld under coinsurance agreement
31,032,174
77,257,253
Deferred federal income taxes
4,023,492
4,228,189
Other liabilities
10,420,062
8,882,142
Total liabilities
617,398,670
608,005,327
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)
96,319
96,319
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)
1,011
1,011
Additional paid-in capital
43,668,023
43,668,023
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)
(893,947 )
(893,947 )
Accumulated other comprehensive loss
(11,024,079 )
(9,641,308 )
Accumulated earnings
37,202,901
30,786,110
Total shareholders' equity
69,050,228
64,016,208
Total liabilities and shareholders' equity
$ 686,448,898
$ 672,021,535
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31,
Revenues
Premiums
$ 41,878,896
$ 38,912,934
Net investment income
30,522,580
31,655,321
Net realized investment gains (losses)
264,821
(180,152 )
Loss on impairments
(129,436 )
-
Service fees
3,161,535
4,701,960
Other income
652,793
666,409
Total revenues
76,351,189
75,756,472
Benefits, Claims and Expenses
Benefits and claims
Increase in future policy benefits
14,565,010
14,212,615
Death benefits
13,176,508
14,298,818
Surrenders
2,471,376
2,173,694
Interest credited to policyholders
15,880,681
15,093,685
Dividend, endowment and supplementary life contract benefits
388,723
362,676
Total benefits and claims
46,482,298
46,141,488
Policy acquisition costs deferred
(16,620,462 )
(13,476,834 )
Amortization of deferred policy acquisition costs
10,775,374
8,863,514
Amortization of value of insurance business acquired
183,913
270,752
Commissions
16,030,481
12,803,764
Other underwriting, insurance and acquisition expenses
11,423,294
11,091,340
Total expenses
21,792,600
19,552,536
Total benefits, claims and expenses
68,274,898
65,694,024
Income before total federal income tax expense
8,076,291
10,062,448
Current federal income tax expense
1,496,626
1,778,778
Deferred federal income tax expense
162,874
368,309
Total federal income tax expense
1,659,500
2,147,087
Net income
$ 6,416,791
$ 7,915,361
Net income per common share
Class A common stock
$ 0.6776
$ 0.8358
Class B common stock
$ 0.5759
$ 0.7104
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31,
Net income
$ 6,416,791
$ 7,915,361
Other comprehensive income (loss)
Total net unrealized investment gains (losses) arising during the period
(1,849,782 )
5,580,785
Less net realized investment losses
(99,183 )
(52,016 )
Net unrealized investment gains (losses)
(1,750,599 )
5,632,801
Adjustment to deferred acquisition costs
(257 )
1,997
Other comprehensive income (loss) before federal income tax expense (benefit)
(1,750,342 )
5,630,804
Federal income tax expense (benefit)
(367,571 )
1,182,469
Total other comprehensive income (loss)
(1,382,771 )
4,448,335
Total comprehensive income
$ 5,034,020
$ 12,363,696
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
Years Ended December 31, 2024 and 2023
Class A
Class B
Accumulated
Common
Common
Additional
Other
Total
Stock
Stock
Paid-in
Treasury
Comprehensive
Accumulated
Shareholders'
$.01 Par Value
$.01 Par Value
Capital
Stock
Loss
Earnings
Equity
Balance as of January 1, 2023
$ 96,319
$ 1,011
$ 43,668,023
$ (893,947 )
$ (14,319,679 )
$ 23,100,785
$ 51,652,512
Cumulative effect adjustment as of January 1, 2023:
Accumulated credit loss January 1, 2023
-
-
-
-
230,036
(230,036 )
-
Adjusted balance as of January 1, 2023
96,319
1,011
43,668,023
(893,947 )
(14,089,643 )
22,870,749
51,652,512
Comprehensive income:
Net income
-
-
-
-
-
7,915,361
7,915,361
Other comprehensive income
-
-
-
-
4,448,335
-
4,448,335
Balance as of December 31, 2023
$ 96,319
$ 1,011
$ 43,668,023
$ (893,947 )
$ (9,641,308 )
$ 30,786,110
$ 64,016,208
Comprehensive income:
Net income
-
-
-
-
-
6,416,791
6,416,791
Other comprehensive loss
-
-
-
-
(1,382,771 )
-
(1,382,771 )
Balance as of December 31, 2024
$ 96,319
$ 1,011
$ 43,668,023
$ (893,947 )
$ (11,024,079 )
$ 37,202,901
$ 69,050,228
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31,
Operating activities
Net income
$ 6,416,791
$ 7,915,361
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on investments
(3,900,534 )
(4,825,475 )
Net realized investment (gains) losses
(264,821 )
180,152
Loss on impairments
129,436
-
Amortization of policy acquisition cost
10,775,374
8,863,514
Policy acquisition cost deferred
(16,620,462 )
(13,476,834 )
Amortization of value of insurance business acquired
183,913
270,752
Allowance for mortgage loan losses
(128,137 )
43,654
Provision for deferred federal income tax expense
162,874
368,309
Interest credited to policyholders
15,880,681
15,093,685
Change in assets and liabilities:
Accrued investment income
468,292
(634,284 )
Recoverable from reinsurers
507,836
749,201
Assets held in trust under coinsurance agreement
51,632,390
17,340,012
Agents' balances and due premiums
(109,274 )
(30,926 )
Other assets (excludes change in receivable for securities sold of $12,920 in 2024)
8,991,711
751,093
Future policy benefits
14,298,302
13,717,356
Policy claims
68,222
(130,845 )
Other policy liabilities
(23,741 )
104,077
Other liabilities (excludes change in payable of securities purchased of ($903) and ($383,426) in 2024 and 2023, respectively)
1,538,823
(5,908,084 )
Net cash provided by operating activities
90,007,676
40,390,718
Investing activities
Purchases of fixed maturity securities
(81,180,014 )
(23,059,491 )
Maturities of fixed maturity securities
3,435,000
4,830,000
Sales of fixed maturity securities
11,744,021
457,601
Purchases of equity securities
(5,129,196 )
(130,550 )
Sale of equity securities
-
Joint venture distribution
115,371
119,306
Purchases of mortgage loans
(143,991,455 )
(130,956,402 )
Payments on mortgage loans
173,048,603
132,634,814
Purchases of other long-term investments
(9,470,507 )
(7,385,062 )
Collections on other long-term investments
17,288,490
18,346,857
Sales of real estate
276,956
-
Policy loans
(893,418 )
(633,229 )
Short-term investments
298,257
1,562,321
Net change in receivable and payable for securities sold and purchased
(13,823 )
(383,426 )
Net cash used in investing activities
(34,471,710 )
(4,597,261 )
Financing activities
Policyholders' account deposits
141,387,484
69,082,635
Policyholders' account withdrawals
(166,419,069 )
(104,579,076 )
Net cash used in financing activities
(25,031,585 )
(35,496,441 )
Increase in cash and cash equivalents
30,504,381
297,016
Cash and cash equivalents, beginning of period
33,839,741
33,542,725
Cash and cash equivalents, end of period
$ 64,344,122
$ 33,839,741
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure - Cash and Non-Cash Impact on Operating, Investing and Financing Activities
During 2024 and 2023, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and $764,967, respectively and transferred the property to investment real estate that is now held for sale.
In conjunction with this foreclosure, the non-cash impact on investing activities is summarized as follows:
Year Ended
Year Ended
December 31, 2024
December 31, 2023
Reductions in mortgage loans due to foreclosure
$ 1,441,287
$ 764,967
Investment real estate held-for-sale acquired through foreclosure
(1,441,287 )
(764,967 )
Net cash used in investing activities
$ -
$ -
See notes to consolidated financial statements.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies
First Trinity Financial Corporation (the “Company” or “FTFC”) is the parent holding company of Trinity Life Insurance Company (“TLIC”), Family Benefit Life Insurance Company (“FBLIC”), Trinity Mortgage Corporation (“TMC”) and Trinity American, Inc. (“TAI”). The Company was incorporated in Oklahoma on April 19, 2004, for the primary purpose of organizing a life insurance subsidiary.
The Company owns 100% of TLIC. TLIC owns 100% of FBLIC. TLIC and FBLIC are primarily engaged in the business of marketing, underwriting and distributing a broad range of individual life insurance and annuity products to individuals. TLIC’s and FBLIC’s current product portfolio consists of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term, final expense, accidental death and dismemberment and annuity products. The term products are both renewable and convertible and issued for 10, 15, 20 and 30 years. They can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense product is issued as either a simplified issue or as a graded benefit, determined by underwriting. The TLIC and FBLIC products are sold through independent agents. TLIC is licensed in the states of Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and West Virginia. FBLIC is licensed in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia.
The Company owns 100% of TMC that was incorporated in 2006 and began operations in January 2007. TMC’s primary focus changed during 2020 from premium financing loans to originating, brokering and administrating residential and commercial mortgage loans for third parties.
The Company owns 100% of TAI. TAI was incorporated in Barbados, West Indies on March 24, 2016 for the primary purpose of forming a life insurance company producing United States (U.S.) dollar denominated life insurance policies and annuity contracts outside of the United States and Barbados. TAI is licensed as an Exempt Insurance Company under the Exempt Insurance Act of Barbados. TAI was initially involved in developing life insurance contracts but is now issuing life insurance policies and annuity contracts through an association with distribution channels. The Company’s acquisition of TAI was formally approved by Barbados regulators and the certifications were received in 2019.
Company Capitalization
The Company raised $1,450,000 from two private placement stock offerings during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012 and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.
The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital.
In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of Class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to common stock and additional paid-in capital.
The Company has also purchased 247,580 shares of treasury stock at a cost of $893,947 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
Acquisition of Other Companies
On December 23, 2008, FTFC acquired 100% of the outstanding common stock of First Life America Corporation (“FLAC”) from an unaffiliated company. The acquisition of FLAC was accounted for as a purchase. The aggregate purchase price for FLAC was $2,695,234 including direct costs associated with the acquisition of $195,234. The acquisition of FLAC was financed with the working capital of FTFC.
On December 31, 2008, FTFC made FLAC a 15 year loan in the form of a surplus note in the amount of $250,000 with an interest rate of 6% payable monthly, that was approved by the Oklahoma Insurance Department (“OID”). This surplus note is eliminated in consolidation.
On August 31, 2009, two of the Company’s subsidiaries, Trinity Life Insurance Company (“Old TLIC”) and FLAC, were merged, with FLAC being the surviving company. Immediately following the merger, FLAC changed its name to TLIC.
On December 28, 2011, TLIC acquired 100% of the outstanding common stock of FBLIC from FBLIC’s shareholders. The acquisition of FBLIC was accounted for as a purchase. The aggregate purchase price for the acquisition of FBLIC was $13,855,129. The acquisition of FBLIC was financed with the working capital of TLIC.
On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $3,644,839, assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.
On April 3, 2018, FTFC acquired 100% of the outstanding stock of TAI domiciled in Barbados, West Indies. The Barbados regulators approved the acquisition and supplied certifications during 2019. The aggregate purchase price for the acquisition of TAI was $250,000. The acquisition of TAI was financed with the working capital of FTFC.
Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN insurance company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.
On January 4, 2022, FTFC acquired Royalty Capital Life Insurance Company (“RCLIC”) from Royalty Capital Corporation (“Royalty”) in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance approved FTFC’s contribution and merger of RCLIC into FBLIC.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Investments
Change in significant Accounting Policies - Credit Losses on Investments and Allowance for Loan Losses from Mortgage Loans
In first quarter 2023, the Company adopted Accounting Standards Update 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments and all related guidance dealing with the FASB’s pronouncements dealing with changes in accounting for and recognizing credit losses.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
Fixed maturity securities comprised of bonds and redeemable preferred securities 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. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity.
Interest income on fixed maturity securities, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. Dividend income on redeemable preferred securities are recognized in net investment income when declared. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline in value is considered to be other-than-temporary.
The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings.
The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency ratings, the financial condition of the issuer or underlying obligors, payment history, payment structure of the security, industry and market conditions, underlying collateral, and other factors that may be relevant based on the facts and circumstances pertaining to individual securities.
If the Company intends to sell the fixed maturity security or will be more likely than not be required to sell the fixed maturity security before recovery of its amortized cost basis, then any allowance for credit losses, if previously recorded is written off and the fixed maturity security’s amortized cost is written down to the security’s fair value as of the reporting date with any incremental impairment recorded as a charge to noninterest income.
Equity securities are comprised of mutual funds and common stocks and are carried at fair value. The associated unrealized gains and losses are included in net realized investment gains (losses). Dividends from these investments are recognized in net investment income when declared.
Mortgage loans are carried at unpaid balances, net of unamortized premium or discounts. This measurement of mortgage loans on an amortized cost basis is reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized costs basis of mortgage loans to present the net carrying value at the amount expected to be collected on the mortgage loans.
Interest income and the amortization of premiums or discounts are included in net investment income. Mortgage loan fees, certain direct loan origination costs, and purchase premiums and discounts on loans are recognized as an adjustment of yield by the interest method based on the contractual terms of the loan. In certain circumstances, prepayments may be anticipated.
The statement of operations reflects the measurement of credit losses for newly recognized mortgage loans as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported mortgage loan balances. The Company uses judgment in determining the relevant information and estimation methods that are appropriate in establishing the valuation allowance for credit losses. The allowance for credit losses for mortgage loans with a more-than-insignificant amount of credit determination since origination is determined and the initial allowance for credit losses should be added to the purchase price of mortgage loans rather than being reported as a credit loss expenses.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
The Company, however, has established and will continue to establish a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow based on historical patterns. The Company’s foreclosed properties have not resulted in accumulated losses and due to the low loan-to-value the Company holds with respect to its mortgage loans, the Company has not recorded and does not expect to record the addition to the purchase price of mortgage loans an initial allowance for credit losses to be amortized over the life of the mortgage loans. The Company will continue to record credit losses for mortgage loans not supported by funds held in escrow in accordance with its valuation policy for mortgage loans on real estate followed before 2023.
While the Company utilizes its 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 and commercial mortgage loan portfolio, the economy and changes in interest rates. The 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 but not specifically identified loans.
The Company considers mortgage loans on real estate impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the mortgage loan agreement. Impairment is measured on a loan-by-loan basis. Factors that the Company considers in determining impairment include payment status, collateral value of the real estate subject to the mortgage loan and the probability of collecting scheduled principal and interest payments when due. Mortgage loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the mortgage loan on real estate and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.
Investment real estate in land held for both the production of income and for sale is carried at cost. Investment real estate obtained through foreclosure on mortgage loans on real estate is carried at the lower of acquisition cost or net realizable value.
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.
Other long-term investments are comprised of lottery prize receivables and are carried at amortized cost. Interest income and the accretion of discount are included in net investment income. These investments are backed by the lottery departments at the various states by U.S. Treasury Bonds and Notes or in the case of Pennsylvania, by annuities purchased from a highly rated life insurance company. Given this support to lottery prize receivables, the Company has not recorded and does not expect to incur any current estimated credit losses on its investments in lottery prize receivables.
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.
Reclassifications
Certain reclassifications have been made in the prior year financial statements to conform to current year classifications. These reclassifications had no effect on previously reported net income or shareholders' equity.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
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.
Common Stock and Treasury Stock
Class A and Class B common stock are both fully paid, non-assessable and has a par value of $.01 per share. Class B shareholders are entitled to elect a majority of FTFC’s Board of Directors (one-half plus one) but will only receive, compared to FTFC’s Class A shareholders, 85% of cash dividends, stock dividends or amounts due upon any FTFC merger, sale or liquidation event. FTFC’s Class B shareholders may also convert one share of FTFC’s Class B common stock for a .85 share of FTFC’s Class A common stock. FTFC’s Class A shareholders will elect the remaining Board of Directors members and will receive 100% of cash dividends, stock dividends or amounts due upon any Company merger, sale or liquidation event.
Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, is recorded at the reacquisition cost and the shares are no longer outstanding.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts due from banks and money market instruments.
Short-term investments
Short-term investments include funds that have a maturity of more than 90 days but less than one year at the date of purchase.
Investment Income and Realized Gains and Losses on Sales of Investments
Interest and dividends earned on investments are included in net investment income. Realized gains and losses on sales of investments are recognized in operations on the specific identification basis.
Deferred Policy Acquisition Costs
Commissions and other acquisition costs which vary with and are primarily related to the successful production of new business are deferred and amortized in a systematic manner based on the related contract revenues or gross profits as appropriate. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense.
Deferred acquisition costs for the successful production of traditional life insurance contracts are deferred to the extent deemed recoverable and amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities. Deferred acquisition costs related to the successful production of insurance and annuity products that subject the Company to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
To the extent that realized gains and losses on fixed income securities result in adjustments to deferred acquisition costs related to insurance and annuity products, such adjustments are reflected as a component of the amortization of deferred acquisition costs. Deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation or amortization. Office furniture, equipment and computer software is recorded at cost or fair value at acquisition less accumulated depreciation or amortization using the straight-line method over the estimated useful life of the respective assets of three to ten years. Leasehold improvements are recorded at cost and depreciated over the remaining non-cancellable lease term.
Reinsurance
The Company cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth. Estimated reinsurance recoverable balances are reported as assets and are recognized in a manner consistent with the liabilities related to the underlying reinsured ceded contracts. The Company also assumes reinsurance under various agreements allowing management to increase growth in assets and profitability. Estimated reinsurance payable balances are reported as liabilities and are recognized in a manner consistent with the assets related to the underlying assumed reinsurance contracts.
Funds Withheld Coinsurance
In accordance with an annuity coinsurance agreement with an offshore annuity and life insurance company, TLIC holds assets and recognizes a funds withheld liability for the benefit of the assuming company in an amount at least equal to the annuity reserves in accordance with U.S. statutory accounting principles generated by this ceded business. In addition, the assuming company maintains a trust related to this ceded business amounting to at least an additional 4% of assets above the annuity reserve required under U.S. statutory accounting principles. This coinsurance agreement may be terminated for new business by either party at any time upon 30 days prior written notice to the other party.
In addition, in accordance with this annuity coinsurance agreement, investment income, investment expenses, other income and other expenses earned or incurred in relation to the operations of this annuity coinsurance agreement are not reported on the Company’s Consolidated Statements of Operations. The unrealized appreciation (depreciation) of fixed available-for-sale fixed maturity securities and the related income tax expense (benefit) is not reported as accumulated other comprehensive income in the shareholders’ equity section of the Company’s Consolidated Statements of Financial Position. Correspondingly, the net unrealized gains (losses) arising during the period, the net realized gains (losses) having no credit gains (losses) and the related income tax expense (benefit) associated with the available-for-sale fixed maturities held under this coinsurance agreement are not included in the computation of total other comprehensive income (loss) in the Company’s Consolidated Statement of Comprehensive Loss.
The Company’s Consolidated Statement of Cash Flows only includes the cash flow activities related to the assets and funds withheld under the coinsurance agreement in a one-line presentation and does not include those cash flow activities in the other financial captions and categories presented in that financial statement.
Value of Insurance Business Acquired
As a result of the Company’s purchases of FLAC and FBLIC, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under Financial Accounting Standards Board (“FASB”) guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
For the amortization of the value of acquired insurance in force, the Company periodically reviews its estimates of gross profits. The most significant assumptions involved in the estimation of gross profits include interest rate spreads, future financial market performance, business surrender/lapse rates, mortality and morbidity, expenses and the impact of realized investment gains and losses. In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company is required to record a charge or credit to amortization expense for the period in which an adjustment is made.
As of December 31, 2024 and 2023, there was $5,146,438 and $4,962,525, respectively, of accumulated amortization of the value of insurance business acquired due to the purchases of FLAC and FBLIC. The Company expects to amortize the value of insurance business acquired by the following amounts over the next five years:, $156,102 in 2025, $142,645 in 2026, $149,467 in 2027, $144,043 in 2028 and $148,414 in 2029.
Other Assets and Other Liabilities
Other assets consist primarily of advances to mortgage loan originator, receivable for securities sold, federal and state income taxes recoverable, guaranty funds, notes receivable, prepaid assets, deposits, other receivables and property and equipment.
Other liabilities consist primarily of accrued expenses payable, accounts payable, remittance and suspense items not allocated, payable for securities purchased, guaranty fund assessments, unclaimed funds, deferred revenue, unearned investment income, withholdings, escrows and other payables.
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 interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 2.25% to 5.75%. Interest crediting rates for deposit-type liabilities range from 2.50% to 4.00%.
Future Policy Benefits
The Company’s liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For life insurance and annuity products, expected mortality and morbidity is generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality, morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses by establishing premium deficiency reserves.
Policy Claims
Policy claim liabilities represent the estimated liabilities for claims reported plus estimated incurred but not yet reported claims developed from trends of historical market data applied to current exposure.
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 U.S. GAAP and balances determined using tax bases. A valuation allowance is established for the amount of the deferred tax asset that exceeds the amount of the estimated future taxable income needed to utilize the future tax benefits.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
Accumulated Other Comprehensive Income (Loss)
FASB guidance requires the inclusion of unrealized gains or losses on available-for-sale securities, net of tax, as a component of other comprehensive income (loss). Unrealized gains and losses recognized in accumulated other comprehensive income (loss) that are later recognized in net income through a reclassification adjustment are identified on the specific identification method. In addition, deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.
Revenues and Expenses
Revenues on traditional life insurance products consist of direct premiums reported as earned when due. Liabilities for future policy benefits are provided and acquisition costs are amortized in a systematic manner based on the related contract revenues or gross profits as appropriate.
The Company generates fee income and recognizes revenue from providing contractual services to third parties that are outside traditional life insurance sources of revenues. This fee income is recognized as revenue in the Service Fees caption of the Statement of Operations for the years ended December 31, 2024 and 2023. The primary source of this fee income during 2024 and 2023 was the recognition of fee income from providing residential mortgage loan on real estate lending opportunities to third parties through the introduction of qualified borrowers identified and provided by the Company. This fee income is associated with a single performance obligation and is not recognized as revenue until the point in time the third party issues a residential mortgage loan on real estate to a qualified borrower identified and provided by the Company. Additional fee income with one specific third party is recognized by the Company as contractual revenues for the Company being available to provide and providing services to manage brokered residential mortgage loans on real estate during the period that the obligations are held by the third party for the qualified borrower identified and provided by the Company.
Acquisition costs for traditional life insurance contracts are deferred to the extent deemed recoverable and are amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities. Traditional life insurance products are treated as long-duration contracts since they generally remain in force for the lifetime of the insured.
Deferred acquisition costs related to insurance and annuity products that subject the Company to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies. These types of insurance and annuity contracts are treated as long-duration insurance contracts since they generally remain in force for an extended period.
Net Income Per Common Share Basic
For the year ended December 31, 2024 and 2023, the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,470,277) of Class A shares (9,384,340) and Class B shares (85,937) as of the reporting date.
For the year ended December 31, 2024, the net income allocated to the Class A shareholders of $6,358,563 is the total net income $6,416,791 less the net income allocated to the Class B shareholders $58,228. For the year ended December 31, 2023, the net income allocated to the Class A shareholders of $7,843,534 is the total net income $7,915,361 less the net income allocated to the Class B shareholders $71,827.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
The weighted average outstanding common shares basic for the year ended December 31, 2024 and 2023 were 9,384,340 for Class A shares and 101,102 for Class B shares.
Cybersecurity
The Company has established and continues to enhance its cybersecurity enterprise risk management program. The Company’s executive team meets formally at least monthly, and informally as needed, to set and maintain a strategy focused on achieving a high level of cybersecurity protection. The Company’s executive management team makes quarterly reports to the Company’s Board of Directors and Audit Committee.
The Company’s executive management team is enhanced by the inclusion of an information technology external consultant to advise the Company’s executive management team and to focus on developing and maintaining external and internal cybersecurity. Working with Company executives and staff, the information technology consultant advises and helps the Company implement its strategy with respect to:
●
Computer hardware and software,
●
Security access, logging and user termination,
●
In house and remote user access - user accounts, password protection, authentication, monitoring usage, intrusion detection, incident identification and related controls,
●
Encryption,
●
System change control,
●
Data back up and remote sites,
●
Data recovery,
●
and Disaster recovery
The Company also utilizes training to foster an environment of information security awareness, training and education. Beyond making employees aware of its cybersecurity risk management program, strategy and governance, this training also introduces all employees to many types of cybersecurity risks to introduce skepticism and enhance skills to identify and report potential situations encountered to the executive management team for further assessment.
Subsequent Events
Management has evaluated all events subsequent to December 31, 2024 through the date that these financial statements have been issued.
Adopted Accounting Standards
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued updated guidance (Accounting Standards Update 2016-13) for the accounting for credit losses for financial instruments. The updated guidance applied a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables, including structured settlements that are recorded as part of reinsurance recoverables) and required an entity to estimate the credit losses expected over the life of an exposure or pool of exposures.
The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
The updated guidance also amended the current other-than-temporary impairment model for available-for-sale debt securities and requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted this standard in first quarter 2023 on a modified retrospective basis. The cumulative effect adjustment to January 1, 2023 accumulated earnings for the adoption of this standard was a charge of $230,036.
Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduced new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgated 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 required that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The Company adopted the amendments in this standard in first quarter 2023. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued amendments (Accounting Standards Update 2023-07) to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The amendments require public entities to follow the significant expense principle and disclose on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) with additional disclosure of the CODM’s title, position and how the reported measure(s) of segment profit or loss are used in assessing segment performance and allocating resources. In addition, amounts for other segment items are required to be disclosed including a description of its composition. If the COMD uses more than one measure in assessing segment performance and allocating resources, at least one of the measures should be consistent with the corresponding amounts utilized in the public entity’s consolidated financial statements.
The amendments in this guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted this Update for year-end reporting in 2024 and will adopt for interim periods beginning in 2025.
Cybersecurity Risk Management, Strategy, Governance and Incident Disclosures by Public Companies
On July 26, 2023, the U.S. Securities and Exchange Commission adopted this Final Rule (the “Cybersecurity Final Rule”) enhancing disclosure requirements for registered companies covering cybersecurity risk and management. The Cybersecurity Final Rule requires registrants to disclose material cybersecurity incidents on Form 8-K within four business days of a determination that a cybersecurity incident is material, and such materiality determination must be made without unreasonable delay.
The rule also requires periodic disclosures of, among other things, details on the company’s processes to assess, identify, and manage cybersecurity risks, cybersecurity governance, and management’s role in overseeing such a compliance program, including the board of directors’ oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule became effective in December 2023.
The Company has never had a material cyber security incident but will follow the Cybersecurity Final Rule regarding timely disclosure of a material cyber security incident. The Company has also disclosed its strategy and governance with respect to its cybersecurity risk management program in this December 31, 2024 Form 10-K.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
Recent Accounting Pronouncements
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued updated guidance (Accounting Standards Update 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. This update improves the timeliness of recognizing changes in the liability for future policy benefits, modifies the rate used to discount future cash flows, simplifies and improves accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplifies the amortization of deferred acquisitions costs and expands required disclosures. The expanded disclosure requires an insurance entity to provide disaggregated roll forwards of beginning to ending balances of the following: liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs including disclosure about, changes to and effect of changes for significant inputs, judgments, assumptions and methods used in measurements.
The updated guidance was effective for reporting periods beginning after December 15, 2020. As a Smaller Reporting Company, the effective date has been changed twice and the delayed effective date is now for reporting periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted but not likely to be elected by the Company. With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, an insurance entity may elect to apply the amendments retrospectively as of the beginning of the earliest period presented. With respect to the market risk benefits, an insurance entity should apply the amendments retrospectively as of the beginning of the earliest period presented. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.
Transition for Sold Contracts
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. Early adoption is permitted but not likely to be elected by the Company. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
Improvements to Income Tax Disclosures
In December 2023, the FASB issued amendments (Accounting Standards Update 2023-09) to enhance the transparency and decision usefulness of income tax disclosures. The amendments require that public business entities on an annual basis disclose information about taxes paid and a tabular reconciliation using both percentages and amounts of specific categories in the rate reconciliation. In addition, separate disclosure is required for any reconciling item equal to or greater than five (5) percent of the amount computed by multiplying the income or loss from continuing operations before income taxes by the statutory income tax rate. If not otherwise evident, a public business entity is required to provide an explanation of the individual reconciling items such as the nature, effect and causes of the reconciling items.
The amendments in this guidance are effective for public companies for fiscal years beginning after December 15, 2024. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2025.
Expense Disaggregation Disclosures
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-03) to disclose more granular information about costs of sales and general and administrative expenses including employee compensation to improve the disclosure about a public enterprise’s expenses by providing more detailed information about the types of expenses commonly presented in expense captions such as costs of sales and general and administrative expenses.
The amendments in this Update require disclosing, in the notes to the financial statements, the following specified information about costs and expenses included in general captions on the face of the financial statements at each interim and annual reporting period of the entity: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil and gas producing activities or other amounts of depletion expenses.
An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In addition, the amendments in this Update do not change or remove current expense disclosure requirements including those of specialized industries.
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2027 and interim reporting beginning in first quarter 2028.
Debt With Conversion and Other Options
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-04) to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted as an induced conversion. Under this Update, an inducement offer is required to provide the debt holder with, at a minimum, the consideration in form and amount issuable under the conversion privileges provided in the instrument. If the convertible debt instrument has been exchanged, modified or deemed not substantially different within the one-year period before the settlement date, the current inducement offer should be compared to the inducement offer that existed one-year before the settlement date.
In addition, the incorporation, elimination or modification of a volume weighted average price formula does not automatically cause a settlement to be accounted for as an extinguishment; there is instead a need to assess whether the form and amount of the conversion consideration is preserves using the fair value of the shares as of the settlement date. This induced conversion guidance applies to convertible debt instruments that are not currently convertible as long as there was a substantive conversion feature as of its issuance date or settlement date.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1. Organization and Significant Accounting Policies (continued)
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within that annual reporting period. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company does not have or anticipate having any debt instruments and anticipates never being required to adopt the information required by this Update.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments
Fixed Maturity Securities
Investments in fixed maturity securities as of December 31, 2024 and 2023 are summarized as follows:
Gross
Gross
Amortized Cost
Unrealized
Unrealized
Fair
or Cost
Gains
Losses
Value
December 31, 2024
Fixed maturity securities
U.S. government and U.S. government agencies
$ 4,263,791
$ 12,654
$
$ 4,275,965
States and political subdivisions
8,156,851
463,791
7,693,233
U.S. government agency mortgage backed securities
41,085,693
20,347
870,659
40,235,381
Commercial mortgage-backed securities
19,999,386
5,070
1,505,058
18,499,398
Residential mortgage-backed securities
9,750
4,361
-
14,111
Corporate bonds
106,678,530
28,519
7,350,495
99,356,554
Asset-backed securities
15,628,104
67,390
796,910
14,898,584
Exchange traded securities
1,184,560
-
687,760
496,800
Foreign bonds
29,447,037
5,683
2,212,925
27,239,795
Redeemable preferred securities
1,250,000
-
214,000
1,036,000
Total fixed maturity securities
$ 227,703,702
$ 144,197
$ 14,102,078
$ 213,745,821
Fixed maturity securities held in trust under coinsurance agreement
$ 22,559,107
$ 21,034
$ 4,647,844
$ 17,932,297
December 31, 2023
Fixed maturity securities
U.S. government and U.S. government agencies
$ 3,806,419
$ 14,360
$ 22,495
$ 3,798,284
States and political subdivisions
9,773,549
97,215
338,894
9,531,870
U.S. government agency mortgage backed securities
10,097,479
208,985
-
10,306,464
Commercial mortgage-backed securities
10,629,003
-
2,157,465
8,471,538
Residential mortgage-backed securities
9,986
4,328
-
14,314
Corporate bonds
85,901,454
65,239
6,625,386
79,341,307
Asset-backed securities
12,466,601
43,424
1,017,529
11,492,496
Exchange traded securities
882,631
-
406,631
476,000
Foreign bonds
27,091,108
24,186
1,902,619
25,212,675
Redeemable preferred securities
1,250,000
-
194,000
1,056,000
Total fixed maturity securities
$ 161,908,230
$ 457,737
$ 12,665,019
$ 149,700,948
Fixed maturity securities held in trust under coinsurance agreement
$ 56,824,160
$ 53,496
$ 5,226,397
$ 51,651,259
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
All 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 December 31, 2024 and 2023 are summarized as follows:
Unrealized
Number of
Fair Value
Loss
Securities
December 31, 2024
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies
$ 810,291
$
States and political subdivisions
4,350,258
95,994
U.S. government agency mortgage backed securities
35,821,510
870,659
Commercial mortgage-backed securities
9,319,025
91,842
Corporate bonds
33,196,771
810,633
Asset-backed securities
1,811,793
29,633
Foreign bonds
5,707,531
185,096
Total less than 12 months in an unrealized loss position
91,017,179
2,084,337
More than 12 months in an unrealized loss position
States and political subdivisions
3,102,931
367,797
Commercial mortgage-backed securities
7,541,167
1,413,216
Corporate bonds
61,587,904
6,539,862
Asset-backed securities
7,391,463
767,277
Exchange traded securities
496,800
687,760
Foreign bonds
20,747,051
2,027,829
Redeemable preferred securities
1,036,000
214,000
Total more than 12 months in an unrealized loss position
101,903,316
12,017,741
Total fixed maturity securities in an unrealized loss position
$ 192,920,495
$ 14,102,078
Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position
$ 110,506
$
Total more than 12 months in an unrealized loss position
15,142,397
4,647,228
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position
$ 15,252,903
$ 4,647,844
December 31, 2023
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies
$ 231,010
$
States and political subdivisions
120,734
Corporate bonds
3,762,988
78,589
Foreign bonds
502,835
8,573
Total less than 12 months in an unrealized loss position
4,617,567
87,850
More than 12 months in an unrealized loss position
U.S. government and U.S. government agencies
1,876,612
22,395
States and political subdivisions
4,411,017
338,306
Commercial mortgage-backed securities
8,471,538
2,157,465
Corporate bonds
72,550,042
6,546,797
Asset-backed securities
7,390,830
1,017,529
Exchange traded securities
476,000
406,631
Foreign bonds
23,164,587
1,894,046
Redeemable preferred securities
306,000
194,000
Total more than 12 months in an unrealized loss position
118,646,626
12,577,169
Total fixed maturity securities in an unrealized loss position
$ 123,264,193
$ 12,665,019
Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position
$ 1,400,820
$ 5,810
Total more than 12 months in an unrealized loss position
47,082,945
5,220,587
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position
$ 48,483,765
$ 5,226,397
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
As of December 31, 2024, the Company held 487 available-for-sale fixed maturity securities with an unrealized loss of $14,102,078, fair value of $192,920,495 and amortized cost of $207,022,573. These unrealized losses were primarily due to market interest rate movements in the bond market as of December 31, 2024. The ratio of the fair value to the amortized cost of these 487 securities is 93%.
As of December 31, 2023, the Company held 365 available-for-sale fixed maturity securities with an unrealized loss of $12,665,019, fair value of $123,264,193 and amortized cost of $135,929,212. These unrealized losses were primarily due to market interest rate movements in the bond market as of December 31, 2023. The ratio of the fair value to the amortized cost of these 365 securities is 91%.
The change in the current estimate of credit losses on fixed maturity available-for-sale securities for the year ended December 31, 2024 and 2023, are summarized as follows:
December 31, 2024
December 31, 2023
Beginning balance
$ (430,470 )
$ -
Cumulative adjustment to accumulated earnings as of January 1, 2023
-
(291,185 )
Current estimate of credit losses
(295,490 )
(139,285 )
Ending balance
$ (725,960 )
$ (430,470 )
Net unrealized losses included in other comprehensive loss for investments classified as available-for-sale, net of the effect of deferred income taxes and deferred acquisition costs assuming that the depreciation had been realized as of December 31, 2024 and 2023 are summarized as follows:
December 31, 2024
December 31, 2023
Unrealized depreciation on available-for-sale securities
$ (13,957,881 )
$ (12,207,282 )
Adjustment to deferred acquisition costs
3,351
3,094
Deferred income taxes
2,930,451
2,562,880
Net unrealized depreciation on available-for-sale securities
$ (11,024,079 )
$ (9,641,308 )
Assets held in trust under coinsurance agreement
Unrealized depreciation on fixed maturity securities available-for-sale
$ (4,626,810 )
$ (5,172,901 )
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
The amortized cost and fair value of fixed maturity available-for-sale securities as of December 31, 2024, by contractual maturity, are summarized as follows:
December 31, 2024
Fixed Maturities Available-For-Sale Securities
Amortized Cost
Fair Value
Due in one year or less
$ 4,763,309
$ 4,760,688
Due in one year through five years
42,505,354
40,711,256
Due after five years through ten years
42,007,924
39,132,467
Due after ten years
117,167,979
109,591,901
Due at multiple maturity dates
21,259,136
19,549,509
$ 227,703,702
$ 213,745,821
Expected maturities will 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 fixed maturity available-for-sale securities held in trust under coinsurance agreement as of December 31, 2024, by contractual maturity, are summarized as follows:
December 31, 2024
Fixed Maturity Available-For-Sale Securities
Amortized Cost
Fair Value
Due in one year or less
$ 449,835
$ 448,424
Due after one year through five years
1,536,033
1,505,670
Due after five years through ten years
3,412,424
3,270,622
Due after ten years
14,372,598
10,249,874
Due at multiple maturity dates
2,788,217
2,457,707
$ 22,559,107
$ 17,932,297
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, equity securities, investment real estate, mortgage loans on real estate and other long-term investments for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Fixed Maturity Securities
Equity Securities
Investment Real Estate
Proceeds
$ 15,179,021
$ 5,287,601
$
$ -
$ 276,956
$ -
Gross realized gains
26,198
265,625
-
-
11,251
-
Gross realized losses
(125,381 )
(317,641 )
(4 )
-
-
-
Loss on impairments
-
-
-
-
(129,436 )
Years Ended December 31,
Mortgage Loans on Real Estate
Other Long-Term Investments
Proceeds
$ 173,048,603
$ 132,634,814
$ 17,288,490
$ -
Gross realized gains
734,323
2,496
45,650
-
Gross realized losses
(34,442 )
-
-
-
Loss on impairments
-
-
-
-
The accumulated change in net unrealized investment gains (losses) for fixed maturity available-for-sale securities for the years ended December 31, 2024 and 2023 and the amount of net realized investment gains (losses) on fixed maturity securities available-for-sale, equity securities, investment real estate, mortgage loans on real estate and other long-term investments for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Change in unrealized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities
$ (1,750,599 )
$ 5,632,801
Fixed maturity securities held in trust under coinsurance agreement
546,091
2,268,050
Net realized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities
(99,183 )
(52,016 )
Fixed maturity securities credit losses
(295,490 )
(139,285 )
Equity securities, sale of securities
(4 )
-
Equity securities, changes in fair value
(97,284 )
8,653
Investment real estate
11,251
-
Mortgage loans on real estate
699,881
2,496
Other long-term investments
45,650
-
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
Mortgage Loans on Real Estate
The Company’s mortgage loans by property type as of December 31, 2024 and 2023 are summarized as follows:
December 31, 2024
December 31, 2023
Residential mortgage loans
$ 195,050,397
$ 224,258,534
Commercial mortgage loans by property type
Agricultural
244,253
986,207
Apartment
4,634,586
3,108,829
Industrial
357,193
1,267,264
Lodging
-
24,727
Office building
4,120,057
5,652,487
Retail
4,958,018
4,533,399
Total commercial mortgage loans by property type
14,314,107
15,572,913
Total mortgage loans
$ 209,364,504
$ 239,831,447
Mortgage loans held in trust under coinsurance agreement
Commercial mortgage loans
$ 12,660,117
$ 27,714,891
Less unearned interest on mortgage loans
-
133,010
Total mortgage loans held in trust under coinsurance agreement
$ 12,660,117
$ 27,581,881
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). The Company’s residential and commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans on real estate by credit quality using this ratio as of December 31, 2024 and 2023 are summarized as follows:
December 31,
Residential Mortgage Loans
Commercial Mortgage Loans
Total Mortgage Loans
Loan-To-Value Ratio
Over 70% to 80%
$ 59,821,794
$ 75,718,654
$ 3,119,335
$ 2,099,950
$ 62,941,129
$ 77,818,604
Over 60% to 70%
55,743,022
65,525,308
2,178,948
2,958,186
57,921,970
68,483,494
Over 50% to 60%
36,901,362
38,548,660
2,754,800
1,809,817
39,656,162
40,358,477
Over 40% to 50%
23,308,719
22,283,148
3,020,985
2,394,557
26,329,704
24,677,705
Over 30% to 40%
10,242,789
10,056,308
1,094,274
3,817,212
11,337,063
13,873,520
Over 20% to 30%
4,944,666
7,929,094
1,232,344
463,856
6,177,010
8,392,950
Over 10% to 20%
3,052,985
3,178,001
420,896
1,714,394
3,473,881
4,892,395
10% or less
1,035,060
1,019,361
492,525
314,941
1,527,585
1,334,302
Total
$ 195,050,397
$ 224,258,534
$ 14,314,107
$ 15,572,913
$ 209,364,504
$ 239,831,447
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
The outstanding principal balance of mortgage loans, by state, as of December 31, 2024 and 2023 are summarized as follows:
December 31, 2024
December 31, 2023
Amount
Percentage
Amount
Percentage
Alabama
$ 198,930
0.10 %
$ 516,657
0.22 %
Arizona
1,738,410
0.83 %
2,564,148
1.07 %
Arkansas
583,289
0.28 %
792,495
0.33 %
California
27,618,504
13.19 %
15,612,618
6.51 %
Colorado
1,085,111
0.52 %
1,420,410
0.59 %
Connecticut
980,186
0.47 %
1,301,749
0.54 %
Delaware
416,918
0.20 %
360,334
0.15 %
District of Columbia
52,366
0.03 %
53,031
0.02 %
Florida
56,399,835
26.92 %
88,891,627
37.07 %
Georgia
6,969,271
3.33 %
6,302,274
2.63 %
Hawaii
720,594
0.34 %
473,360
0.20 %
Idaho
115,280
0.06 %
115,286
0.05 %
Illinois
1,674,682
0.80 %
2,562,076
1.07 %
Indiana
151,162
0.07 %
622,476
0.26 %
Kansas
176,949
0.08 %
153,307
0.06 %
Kentucky
182,733
0.09 %
192,485
0.08 %
Louisiana
313,061
0.15 %
177,027
0.07 %
Maine
116,181
0.06 %
118,911
0.05 %
Maryland
1,343,155
0.64 %
1,357,240
0.57 %
Massachusetts
1,913,534
0.91 %
1,858,981
0.78 %
Michigan
555,564
0.27 %
591,204
0.25 %
Minnesota
946,318
0.45 %
908,114
0.38 %
Mississippi
52,819
0.03 %
54,560
0.02 %
Missouri
1,953,587
0.93 %
4,233,592
1.77 %
Nevada
1,124,018
0.54 %
696,957
0.29 %
New Jersey
11,308,858
5.40 %
12,610,602
5.26 %
New Mexico
172,157
0.08 %
79,122
0.03 %
New York
27,423,733
13.10 %
28,845,873
12.03 %
North Carolina
6,479,633
3.09 %
4,250,466
1.77 %
Ohio
9,993,304
4.77 %
10,048,860
4.19 %
Oklahoma
513,490
0.25 %
438,268
0.18 %
Oregon
490,002
0.23 %
648,535
0.27 %
Pennsylvania
2,155,957
1.03 %
1,904,171
0.79 %
Rhode Island
750,266
0.36 %
232,866
0.10 %
South Carolina
2,114,480
1.01 %
1,227,942
0.51 %
South Dakota
162,000
0.08 %
-
0.00 %
Tennessee
1,916,828
0.92 %
3,863,355
1.61 %
Texas
34,797,777
16.62 %
40,130,295
16.73 %
Utah
407,721
0.19 %
409,443
0.17 %
Vermont
22,540
0.01 %
200,295
0.08 %
Virginia
2,486,671
1.19 %
2,307,904
0.96 %
Washington
1,616,854
0.77 %
1,320,541
0.55 %
Wisconsin
160,167
0.08 %
499,987
0.21 %
West Virginia
45,574
0.02 %
46,105
0.02 %
Mortgage loan allowance
(1,035,965 )
-0.49 %
(1,164,102 )
-0.49 %
$ 209,364,504
100.00 %
$ 239,831,447
100.00 %
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
During 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and transferred those properties to investment real estate held for sale. During 2023, the Company foreclosed on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.
The principal balances of the 1,858 residential mortgage loans owned by the Company as of December 31, 2024 that aggregated to $195,050,397 ranged from a low of $329 to a high of $2,399,053 and the interest rates ranged from 3.427% to 16.00%. The principal balances of the 37 commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans owned by the Company as of December 31, 2024 that aggregated to $14,314,107 ranged from a low of $10,682 to a high of $1,984,500 and the interest rates ranged from 6.29% to 16.01%.
The principal balances of the 1,870 residential mortgage loans owned by the Company as of December 31, 2023 that aggregated to $224,258,534 ranged from a low of $286 to a high of $1,650,000 and the interest rates ranged from 3.43% to 16.00%. The principal balances of the 37 commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans owned by the Company as of December 31, 2023 that aggregated to $15,572,913 ranged from a low of $14,478 to a high of $1,493,157 and the interest rates ranged from 5.50% to 10.51%.
There were 30 mortgage loans with a remaining principal balance of $8,120,666 that were more than 90 days past due as of December 31, 2024. There were 14 mortgage loans in default and in the foreclosure process with a remaining principal balance of $4,111,940 as of December 31, 2024.
There were 18 mortgage loans with a remaining principal balance of $6,043,282 that were more than 90 days past due as of December 31, 2023. There were six mortgage loans in default and in the foreclosure process with a remaining principal balance of $2,129,576 as of December 31, 2023.
There are allowances for losses on mortgage loans of $1,035,965 and $1,164,102 as of December 31, 2024 and 2023, respectively. As of December 31, 2024, $754,448 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator. As of December 31, 2023, $890,915 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator.
Investment real estate
TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $280,000. During 2024, the company recognized an impairment loss of $129,436 from a market value appraisal that resulted in fair value estimation less than the carrying value.
FBLIC owns approximately one-half acre of undeveloped land located in Jefferson City, Missouri with a carrying value of $131,000.
During 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and transferred those properties to investment real estate held for sale.
During 2024, the Company sold investment real estate property with an aggregate carrying value of $265,705. The Company recorded a gross realized investment gain on sale of $11,251 based on an aggregate sales price of $276,956.
During 2023, the Company foreclosed on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
The Company’s investment real estate as of December 31, 2024 and 2023 is summarized as follows:
December 31,
Land - held for investment
$ 411,000
$ 540,436
Residential real estate - held for sale
1,940,549
764,967
Total investment in real estate
$ 2,351,549
$ 1,305,403
Other Long-Term Investments
The Company’s investment in co-op loans was $760,833 as of December 31, 2024. A co-op ownership is represented by shares of stock in a corporation that owns the real estate. Co-op loans use the shares of stock and not the real estate to secure the debt.
The Company’s investment in lottery prize cash flows was $57,462,681 and $61,487,939 as of December 31, 2024 and 2023, respectively. The lottery prize cash flows are assignments of the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries.
The amortized cost and estimated fair value of lottery prize cash flows, by contractual maturity, as of December 31, 2024 are summarized as follows:
December 31, 2024
Amortized Cost
Fair Value
Due in one year or less
$ 13,582,946
$ 13,727,065
Due in one year through five years
28,887,987
30,563,019
Due after five years through ten years
9,991,780
11,512,044
Due after ten years
4,999,968
6,499,102
$ 57,462,681
$ 62,301,230
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2. Investments (continued)
The outstanding balance of lottery prize cash flows, by state lottery, as of December 31, 2024 and 2023 are summarized as follows:
December 31, 2024
December 31, 2023
Amount
Percentage
Amount
Percentage
Arizona
$ 255,903
0.45 %
$ 301,299
0.49 %
California
6,366,945
11.08 %
7,327,724
11.92 %
Connecticut
2,600,183
4.52 %
2,285,266
3.72 %
Florida
3,304,344
5.75 %
529,803
0.86 %
Georgia
3,316,521
5.77 %
3,947,186
6.42 %
Illinois
3,323,336
5.78 %
2,587,537
4.21 %
Indiana
3,675,764
6.40 %
4,229,571
6.88 %
Massachusetts
10,772,405
18.75 %
13,632,982
22.17 %
Michigan
168,551
0.29 %
190,457
0.31 %
Missouri
51,776
0.09 %
62,782
0.10 %
New Jersey
35,894
0.06 %
68,823
0.11 %
New York
16,430,600
28.59 %
19,004,811
30.90 %
Ohio
4,177,016
7.27 %
3,755,995
6.11 %
Oregon
15,253
0.03 %
29,272
0.05 %
Pennsylvania
728,145
1.27 %
935,798
1.52 %
Texas
1,421,319
2.47 %
1,774,744
2.89 %
Virginia
-
0.00 %
17,774
0.03 %
Vermont
571,856
1.00 %
550,235
0.89 %
Washington
246,870
0.43 %
255,880
0.42 %
$ 57,462,681
100.00 %
$ 61,487,939
100.00 %
Major categories of net investment income for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Fixed maturity securities
$ 8,534,951
$ 6,550,360
Equity securities
135,911
118,780
Other long-term investments
4,444,639
4,948,734
Mortgage loans
17,079,731
19,678,014
Policy loans
291,170
240,385
Short-term and other investments
2,531,767
2,600,099
Gross investment income
33,018,169
34,136,372
Investment expenses
(2,495,589 )
(2,481,051 )
Net investment income
$ 30,522,580
$ 31,655,321
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
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 and equity 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’s Level 1 assets include equity securities that are 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 U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
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. The Company’s 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 certain private equity 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 Level 3 of the fair value hierarchy are reported as transfers in and out of the Level 3 category as of the beginning of the period in which the reclassifications occur.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
3. Fair Value Measurements (continued)
The Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of December 31, 2024 and 2023 is summarized as follows:
Level 1
Level 2
Level 3
Total
December 31, 2024
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies
$ -
$ 4,275,965
$ -
$ 4,275,965
States and political subdivisions
-
7,693,233
-
7,693,233
U.S. government agency mortgage backed securities
-
40,235,381
-
40,235,381
Commercial mortgage-backed securities
-
18,499,398
-
18,499,398
Residential mortgage-backed securities
-
14,111
-
14,111
Corporate bonds
-
99,356,554
-
99,356,554
Asset-backed securities
-
14,898,584
-
14,898,584
Exchange traded securities
-
496,800
-
496,800
Foreign bonds
-
27,239,795
-
27,239,795
Redeemable preferred securities
-
1,036,000
-
1,036,000
Total fixed maturity securities
$ -
$ 213,745,821
$ -
$ 213,745,821
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement
$ -
$ 17,932,297
$ -
$ 17,932,297
Equity securities
Mutual funds
$ -
$ 48,375
$ -
$ 48,375
Corporate common stock
232,365
4,999,414
55,908
5,287,687
Total equity securities
$ 232,365
$ 5,047,789
$ 55,908
$ 5,336,062
December 31, 2023
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies
$ -
$ 3,798,284
$ -
$ 3,798,284
States and political subdivisions
-
9,531,870
-
9,531,870
U.S. government agency mortgage backed securities
-
10,306,464
-
10,306,464
Commercial mortgage-backed securities
-
8,471,538
-
8,471,538
Residential mortgage-backed securities
-
14,314
-
14,314
Corporate bonds
-
79,341,307
-
79,341,307
Asset-backed securities
-
11,492,496
-
11,492,496
Exchange traded securities
-
476,000
-
476,000
Foreign bonds
-
25,212,675
-
25,212,675
Redeemable preferred securities
-
1,056,000
-
1,056,000
Total fixed maturity securities
$ -
$ 149,700,948
$ -
$ 149,700,948
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement
$ -
$ 51,651,259
$ -
$ 51,651,259
Equity securities
Mutual funds
$ -
$ 50,226
$ -
$ 50,226
Corporate common stock
304,064
-
65,240
369,304
Total equity securities
$ 304,064
$ 50,226
$ 65,240
$ 419,530
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
3. Fair Value Measurements (continued)
As of December 31, 2024 and 2023, Level 3 financial instruments consisted of a private placement common stock that has no active trading and a joint venture investment with a mortgage loan originator.
This private placement common stock represents an investment in a small insurance holding company. The fair value for this security was determined through the use of unobservable assumptions about market participants. The Company has assumed a willing market participant would purchase the security for the same price as the Company paid until such time as this small insurance holding company commences significant operations. The joint venture investment with a mortgage loan originator is accounted for under the equity method of accounting.
Fair values for Level 1 and Level 2 assets for the Company’s fixed maturity available-for-sale securities and equity securities are primarily based on prices supplied by a third party investment service. The third party investment service provides quoted prices in the market 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 obligations U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
The Company’s equity securities are included in Level 1 and Level 2 and the private placement common stocks and joint venture investment are included in Level 3. Level 1 for the equity securities classified as such is appropriate since they trade on a daily basis, are based on quoted market prices in active markets and are based upon unadjusted prices. Level 2 for those equity securities classified as such is appropriate since they are not actively traded.
The Company’s fixed maturity available-for-sale securities and equity securities are highly liquid and allows for a high percentage of the portfolio to be priced through pricing services.
The change in the fair value of the Company’s Level 3 equity securities available-for-sale for the years ended December 31, 2024 and 2023 is summarized as follows:
December 31,
Beginning balance
$ 65,240
$ 53,996
Joint venture net income
106,039
130,550
Joint venture distribution
(115,371 )
(119,306 )
Net realized investment losses
-
-
Ending balance
$ 55,908
$ 65,240
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
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 December 31, 2024 and 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:
Carrying
Fair
Amount
Value
Level 1
Level 2
Level 3
December 31, 2024
Financial assets
Mortgage loans on real estate
Commercial
$ 14,314,107
$ 14,724,122
$ -
$ -
$ 14,724,122
Residential
195,050,397
211,590,742
-
-
211,590,742
Policy loans
4,367,534
4,367,534
-
-
4,367,534
Other long-term investments
58,223,514
63,062,063
-
-
63,062,063
Cash and cash equivalents
64,344,122
64,344,122
64,344,122
-
-
Accrued investment income
5,746,167
5,746,167
-
-
5,746,167
Total financial assets
$ 342,045,841
$ 363,834,750
$ 64,344,122
$ -
$ 299,490,628
Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial
$ 12,660,117
$ 12,660,117
$ -
$ -
$ 12,660,117
Overdraft
(89,726 )
(89,726 )
(89,726 )
-
-
Total financial assets held in trust under coinsurance agreement
$ 12,570,391
$ 12,570,391
$ (89,726 )
$ -
$ 12,660,117
Financial liabilities
Policyholders' account balances
$ 431,190,092
$ 365,288,900
$ -
$ -
$ 365,288,900
Policy claims
2,478,465
2,478,465
-
-
2,478,465
Total financial liabilities
$ 433,668,557
$ 367,767,365
$ -
$ -
$ 367,767,365
December 31, 2023
Financial assets
Mortgage loans on real estate
Commercial
$ 15,572,913
$ 14,803,724
$ -
$ -
$ 14,803,724
Residential
224,258,534
196,514,414
-
-
196,514,414
Policy loans
3,474,116
3,474,116
-
-
3,474,116
Short-term investments
298,257
298,257
298,257
-
-
Other long-term investments
61,487,939
68,023,717
-
-
68,023,717
Cash and cash equivalents
33,839,741
33,839,741
33,839,741
-
-
Accrued investment income
6,214,459
6,214,459
-
-
6,214,459
Total financial assets
$ 345,145,959
$ 323,168,428
$ 34,137,998
$ -
$ 289,030,430
Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial
$ 27,714,891
$ 27,714,891
$ -
$ -
$ 27,714,891
Less unearned interest on mortgage loans
133,010
133,010
-
-
133,010
Cash and cash equivalents
711,733
711,733
711,733
-
-
Total financial assets held in trust under coinsurance agreement
$ 28,293,614
$ 28,293,614
$ 711,733
$ -
$ 27,581,881
Financial liabilities
Policyholders' account balances
$ 391,247,676
$ 344,806,580
$ -
$ -
$ 344,806,580
Policy claims
2,410,243
2,410,243
-
-
2,410,243
Total financial liabilities
$ 393,657,919
$ 347,216,823
$ -
$ -
$ 347,216,823
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
3. Fair Value Measurements (continued)
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 and Equity Securities
The fair value of fixed maturity securities and equity securities are based on the principles previously discussed as Level 1, Level 2 and Level 3.
Mortgage Loans on Real Estate
The fair values for mortgage loans are estimated using discounted cash flow analyses. For both residential and commercial mortgage loans, the discount rate used was indexed to the Secured Overnight Financing Rate.
Cash and Cash Equivalents, Short-Term Investments, Accrued Investment Income and Policy Loans
The carrying value of these financial instruments approximates their fair values. Cash and cash equivalents and short-term investments are included in Level 1 of the fair value hierarchy due to their highly liquid nature.
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.
Investment Contracts - 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
The carrying amounts reported for these liabilities approximate their fair value.
4. Special Deposits
TLIC and FBLIC are required to hold assets on deposit for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of December 31, 2024 and 2023, these required deposits had amortized costs that totaled $6,740,988 and $4,609,927, respectively. As of December 31, 2024 and 2023, these required deposits had fair values that totaled $6,735,209 and $4,596,130, respectively.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
5. Allowance for Loan Losses from Mortgage Loans on Real Estate
As of December 31, 2024, $754,448 of independent residential mortgage loans on real estate are held in escrow by a third party for the benefit of the Company. As of December 31, 2024, $738,411 of that escrow amount is available to the Company as additional collateral on $4,746,638 of advances to the loan originator. The remaining December 31, 2024 escrow amount of $16,037 is available to the Company as additional collateral on its investment of $3,207,399 in mortgage loans on real estate. In addition, the Company has an additional $1,035,965 allowance for possible loan losses in the remaining $206,157,105 of investments in mortgage loans on real estate as of December 31, 2024.
As of December 31, 2023, $890,915 of independent residential mortgage loans on real estate are held in escrow by a third party for the benefit of the Company. As of December 31, 2023, $850,039 of that escrow amount is available to the Company as additional collateral on $4,487,715 of advances to the loan originator. The remaining December 31, 2023 escrow amount of $40,876 is available to the Company as additional collateral on its investment of $8,175,212 in mortgage loans on real estate. In addition, the Company has an additional $1,164,102 allowance for possible loan losses in the remaining $231,656,235 of investments in mortgage loans on real estate as of December 31, 2023.
As of December 31, 2024, the Company’s Chairman, President and Chief Executive Officer has provided approximately $2,500,000 of loans to this mortgage loan originator and with Board of Directors approval, may provide an additional amount of $500,000 so not to exceed $3.0 million in the aggregate.
The balances of and changes in the Company’s credit losses related to residential and commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans on real estate as of and for the years ended December 31, 2024 and 2023 are summarized as follows (excluding $3,207,399 and $8,175,212 of mortgage loans on real estate as of December 31, 2024 and 2023, respectively, with one loan originator where independent mortgage loan balances are held in escrow by a third party for the benefit of the Company):
Years Ended December 31,
Residential Mortgage Loans
Commercial Mortgage Loans
Total
Allowance, beginning
$ 1,085,919
$ 1,030,424
$ 78,183
$ 90,024
$ 1,164,102
$ 1,120,448
Charge offs
-
-
-
-
-
-
Recoveries
-
-
-
-
-
-
Provision
(121,884 )
55,495
(6,253 )
(11,841 )
(128,137 )
43,654
Allowance, ending
$ 964,035
$ 1,085,919
$ 71,930
$ 78,183
$ 1,035,965
$ 1,164,102
Allowance, ending:
Individually evaluated for impairment
$ -
$ -
$ -
$ -
$ -
$ -
Collectively evaluated for impairment
$ 964,035
$ 1,085,919
$ 71,930
$ 78,183
$ 1,035,965
$ 1,164,102
Carrying Values:
Individually evaluated for reserve allowance
$ -
$ -
$ -
$ -
$ -
$ -
Collectively evaluated for reserve allowance
$ 191,842,998
$ 216,097,800
$ 14,314,107
$ 15,558,435
$ 206,157,105
$ 231,656,235
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
6. Deferred Policy Acquisition Costs
The balances of and changes in deferred acquisition costs as of and for the years ended December 31, 2024 and 2023 are summarized as follows:
Balance, beginning of year
$ 60,795,108
$ 56,183,785
Capitalization of commissions, sales and issue expenses
16,620,462
13,476,834
Amortization
(10,775,374 )
(8,863,514 )
Deferred acquisition costs allocated to investments
(1,997 )
Balance, end of year
$ 66,640,453
$ 60,795,108
7. Federal Income Taxes
FTFC filed 2023 and 2022 consolidated federal income tax returns that included TLIC, FBLIC, FTFC and TMC since all companies had been members of a consolidated group for over 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.
A reconciliation of federal income tax expense computed by applying the federal income tax rate of 21% to income before federal income tax expense for the years ended December 31, 2024 and 2023, respectively, are summarized as follows:
Years Ended December 31,
Expected tax expense
$ 1,696,021
$ 2,113,114
Future policy benefits
(126,131 )
116,934
Reinsurance recoverable (payable)
(102,745 )
(158,863 )
Difference in unapplied cash receipts
(99,571 )
7,466
Adjustment of prior years' taxes
(23,759 )
36,495
Unearned investment income
(10,413 )
(23,446 )
Premium amortization
(10,381 )
(47,081 )
Difference in book versus tax basis of available-for-sale securities
32,865
(3,341 )
Non taxable international losses
47,007
44,775
Capital gains taxes
262,248
28,398
Other
(5,641 )
32,636
Total income tax expense
$ 1,659,500
$ 2,147,087
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
7. Federal Income Taxes (continued)
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2024 and 2023 are summarized as follows:
December 31,
Deferred tax liabilities:
Deferred policy acquisition costs
$ 11,859,261
$ 10,880,652
Value of insurance business acquired
754,622
793,244
Reinsurance recoverable
241,766
260,169
Due premiums
105,280
104,257
Other
-
Total deferred tax liabilities
12,960,929
12,038,334
Deferred tax assets:
Policyholders' account balances and future policy benefits
$ 5,640,897
$ 5,027,661
Net unrealized investment losses
2,930,451
2,562,880
Mortgage loans
210,691
241,819
Available-for-sale fixed maturity securities
104,293
76,016
Unearned investment income
23,945
24,186
Available-for-sale fixed equity securities
17,695
(2,734 )
Other liabilities
5,709
(104,516 )
Investment real estate
3,756
(23,425 )
Dividend liability
-
8,258
Total deferred tax assets
8,937,437
7,810,145
Net deferred tax liabilities
$ 4,023,492
$ 4,228,189
FTFC, TLIC, FBLIC and TMC have no remaining net operating loss carryforwards as of December 31, 2024 and December 31, 2023. During 2023, FTFC utilized its remaining $748,067 net operating loss carryforwards existing as of January 1, 2023 to offset 2023 federal taxable income
The Company has 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, has not accrued any such amounts. The Company files U.S. federal income tax returns and income tax returns in various state jurisdictions. The 2021 through 2024 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.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
8. Reinsurance
Statutory reinsurance assumed and ceded amounts for TLIC and FBLIC for 2024 and 2023 are summarized as follows:
Premiums assumed
$ 11,429,232
$ 9,272,154
Commissions and expense allowances assumed
4,655,697
3,652,842
Benefits assumed
365,345
229,729
Reserve credits assumed
19,607,266
14,087,640
In force amount assumed
330,534,332
249,019,338
Premiums ceded
446,138
532,288
Commissions and expense allowances ceded
8,994
11,180
Benefits ceded
3,773,887
5,070,456
Reserve credits ceded
45,161,575
92,309,889
In force amount ceded
64,646,723
64,278,984
TLIC participates in ceded and assumed reinsurance in order to provide risk diversification, additional capacity for future growth and limit the maximum net loss potential arising from large risks. TLIC reinsures all amounts of risk on any one life in excess of $100,000 for individual life insurance with Investors Heritage Life Insurance Company, Optimum Re Insurance Company (“Optimum Re”), RGA Reinsurance Company and Wilton Reassurance Company (“Wilton Re”).
TLIC is a party to an Automatic Retrocession Pool Agreement (the “Reinsurance Pool”) with Optimum Re, Catholic Order of Foresters, American Home Life Insurance Company and Woodmen of the World. The agreement provides for automatic retrocession of coverage in excess of Optimum Re’s retention on business ceded to Optimum Re by the other parties to the Reinsurance Pool. TLIC’s maximum exposure on any one insured under the Reinsurance Pool is $100,000. As of January 1, 2008, the Reinsurance Pool stopped accepting new cessions.
Effective September 29, 2005, FLAC and Wilton Re executed a binding letter of intent whereby both parties agreed that FLAC would cede the simplified issue version of its Golden Eagle Whole Life (Final Expense) product to Wilton Re on a 50/50 quota share original term coinsurance basis. The letter of intent was executed on a retroactive basis to cover all applicable business issued by FLAC subsequent to January 1, 2005. Wilton Re agreed to provide various commission and expense allowances to FLAC in exchange for FLAC ceding 50% of the applicable premiums to Wilton Re as they were collected. As of June 24, 2006, Wilton Re terminated the reinsurance agreement for new business issued after the termination date.
FBLIC also participates in reinsurance in order to provide risk diversification, additional capacity for future growth and limit the maximum net loss potential arising from large risks. FBLIC reinsures initial amounts of risk on any one life in excess of $100,000 for individual life insurance with Optimum Re. TLIC and FBLIC also reinsure the accidental death benefit portion of their life policies under a bulk agreement with Optimum Re.
To the extent that the reinsurance companies are unable to meet their obligations under the reinsurance agreements, TLIC and FBLIC remain primarily liable for the entire amount at risk.
Effective January 1, 2018, TLIC entered into an annuity coinsurance agreement with an offshore annuity and life insurance company whereby 90% of TLIC’s annuity considerations originated after December 31, 2017 were ceded to the assuming company. The assuming company contractually reimburses TLIC for the related commissions, withdrawals, settlements, interest credited, submission costs, maintenance costs, marketing costs, excise taxes and other costs plus a placement fee. Effective April 1, 2020, the Company and an offshore annuity and life insurance company mutually agreed that the Quota Share under its existing reinsurance agreement shall be 0% for future business instead of the original contractual amount of 90%.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
8. Reinsurance (continued)
In accordance with this annuity coinsurance agreement, TLIC holds assets and recognizes a funds withheld liability for the benefit of the assuming company in an amount at least equal to the annuity reserves in accordance with U.S. statutory accounting principles generated by this ceded business. In addition, the assuming company maintains a trust related to this ceded business amounting to at least an additional 4% of assets above the annuity reserve required under U.S. statutory accounting principles. This coinsurance agreement may be terminated for new business by either party at any time upon 30 days prior written notice to the other party.
In 2019, TLIC entered into a life insurance coinsurance agreement with TAI, effective October 1, 2018, whereby 100% of TAI’s life insurance policies and annuity contracts issued after September 30, 2018 were ceded to TLIC. TLIC contractually reimburses TAI for the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of life insurance policies and annuity contracts. These transactions are eliminated in consolidation.
In 2022, FBLIC entered into group life insurance coinsurance agreement with Texas Republic Life Insurance Company (“TRLIC”), whereby generally 50% of TRLIC group life insurance policies and premiums were ceded to FBLIC. FBLIC contractually reimburses TRLIC for generally 50% of the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of group life insurance policies.
With the acquisition of RCLIC in 2022, FBLIC reinsures individual life insurance and annuity contracts with Security National Life Insurance Company (”SNLIC”). In addition, an agreement was established with SNLIC in which all funds associated with the reinsurance agreement are held in a trust by SNLIC. There are no cash transfers between FBLIC and SNLIC associated with this agreement. Under the trust agreement, FBLIC would have access to the funds to satisfy policy obligations in the event SNLIC’s inability to meet policy obligations.
9. Leases
The Company leases 7,302 square feet of office space in Tulsa, Oklahoma. The lease began on October 1, 2015 and ended on September 30, 2020. The Company signed an amended lease agreement effective August 1, 2020 and ending on September 30, 2027. The amended lease agreement provides for the expansion of the existing premises from 6,769 square feet to 7,302 square feet. The Company incurred rent expense (including charges for the lessor’s building operating expenses above those specified in the lease agreement less monthly amortization of the leasehold improvement allowance received from the lessor) of $115,309 and $111,755 for the years ended December 31, 2024 and 2023, respectively.
In accordance with the current lease, the Company was provided an allowance of $54,152 for leasehold improvements. For the amended lease, the Company was provided allowance of $77,000 for leasehold improvements. The leasehold improvement allowance is amortized over the non-cancellable lease term and reduced rent expense by $11,000 for the years ended December 31, 2024 and 2023. The future minimum lease payments to be paid under the non-cancellable lease agreement are $123,130, $125,576 and $95,620 for the years 2025, 2026 and 2027, respectively.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
10. Shareholders’ Equity and Statutory Accounting Practices
FBLIC and TLIC are domiciled in Oklahoma and prepares their statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the OID. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners, state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing investments, deferred taxes, and certain assets on a different basis.
The statutory net losses for TLIC amounted to ($1,726,700) and ($249,030) for the years ended December 31, 2024 and 2023, respectively. The statutory capital and surplus of TLIC was $13,148,069 and $17,980,111 as of December 31, 2024 and 2023, respectively. The statutory net income (loss) for FBLIC amounted to ($2,596,050) and $1,027,432 for the years ended December 31, 2024 and 2023, respectively. The statutory capital and surplus of FBLIC was $10,677,658 and $13,735,110 as of December 31, 2024 and 2023, respectively.
TLIC and FBLIC are subject to Oklahoma laws that limit the amount of dividends insurance companies can pay to stockholders without approval of the Oklahoma Department of Insurance. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC has paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC in 2024 and 2023.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
11. Segment Data
The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment.
These segments as of and for the years ended December 31, 2024 and 2023 are summarized as follows:
Year Ended December 31,
Revenues:
Life insurance operations
$ 49,727,760
$ 46,859,649
Annuity operations
24,102,511
24,531,347
Corporate operations
2,520,918
4,365,476
Total
$ 76,351,189
$ 75,756,472
Income before income taxes:
Life insurance operations
$ 5,897,565
$ 3,463,203
Annuity operations
945,053
3,453,174
Corporate operations
1,233,673
3,146,071
Total
$ 8,076,291
$ 10,062,448
Amortization expense:
Life insurance operations
$ 9,038,552
$ 7,705,997
Annuity operations
1,920,735
1,428,269
Total
$ 10,959,287
$ 9,134,266
December 31,
Assets:
Life insurance operations
$ 165,925,854
$ 164,653,497
Annuity operations
506,980,782
495,979,724
Corporate operations
13,542,262
11,388,314
Total
$ 686,448,898
$ 672,021,535
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
11. Segment Data (continued)
The increases and decreases of revenues and profitability from our business segments for the years ended December 31, 2024 and 2023 are summarized as follows:
Life Insurance
Annuity
Corporate
Operations
Operations
Operations
Total
Revenues
Premiums
$ 2,965,962
$ -
$ -
$ 2,965,962
Net invesment income
(337,189 )
(1,135,787 )
340,235
(1,132,741 )
Net realized investment gains less impairments
80,881
234,656
-
315,537
Service fees and other income
158,457
472,295
(2,184,793 )
(1,554,041 )
Total revenue
2,868,111
(428,836 )
(1,844,558 )
594,717
Benefits and claims
Increase in future policy benefits
352,395
-
-
352,395
Death benefits
(1,122,310 )
-
-
(1,122,310 )
Surrenders
297,682
-
-
297,682
Interest credited to policyholders
-
786,996
-
786,996
Dividend, endowment and supplementary life contract benefits
26,047
-
-
26,047
Total benefits and claims
(446,186 )
786,996
-
340,810
Expenses
Policy acquisition costs deferred net of amortization
135,701
(1,367,469 )
-
(1,231,768 )
Amortization of value of insurance business acquired
(43,420 )
(43,419 )
-
(86,839 )
Commissions
794,093
2,432,624
-
3,226,717
Other underwriting, insurance and acquisition expenses
(6,439 )
270,553
67,840
331,954
Total expenses
879,935
1,292,289
67,840
2,240,064
Total benefits, claims and expenses
433,749
2,079,285
67,840
2,580,874
Income (loss) before federal income tax expense (benefit)
$ 2,434,362
$ (2,508,121 )
$ (1,912,398 )
$ (1,986,157 )
The Company conducts and manages its business through three reporting business segments. The two reporting segments representing the major lines of business, are: (1) Life Insurance Operations and (2) Annuity Operations. The third reporting business segment is Corporate Operations that represents the activities of the financial holding companies that own all consolidated subsidiaries and include excess assets that are invested primarily in mortgage loan activities. The Company allocates the impact of corporate-level transactions to all three reporting segments, consistent with the basis for management's evaluation of the results of those reporting segments.
The accounting policies of the reporting segments are the same as those described in Note 1 - Organization and Significant Accounting Policies. Business segment allocations are based on certain assumptions and estimates primarily related to asset and liability holdings and revenue and cost activity with methodologies applied consistently from year-to-year. Stated segment operating results would change if different methods were applied.
The Company’s Chief Executive Officer is the chief operating decision maker (CODM), responsible for reviewing financial performance and making decisions regarding the allocation of resources for the reporting segments. The Company measures and analyzes segment performance based on earnings focused on investment yield, mortality of life insurance operations, interest assumptions inherent in life insurance future policy benefits, policyholders’ balances interest crediting rates and relative ratios of commission to life insurance premiums and annuity deposits as presented in our consolidated statements of operations. FTFC believes that U.S. GAAP earnings before federal income taxes is an appropriate indicator of the profitability and underlying trends in our life insurance and annuity business. The CODM considers actual-to-budget variances in U.S. GAAP earnings on a quarterly basis when making decisions about allocating capital and personnel to segments and evaluating product pricing.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
11. Segment Data (continued)
Disaggregated financial information for these segments, as regularly provided to the CODM, as of December 31, 2024 and 2023 is summarized as follows:
Year ended December 31, 2024:
Life Insurance
Annuity
Corporate
Operations
Operations
Operations
Total
Revenues
Premiums
$ 41,878,896
$ -
$ -
$ 41,878,896
Net invesment income
7,241,867
22,218,578
1,062,135
30,522,580
Net realized investment gains less impairments
34,380
101,005
-
135,385
Service fees and other income
572,617
1,782,928
1,458,783
3,814,328
Total revenue
49,727,760
24,102,511
2,520,918
76,351,189
Benefits and claims
Increase in future policy benefits
14,565,010
-
-
14,565,010
Death benefits
13,176,508
-
-
13,176,508
Surrenders
2,471,376
-
-
2,471,376
Interest credited to policyholders
-
15,880,681
-
15,880,681
Dividend, endowment and supplementary life contract benefits
388,723
-
-
388,723
Total benefits and claims
30,601,617
15,880,681
-
46,482,298
Expenses
Policy acquisition costs deferred net of amortization
(3,436,238 )
(2,408,850 )
-
(5,845,088 )
Amortization of value of insurance business acquired
91,956
91,957
-
183,913
Commissions
11,392,911
4,637,570
-
16,030,481
Other underwriting, insurance and acquisition expenses
5,179,949
4,956,100
1,287,245
11,423,294
Total expenses
13,228,578
7,276,777
1,287,245
21,792,600
Total benefits, claims and expenses
43,830,195
23,157,458
1,287,245
68,274,898
Income before federal income tax expense (benefit)
$ 5,897,565
$ 945,053
$ 1,233,673
$ 8,076,291
Year ended December 31, 2023:
Life Insurance
Annuity
Corporate
Operations
Operations
Operations
Total
Revenues
Premiums
$ 38,912,934
$ -
$ -
$ 38,912,934
Net invesment income
7,579,056
23,354,365
721,900
31,655,321
Net realized investment gains less impairments
(46,501 )
(133,651 )
-
(180,152 )
Service fees and other income
414,160
1,310,633
3,643,576
5,368,369
Total revenue
46,859,649
24,531,347
4,365,476
75,756,472
Benefits and claims
Increase in future policy benefits
14,212,615
-
-
14,212,615
Death benefits
14,298,818
-
-
14,298,818
Surrenders
2,173,694
-
-
2,173,694
Interest credited to policyholders
-
15,093,685
-
15,093,685
Dividend, endowment and supplementary life contract benefits
362,676
-
-
362,676
Total benefits and claims
31,047,803
15,093,685
-
46,141,488
Expenses
Policy acquisition costs deferred net of amortization
(3,571,939 )
(1,041,381 )
-
(4,613,320 )
Amortization of value of insurance business acquired
135,376
135,376
-
270,752
Commissions
10,598,818
2,204,946
-
12,803,764
Other underwriting, insurance and acquisition expenses
5,186,388
4,685,547
1,219,405
11,091,340
Total expenses
12,348,643
5,984,488
1,219,405
19,552,536
Total benefits, claims and expenses
43,396,446
21,078,173
1,219,405
65,694,024
Income before federal income tax expense (benefit)
$ 3,463,203
$ 3,453,174
$ 3,146,071
$ 10,062,448
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
12. Concentrations of Credit Risk
Credit risk is limited by diversifying the Company’s investments. The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures accounts up to $250,000. Uninsured balances aggregate $50,995,135 as of December 31, 2024. Other funds are invested in mutual funds that invest in U.S. government securities. 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 such accounts.
The Company’s lottery prize receivables due from various states and the geographical distribution of the Company’s mortgage loans by state are summarized in Note 2.
13. Contingent Liabilities
From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in three pending lawsuits.
A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn (“Mr. Zahn”) styled First Trinity Financial Corporation and Gregg E. Zahn vs. C. Wayne Pettigrew and Group & Pension Planners was originally filed in 2013 in the District Court of Tulsa County, Oklahoma against former Company Board of Director, C. Wayne Pettigrew (“Mr. Pettigrew”). The Company and Mr. Zahn alleged that Mr. Pettigrew defamed Mr. Zahn and the Company and that Mr. Pettigrew breached his fiduciary duties to the Company by making untrue statements about the Company and Mr. Zahn to the press, state regulators and to certain shareholders.
In February 2017, the lawsuit resulted in a jury verdict in favor of the Company and Mr. Zahn, with the jury awarding damages of $800,000 to the Company and $3,500,000 to Mr. Zahn. In February 2020, the Oklahoma Court of Civil Appeals, upon an appeal by Mr. Pettigrew, reversed the judgment and remanded the case for a new trial. A Petition for Certiorari review with the Oklahoma Supreme Court by the Company and Mr. Zahn was declined in December, 2020. The case is now scheduled to be retried in the District Court once a trial date is set. The Company is vigorously prosecuting this case. The Company faces no exposure in connection with this action since there are no counterclaims or cross claims made against the Company. Management believes that this lawsuit is not material in relation to the Company’s financial position or results of operations.
The Company, through its life insurance subsidiary, TLIC, commenced two lawsuits as plaintiff, both in the New York Supreme Court, New York County, one on June 29, 2020 and another on March 4, 2022, for breach of contract against a company for failure to advance funding to lottery ticket winners to the detriment of TLIC and against various of that company’s associated persons for unjust enrichment and fraud perpetuated on TLIC. The cases are entitled “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, and Monica L. Ray, Index No. 652780/2020” (New York Supreme Court, New York County) and “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, Julie Casal, and Monica L. Ray, Index No. 651023/2022” (New York Supreme Court, New York County). The Company is vigorously prosecuting this case against the defendants. The Company faces no exposure in connection with either action since no counterclaims or cross claims have been made against the Company. Management believes that these lawsuits are not material in relation to the Company’s financial position or results of operations.
Guaranty fund assessments, brought about by the insolvency of life and health insurers, are levied at the discretion of the various state guaranty fund associations to cover association obligations. In most states, guaranty fund assessments may be taken as a credit against premium taxes, typically over a five-year period.
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
14. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The changes in the components of the Company’s accumulated other comprehensive loss for the years ended December 31, 2024 and 2023 are summarized as follows:
Unrealized
Accumulated
Depreciation on
Adjustment to
Other
Available-For-Sale
Deferred Acquisition
Comprehensive
Securities
Costs
Loss
Year Ended December 31, 2024
Balance as of January 1, 2024
$ (9,643,766 )
$ 2,458
$ (9,641,308 )
Other comprehensive loss before reclassifications, net of tax
(1,461,329 )
(1,461,126 )
Less amounts reclassified from accumulated other comprehensive loss having no credit losses, net of tax
(78,355 )
-
(78,355 )
Other comprehensive loss
(1,382,974 )
(1,382,771 )
Balance as of December 31, 2024
$ (11,026,740 )
$ 2,661
$ (11,024,079 )
Year Ended December 31, 2023
Balance as of January 1, 2023
$ (14,323,715 )
$ 4,036
$ (14,319,679 )
Cumulative effect adjustment as of January 1, 2023
Accumulated credit loss January 1, 2023
230,036
-
230,036
Other comprehensive income before reclassifications, net of tax
4,408,820
(1,578 )
4,407,242
Less amounts reclassified from accumulated other comprehensive income having no credit losses, net of tax
(41,093 )
-
(41,093 )
Other comprehensive income
4,449,913
(1,578 )
4,448,335
Balance as of December 31, 2023
$ (9,643,766 )
$ 2,458
$ (9,641,308 )
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
14. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss (continued)
The pretax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit) for each component for the years ended December 31, 2024 and 2023 are summarized as follows:
Income Tax
Expense
Pretax
(Benefit)
Net of Tax
Year Ended December 31, 2024
Other comprehensive loss:
Change in net unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period
$ (1,849,782 )
$ (388,453 )
$ (1,461,329 )
Reclassification adjustment for net losses included in operation having no credit losses
(99,183 )
(20,828 )
(78,355 )
Net unrealized losses on investments
(1,750,599 )
(367,625 )
(1,382,974 )
Adjustment to deferred acquisition costs
Total other comprehensive loss
$ (1,750,342 )
$ (367,571 )
$ (1,382,771 )
Year Ended December 31, 2023
Other comprehensive income:
Change in net unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period
$ 5,580,785
$ 1,171,965
$ 4,408,820
Reclassification adjustment for net losses included in operation having no credit losses
(52,016 )
(10,923 )
(41,093 )
Net unrealized gains on investments
5,632,801
1,182,888
4,449,913
Adjustment to deferred acquisition costs
(1,997 )
(419 )
(1,578 )
Total other comprehensive income
$ 5,630,804
$ 1,182,469
$ 4,448,335
Realized gains and losses on the sales of investments are determined based upon the specific identification method and include provisions for other-than-temporary impairments where appropriate.
The pretax and the related income tax components of the amounts reclassified from the Company’s accumulated other comprehensive loss to the Company’s consolidated statements of operations for the years ended December 31, 2024 and 2023 are summarized as follows:
Years Ended December 31,
Reclassification Adjustments
Realized losses on sales of securities (a)
$ (99,183 )
$ (52,016 )
Income tax benefit (b)
(20,828 )
(10,923 )
Total reclassification adjustments
$ (78,355 )
$ (41,093 )
(a)
These items appear within net realized investment gains (losses) in the consolidated statements of operations.
(b)
These items appear within federal income taxes in the consolidated statements of operations.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. 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 Exchange Act of 1934 as amended (“Exchange Act”) as of the end of the fiscal period covered by this Annual Report on Form 10-K (“Annual Report”). 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.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. As of the end of the period covered by this Annual Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Certifying Officers, of the effectiveness of the design and operation of the Company’s internal controls over financial reporting as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act. The standard measures adopted by management in making its evaluation are the measures in the Internal-Control Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon such evaluation, management has determined that internal control over financial reporting was effective as of December 31, 2024.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Limitations on the Effectiveness of Controls
The Company’s management, including the Certifying Officers, does not expect that the disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes to Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fiscal year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None
Part III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The following sets forth certain information regarding the current Class A Directors of First Trinity Financial Corporation (“FTFC”) including age, position with the Company, principal occupation and term of service. The Company Class A Directors serve until the next Annual Meeting of Shareholders or until their successors are duly elected and qualified.
Director
Name of Nominee
Age
Position/Principal Occupation
Since
Gregg E. Zahn (4)
Director; Chairman, President and Chief Executive Officer of First Trinity
Charles W. Owens (3) (4)
Director; Insurance and Marketing Services
George E. Peintner (2) (4)
Director; Marketing Company
Francine M. Zahn (3) (4)
Sales Representative, Account Manager
(1)
Member Audit Committee
(2)
Member Compensation Committee
(3)
Member Nominating and Corporate Governance Committee
(4)
Member Investment Committee
The following is a brief description of the business backgrounds of the Class A directors.
Gregg E. Zahn has been a member of the Board of Directors since inception in 2004. He is President, Chief Executive Officer and Chairman of the Board of Directors of First Trinity. He has been President and Chief Executive Officer since October 2007 and became Chairman in 2011. From 2004 until October 2007, he was First Trinity’s Director of Training and Recruiting. He is President, Chief Executive Officer, Chairman and Director of Trinity Life Insurance Company (“TLIC”) and Trinity Mortgage Corporation (“TMC”) and has served in those positions since October 2007. He was Executive Vice President of First Life America Corporation of Topeka, Kansas (acquired in 2008 and merged with TLIC in 2009) from December 2008 until August 2009. He became Chairman, Chief Executive Officer and Director of Family Benefit Life Insurance Company (“FBLIC”) in December 2011. He became Chairman of Texas Republic Capital Corporation (“TRCC”) in 2012. He also was Chairman of Royalty Capital Corporation (“RCC”) from its inception in 2013 through its dissolution in 2022 when RCC’s life insurance subsidiary, Royalty Capital Life Insurance Company (“RCLIC”), was sold to FTFC. Between 1997 and March 2004, Mr. Zahn served as Marketing Vice President of First Alliance Insurance Company of Lexington, Kentucky and as Assistant to the President of First Alliance Corporation and Mid-American Alliance Corporation. He was President of Alliance Insurance Management from 2001 to 2003.
Charles W. Owens has been a member of the Board of Directors since inception in 2004. He is a Director of TLIC, FBLIC and TMC. Mr. Owens has served as the President and Owner of Tinker Owens Insurance and Marketing Services since its inception in 1988.
George E. Peintner has been a member of the Board of Directors since inception in 2004. He is a Director of TLIC, FBLIC and TMC. Mr. Peintner is the Owner of Peintner Enterprises. Peintner Enterprises is a Marketing Company established in 1980.
Francine M. Zahn is currently a Sales Representative/Account Manager, PROAMPAC/TULSACK (March 2008-Present). Other positions include Executive Assistant, FTFC, Tulsa OK (May 2005-March 2008) and Agency Assistant for Independent Health Insurance Agent, ANTHEM BlueCross and BlueShield, Lexington KY (January 2003-April 2004). Her education includes Undergraduate Studies, Education, BA, Hammond, LA (August 1979-December 1983), Graduate Studies, Special Education, Lexington, KY (January 2004-April 2004) and Professional Career Development Institute, Medical Billing, Home Study, January 2005-May 2005.
The following sets forth certain information regarding the current directors that were appointed by a vote of the Class B shareholders including age, position with the Company, principal occupation and term of service. The Company’s Class A Directors serve until the next Annual Meeting of Shareholders or until their successors are duly elected and qualified.
Director
Name of Nominee
Age
Position/Principal Occupation
Since
William S. Lay (3) (4)
Director; Former Vice President and Chief Investment Officer of FTFC
Bill H. Hill (1) (2)
Director; Former President of Eastern Oklahoma State College
Gary L. Sherrer (1) (3)
Director; Former Assistant Vice President, Division of Agricultural Sciences and Natural Resources for Oklahoma State University Foundation
Will W. Klein (1) (2)
Director; Insurance Company Chief Executive Officer
Gerald J. Kohout (1) (2)
Director; Former Officer and Director of Life and Health Insurance Companies
(1)
Member Audit Committee
(2)
Member Compensation Committee
(3)
Member Nominating and Corporate Governance Committee
(4)
Member Investment Committee
The following is a brief description of the business backgrounds of the current directors that were appointed by a vote of the Class B shareholders.
Bill H. Hill has been a member of the Board of Directors since inception in 2004. He also serves as a Director of TLIC, FBLIC and TMC. He was President of Eastern Oklahoma State College, in Wilburton, OK from 1986-2000. He retired in 2000 and has been a rancher since that time.
Will W. Klein has been a member of the Board of Directors since 2011. He also serves as a Director of TLIC, FBLIC and TMC. He has been Chief Executive Officer of SkyMed International, Inc. since 1993. Mr. Klein was named to The Order of Canada in 1983, the country’s highest civilian honor.
Gerald J. Kohout has been a member of the FBLIC Board of Directors since 2013. He also has served as a Director of FTFC, TLIC and TMC since 2015 and TRCC since 2021. He is a retired officer and director of numerous life and health insurance companies spanning a period of several decades. Mr. Kohout has extensive experience in the administrative operations of life and health insurance companies with significant experience in business mergers, acquisitions, logistics and reorganizations.
William S. Lay has been a member of the Board of Directors since 2007. He was FTFC’s Vice President, Chief Investment Officer from March 2011 through is retirement in December 2022 and served as Chief Financial Officer from April of 2007 through June 2010 and Secretary and Treasurer from April 2007 through March 2011. He continues to serve as a Director of TLIC, FBLIC, TMC and TRCC. Mr. Lay was a director of RCC from its inception in 2013 through its dissolution in 2022 when RCC’s life insurance subsidiary, RCLIC, was sold to FTFC. Prior to his retirement, Mr. Lays was a financial officer and business consultant, specializing in corporate financial and consulting services for small-sized entrepreneurial companies. Prior to that, Mr. Lay was an officer and director of numerous life insurance companies and has experience in business acquisitions, mergers and reorganizations.
Gary L. Sherrer has been a member of the Board of Directors since inception in 2004 and in 2017 was appointed the Company’s Oklahoma Legislative Liaison. He is a Director of TLIC, FBLIC and TMC. He retired from Oklahoma State University where he was serving as Assistant Vice President for External Affairs for the Division of Agricultural Sciences and Natural Resources.
Mr. Sherrer previously was Assistant Chief Executive Officer of KAMO Power, Oklahoma’s first Secretary of Agriculture, Oklahoma’s Commissioner of Agriculture, Oklahoma’s second and sixth Secretary of Environment and Director of Oklahoma’s Water Resources Board. He also served for four terms in the Oklahoma House of Representatives and in the United States Army as a combat medic in Vietnam.
Director Compensation
Effective January 1, 2020, Directors who are not employees of the Company receive a $9,500 annual retainer, paid monthly, $5,500 plus expenses for each Board of Directors meeting attended in person, telephonically or electronically and $500 for any committee meeting they attend not held in conjunction with a Board of Directors’ meeting. Committee Chairman receive an additional $9,500 annual retainer paid monthly. In addition, effective January 1, 2020, Directors who are not employees, would have the following increases in directors compensation: for each $100,000,000 in asset growth of the Company beyond $600,000,000, there will be an annual retainer increase of $1,000, a meeting attendance in person increase of $500 and an increase in the annual retainer of committee chairmen of $1,000.
The Director Compensation Table for 2024 is set forth below.
DIRECTOR COMPENSATION TABLE
Name
Fees Earned
or Paid in
Cash ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity Incentive Plan Compensation
($)
Change in
Pension value
and
Nonqualified Deferred Compensation Earnings
($)
All Other Compensation
( $)
Total
($)
Bill H. Hill
37,000
-
-
-
-
-
37,000
Will W. Klein
46,500
-
-
-
-
-
46,500
Gerald J. Kohout
37,000
-
-
-
-
-
37,000
William S. Lay
32,500
-
-
-
-
-
32,500
Charles W. Owens
41,500
-
-
-
-
-
41,500
George E. Peintner
43,000
-
-
-
-
-
43,000
Gary L. Sherrer
45,500
-
-
-
-
-
45,500
Francine M. Zahn
22,438
-
-
-
-
-
22,438
Executive Officers
The following sets forts information regarding the current executive officers of FTFC including age, current and prior positions with the Company and terms of service. The Company’s Executive Officers serve a term of one year as elected by the Board of Directors or until their successors are duly elected and qualified.
Employee
Name of Officer
Age
Position/Principal Occupation
Since
Gregg E. Zahn (1)
Chairman, President and Chief Executive Officer
Jeffrey J. Wood (2)
Chief Financial Officer, Secretary and Treasurer
(1)
Mr. Zahn was elected President and Chief Executive Officer in October 2007 and Chairman in May 2011 and previously served as Director of Training and Recruiting from 2004 through October 2007.
(2)
Mr. Wood was elected Chief Financial Officer in June 2010 and Secretary and Treasurer in March 2011.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act (“Section 16(a)”) requires the Company’s executive officers and directors, and certain persons who own more than 10% of a registered class of the Company’s equity securities (“10% Stockholders”), to file reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such executive officers, directors and 10% Stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such reports furnished to the Company and written representations that no other reports were required to be filed during 2024, the Company believes that its executive officers, directors and 10% Stockholders have complied with all Section 16(a) filing requirements applicable to them.
Corporate Governance
The Company has a Code of Conduct and Ethics (“Code”) applicable to all directors and employees, including our Chairman of the Board, Chief Executive Officer and other senior executives, to help ensure that our business is conducted in accordance with high standards of ethical behavior. The Code is published on our website at www.firsttrinityfinancial.com under “Corporate Governance” and may be obtained free of charge by contacting our corporate offices at (918) 249-2438 or requesting a copy in writing to 7633 East 63rd Place, Suite 230, Tulsa, Oklahoma 74113-1246. The Company will post amendments to or waivers from the Code of Business Conduct and Ethics (to the extent applicable to the Company’s principal executive officer, principal financial officer or principal accounting officer or controller) on its website.
The Company’s Board of Directors, Executive Officers, Officers and Management annually complete and verify biographical affidavits, questionnaires and conflict and interest forms to document compliance with the Code.
The Company has four major committees to ensure that First Trinity Financial Corporation’s activities, decisions and transactions are subject to review and scrutiny.
Audit Committee
The Audit Committee of the Board of Directors is currently composed of four directors: Will W. Klein (chairman), Bill H. Hill, Gerald J. Kohout and Gary L. Sherrer, each of whom is determined to be an independent director as the term is defined by the NASDAQ listing standards. The Board of Directors has also determined that Mr. Klein qualifies as an "audit committee financial expert," as defined in applicable SEC rules.
The Audit Committee was established by the Board of Directors in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 to oversee the Company's financial reporting process, the system of internal financial controls and audits of its financial statements. The Audit Committee (1) provides oversight of the Company’s accounting and financial reporting processes and the audit of the Company’s financial statements, (2) assists the Board of Directors in oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent public accounting firm’s qualifications, independence and performance, and the Company’s internal accounting and financial controls and (3) provides to the Board of Directors such information and materials as it may deem necessary to make the Board of Directors aware of significant financial matters that require the attention of the Board of Directors. The Audit Committee acts pursuant to a written charter adopted by the Board of Directors, which is available in the “Corporate Governance” section of the Company’s website at www.firsttrinityfinancial.com.
Compensation Committee
The Compensation Committee is currently composed of four directors: George E. Peintner (chairman), Bill H. Hill, Gerald J. Kohout and Will W. Klein, each of whom is determined to be an independent director as the term is defined by the NASDAQ listing standards. The Compensation Committee reviews and approves the compensation and benefits for the Company’s executive officers and performs such other duties as may from time to time be determined by the Board of Directors. The Compensation committee acts pursuant to a written Charter adopted by the Board of Directors, which is available in the “Corporate Governance” section of the Company’s website at www.firsttrinityfinancial.com.
Nominating and Corporate Governance Committee
The Board of Directors has a Nominating and Corporate Governance Committee. This committee meets on call and submits recommendations to the Board of Directors for the number of members to be included in the Company’s Board of Directors, the individuals to be submitted to the shareholders for election for the Company’s Board of Directors and coordinates the corporate governance activities of the Company. The Nominating and Corporate Governance Committee currently consists of four independent directors Charles W. Owens (Chairman), William S. Lay, Gary L. Sherrer and Francine M. Zahn. The Nominating and Corporate Governance committee acts pursuant to a written Charter adopted by the Board of Directors, which is available in the “Corporate Governance” section of the Company’s website at www.firsttrinityfinancial.com.
Investment Committee
The Investment Committee of the Board of Directors is currently composed of five directors: Gregg E. Zahn (chairman), William S. Lay, Charles W. Owens, George E. Peintner and Francine M. Zahn. The Investment Committee (1) reviews and approves investment transactions on at least a quarterly basis, (2) establishes the Company’s investment policy, (3) provides specific guidelines for the allocation of the Company’s available funds for investments and other purposes and (4) monitors those guidelines to ensure that available funds are properly allocated into investment categories consistent with the Company’s investment policies.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The Compensation Committee assists the Board of Directors in overseeing the management of the Company’s compensation and benefits program, chief executive officer performance and executive development and succession efforts. In addition, the Compensation Committee oversees the evaluation of management and compensation of the officers of the Company.
The primary objective of our compensation program is to offer executive officers competitive compensation packages that will permit the Company to attract and retain individuals with superior abilities and to motivate and reward these individuals in an appropriate manner in the long-term interest of the Company and its shareholders. Management provides recommendations to the Compensation Committee regarding most compensation matters, including executive compensation; however, the Compensation Committee does not delegate any of its functions to others in setting compensation. The Company does not currently engage any consultant related to executive compensation.
The Company’s compensation program for executive officers consists of base salary, consideration for annual bonuses, 401(k) plan and life, health and dental insurance coverage. These elements are intended to provide an overall compensation package that is commensurate with the Company’s financial resources, that is appropriate to assure the retention of experienced management personnel and that aligns their financial interest with those of our shareholders.
Base Salary: Salary levels recommended by the Compensation Committee are intended to be competitive with salary levels of similarly situated companies, commensurate with the executive officers' respective duties and responsibilities, and reflect the financial performance of the Company. Annual salary increases are considered based on the same criteria.
Cash Bonuses: Bonus amounts are based on individual performance and are intended to reward superior performance. The Compensation Committee may also consider additional considerations that it deems appropriate. Bonuses are discretionary and there is no formal bonus plan in place except for Gregg E. Zahn’s asset and net profit bonuses discussed below.
The following Summary Compensation Table sets forth the compensation of the executive officers’ that exceeded $100,000.
Summary Compensation Table
All Other
Salary
Bonus
Compensation
Total
Name and Principal Position
Year
($)
($)
($) (3)
($)
Gregg E. Zahn (1)
603,961
395,768
24,000
1,023,729
President and Chief Executive Officer
569,775
309,235
24,000
903,010
Jeffrey J. Wood (2)
323,027
35,000
-
358,027
Chief Financial Officer, Secretary and Treasurer
313,617
25,000
-
338,617
(1)
Mr. Zahn was elected President and Chief Executive Officer on October 4, 2007.
(2)
Mr. Wood was elected Chief Financial Officer in June 2010 and Secretary and Treasurer in March 2011.
(3)
Represents annual auto allowance of $24,000 in 2024 and 2023.
Employment Agreements
Gregg E. Zahn entered into an employment agreement with FTFC on June 7, 2010, with amendments on December 8, 2011, October 8, 2012 and April 9, 2013, September 5, 2017 and May 23, 2022. The employment agreement and amendments were reported by the Company in its Reports on Form 8-K filed on June 11, 2010, December 13, 2011, October 10, 2012, April 11, 2013, September 8, 2017 and May 25, 2022, respectively. The employment agreement dated June 7, 2010, contained the terms and conditions of the agreement.
The most recent amended agreement is continuous with automatic monthly extensions on the first day of each month, provides health, dental and vision benefits for a three year-period following the date of separation, grosses up federal and state taxes for separation payments up to three years of salary following the date of separation and is subject to earlier termination based on disability, death or termination by the Company, with or without cause.
Under the May 23, 2022, amendment:
In the event the Company undergoes a Change in Control, and so long as Employee is employed with the Company immediately before the Change in Control, Employee will receive a payment (the “Change in Control Payment”), subject to applicable withholdings and deductions, equal to the greater of (a) 2.99 times the average of Employee’s W-2 compensation (as reported in box 1) for the three completed years that immediately precede the Change in Control; and (b) three million nine hundred fifty thousand dollars ($3,950,000). The Change in Control Payment will be paid to Employee no later than sixty (60) days after the effective date of the Change in Control.
Under the September 5, 2017, amendment:
●
Mr. Zahn's annual salary of $300,000 increased annually on January 1st of each year by 6% (retroactive to January 1, 2013) during 2013 and in subsequent years as follows: 2013 - $318,000; 2014 - $337,080; 2015 - $357,304; 2016 - $378,743; 2017 - $401,467, 2018 - $425,556, 2019 - $451,089, 2020 - $478,154, 2021 - $506,843, 2022 - $537,254 and 2023 - $569,775.
●
Mr. Zahn will receive an asset growth bonus (with assets measured using the U.S. GAAP basis of accounting) as follows: $200,000 bonus when the Company’s assets reach $200,000,000; $250,000 bonus when the Company’s assets reach $250,000,000; $300,000 bonus when the Company’s assets reach $300,000,000; $350,000 bonus when the Company’s assets reach $350,000,000; $400,000 bonus when the Company’s assets reach $400,000,000; $450,000 bonus when the Company’s assets reach $450,000,000 and $500,000 bonus when the Company’s assets reach $500,000,000. More than one asset growth bonus can be reached in any given year. Mr. Zahn’s asset growth bonus is being revisited since the Company’s assets exceed $500,000,000 but Mr. Zahn was granted a $600,000 bonus at the discretion of the Board of Directors in 2020 when the Company’s assets exceeded $600,000,000.
●
Mr. Zahn will receive a net profit bonus of 5% of the net income (with operating results measured using the U.S. GAAP basis of accounting) of the Company each year after completion of the annual audit and the filing of the Company’s Form 10-K. The net profit bonus will be capped at 200% of Mr. Zahn’s base salary for the year the net profit bonus was calculated. The initial net profit bonus was calculated for the year ended December 31, 2012.
Mr. Zahn also received a monthly auto allowance of $1,100 through March 31, 2020 that was increased to a monthly auto allowance of $1,500 effective April 1, 2020 and $2,000 effective April, 1, 2021. He is entitled to participate in the Company’s employee benefit plans available to other executives. Amounts payable, as of December 31, 2024, in the event of Mr. Zahn’s termination of employment by the Company not for cause or for good reason (including salaries, bonus, auto allowance, benefits and tax rate adjustment for 2.99 years) is $3,950,000.
Jeffrey J. Wood entered into an employment agreement dated December 8, 2011 with the Company, effective and retroactive to August 1, 2011. The agreement was for a term through December 31, 2013 with automatic one-year extensions each year on December 31 and is subject to earlier termination based on disability, death, termination by the Company, with or without cause. Mr. Wood’s base salary of $200,000 effective August 1, 2011 was increased to $225,000 per year pursuant to an amendment to his employment agreement as of April 9, 2013, and effective as of January 1, 2013. The amendment was reported in the Company's Report on Form 8-K filed on April 11, 2013.
Mr. Wood’s base salary of $225,000 retroactively effective January 1, 2013 was increased to $240,000 per year pursuant to an amendment to his employment agreement as of December 23, 2015, and effective as of January 1, 2015. The amendment was reported in the Company's Report on Form 8-K filed on December 28, 2015.
Mr. Wood’s base salary of $240,000 retroactively effective to January 1, 2015 was increased to $255,000 per year pursuant to an amendment to his employment agreement as of February 26, 2016, and effective as of January 1, 2016. This annual salary of $255,000 will increase annually beginning January 1, 2017 by 3%. The amendment was reported in the Company's Report on Form 8-K filed on February 29, 2016.
A further amended agreement dated March 18, 2019 and reported in the Company’s Form 8-K filed on March 20, 2019 requires a continuous employment agreement with automatic monthly extensions on the first day of each month.
The most recent amended agreement dated August 15, 2024 and reported in the Company’s Form 8-K filed on August 20, 2014 provides a 6% annual salary increase beginning January 1, 2025 2.50% times the average of Mr. Wood’sW-2 compensation for the two completed years immediately preceding any date of separation and is subject to earlier termination based on disability, death, termination by the Company, with or without cause. He is entitled to participate in the Company’s employee benefit plans available to other executives. He is eligible for a bonus at the discretion of the Compensation Committee and the Board of Directors, based on performance. Amounts payable, as of December 31, 2024, in the event of Mr. Wood’s termination of employment by the Company, not for cause or for good reason (including salary and bonus) is $870,808.
First Trinity Financial Corporation pay versus performance table is summarized as follows:
Year
Summary Compensation
Table Total for Principal
Executive Officer ("PEO")
($)
Compensation
Actually Paid
to PEO
($)
Average Summary
Compensation Table Total
for Named Executive Officers
("NEOs") Excluding PEO
($)
Average Compensation
Actually Paid to
NEOs Excluding PEO
($)
Value of Initial Fixed $100
Investment Based On
Total Shareholder Return
($) (1)
Net Income
($)
1,023,729
1,023,729
358,027
358,027
6,416,791
903,010
903,010
338,617
338,617
7,915,361
774,623
774,623
329,484
329,484
6,184,703
(1) First Trinity Financial Corporation is a small reporting company and is not required to provide this information. Gregg E. Zahn is the Company's PEO and Jeffrey J. Wood is the Company's NEO, Non-PEO. Mr. Zahn's contractual base compensation increases each year by six percent. Mr. Zahn also receives a contractual profitability bonus of five percent of annual audited U.S. GAAP net income. Mr. Wood's contractual base compensation increased by three percent in 2022, 2023 and 2024. Mr. Wood is also eligible for a discretionary bonus based on performance.
2024 Compensation Disclosure Ratio of the Median Annual Total Compensation of All Company Employees to the Annual Total Compensation of the Company’s Chief Executive Officer
The 2024 compensation disclosure ratio of the median annual total compensation of all Company employees to the annual total compensation of the Company’s chief executive officer is as follows:
Total Compensation
Category
and Ratio
Median annual total compensation of all employees (excluding Gregg E. Zahn)
$ 80,000
Annual total compensation of Gregg E. Zahn, Chief Executive Officer
$ 1,023,729
Ratio of the median annual total compensation of all employees to the annual total compensation of Gregg Zahn, Chief Executive Officer
7.81 %
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
The following Compensation Discussion and Analysis ("CD&A") describes the material elements of compensation for executive officers identified in the Summary Compensation Table.
Compensation Philosophy
The Compensation Committee, composed of four independent directors, is responsible for implementing our compensation philosophy for directors, executive officers and employees. Our goal is to ensure we employ qualified, experienced executive officers whose financial interests are aligned with that of our shareholders. Because we do believe a systematic pattern exists between executive compensation and performance, our compensation philosophy is structured to "motivate" managerial behaviors through a combination of base and incentive compensation.
Another of our objectives is to acquire and retain people of integrity who take pride in delivering positive results. The final objective, due to our philosophy to outsource many functions and retain a low number of full-time and part-time employees, requires us to have executive officers that are able to perform and have an intimate knowledge of a combination of executive, actuarial, accounting, operating and other understandings inherent in supervising and growing a successful life insurance company.
Overview of Compensation Program
Our compensation consists of salary, bonuses, allowances and benefit plans generally administered equally for all qualified Company employees. The Compensation Committee establishes a salary for each senior executive based on long-term corporate objectives, competitive industry practices and each executive officer's contributions. The Compensation Committee seeks to ensure executive compensation is reasonable, fair and competitive. In order to make this determination, after the end of each calendar year and when financial results for the year are finalized and affirmed by the issuance of an unqualified opinion by the Company’s independent registered public accounting firm, the Compensation Committee generally evaluates the Company's performance and then conducts a similar exercise with respect to a group of comparable companies.
"Say-on-Pay" and "Say-When-on-Pay"
We believe our compensation philosophy and structure is fair for our executive officers. Shareholders will not find complex compensation formulas to evaluate and approve. However, to retain our limited number of corporate executives, we generally allow a minimum of two- and one-half years to a maximum of 2.99 years of compensation in the event of termination of employment by the Company not for cause or for good reason.
Our straightforward and simplified approach to executive compensation insulates our shareholders from the types of corporate excesses which led to the enactment of "Say-on-Pay" and "Say-When-on Pay." We believe our compensation solution favorably serves our shareholders on matters of executive pay.
Compensation Performance Analysis
Our executive management team is led by Gregg E. Zahn and Jeffrey J. Wood who are full-time employees. The Compensation Committee conducted a review of the performance of Gregg E. Zahn and Jeffrey J. Wood for the year 2024. This review included an evaluation of the progress made towards the attainment of our corporate objectives and the role these individuals played in meeting those objectives. The review also included a broad-based comparison of salaries with senior executives of other publicly traded life insurance companies.
Due to being a smaller public reporting company and that our Class A common stock is not publicly traded, it is difficult to find public life insurance companies that are comparable to us. With our life insurance business achieving investment opportunities with positive yields and pursuing acquisition and growth opportunities, the Company reported increased assets of $14,427,363 from $672,021,535 as of December 31, 2023 to $686,448,898 as of December 31, 2024 and increased shareholders’ equity of $5,034,020 from $64,016,208 as of December 31, 2023 to $69,050,228 as of December 31, 2024. The Company also achieved increased revenues of $594,717 from $75,756,472 in 2023 to $76,351,189 in 2024 and decreased net income of $1,498,570 from $7,915,361 in 2023 to $6,416,791 in 2024.
The Company's performance in 2024 reflected the business philosophy and leadership primarily of Gregg E. Zahn supported by Jeffrey J. Wood. Considering these factors, the Compensation Committee was encouraged by executive management's demonstrated leadership. The Compensation Committee considers Gregg E. Zahn and
Jeffrey J. Wood to be valuable executive officers in implementing our corporate objectives.
Gregg E. Zahn continues to lead the Company in accordance with the ideals and philosophies of acquisition of companies, organic growth of the life insurance and annuity business and pursuit of secure, attractive yielding investment returns coupled with the ultimate goal of either establishing a publicly traded stock or inclusion by an already established company with attractive liquidity settlements for FTFC’s shareholders.
Jeffrey J. Wood reports to Gregg E. Zahn and leads the daily financial and related operations of the Company in accordance with those same ideals and philosophies.
In 2024, Gregg E. Zahn and Jeffrey J. Wood met the subjective expectations of our Board of Directors and shareholders.
The Compensation Committee remains cautious about its responsibility to shareholders in setting executive compensation and has asked executive management to focus on continued asset growth and profitability. Gregg E. Zahn received a 6.00% increase in base salary to $603,961 in 2024, received a $395,768 bonus in 2024 representing 5.00% of FTFC’s U.S. GAAP net income of $7,915,361 and also received an automobile allowance of $24,000. Jeffrey J. Wood received a 3.00% increase in base salary to $323,027 in 2024 and received a bonus of $35,000 in 2024. Mr. Wood’s base salary will increase by 6% in 2025 in accordance with his amended employment contract.
Compensation Studies
To assist in evaluating the compensation for 2024 and establishing compensation for future years, the Compensation Committee utilized independent sources in a formal study to identify the total compensation within the life insurance industry of individuals with the position title chief financial officer. This independent study was not done for the position title chief executive officer but the Compensation Committee will utilize the chief financial officer independent study as a guideline in evaluating the compensation within the life insurance industry of its two executive officers. We believe an independent study is a point of reference for measurement, but not the determinative factor for the compensation of our two executives' officers. Because a formal study of chief financial officer compensation in the life insurance industry by independent sources is one of several analytic tools used in setting executive compensation, the Compensation Committee has discretion in determining the manner and extent of its use.
The specific formal study of total compensation for the position title of chief financial officer within the life insurance industry was performed by an independent source in the investment banking industry in the spring of 2024 and included twenty-three (23) life insurance companies’ information for 2021, 2022 and 2023.
Data obtained on each comparable chief financial officer compensation within the life insurance industry included base salaries, bonuses, other incentives, deferred compensation, non-cash compensations, stock incentive plans, change-in-control amounts and any other fees paid to the chief financial officer within the life insurance industry.
Comparative Compensation Analysis
The overall results of the above independent study of the chief financial officer position within twenty-three (23) life insurance companies within the life insurance industry provided additional information for the Compensation Committee to consider. As noted above, the Compensation Committee reviewed a number of factors within this independent study; however, with the focus on total compensation (base salaries, bonuses and all other compensation).
Based on the Compensation Committee's analysis, the recommended 2024 base salary compensation for Gregg E. Zahn, our President and Chief Executive Officer, and Jeffrey J. Wood, our Chief Financial Officer, Secretary and Treasurer, was determined to be low by the Compensation Committee, especially with the many roles that they perform for our Company. These amounts are below the lowest of the total compensation for the chief financial officer position compared to the companies in the independent survey. This also shows that the total compensation for the chief executive officer is probably low compared to other companies in the life insurance industry.
The reason for this low compensation for its two executive officers within the life insurance industry is that the Compensation Committee and the Board of Directors have motivated these two executive officers with employment contracts that result in change-in-control payments to produce a liquidation event or nationally exchanged traded security for the Company shareholders at per share amounts in excess of the Company’s shareholder’s investment in its Class A and Class B common stock.. In addition, the Company’s Compensation Committee and Board of Directors realize that its Class A common stock is subject to the regulations of the United States Securities and Exchange Commission but has not been publicly traded on a national exchange during the Company’s history.
In analyzing all these factors, the Compensation Committee concluded that it has two talented executive officers that are working diligently to continue the Company’s growth and profitability, continue protecting the Company’s and shareholders’ valuable investments and are seeking a liquidation event or exchange traded national security for the Company whereby the shareholders will be rewarded and the executive officers compensated.
The Compensation Committee believes that through the use of current and appropriate base salaries, bonuses and other incentives including a change-in-control employment contract feature focused on creating a positive liquidity event or nationally exchanged traded security for the Company, these compensation shortages can be managed most efficiently and effectively using Company asset growth and profitability, protection of shareholders and the desire for shareholders to receive a return on their investments as measurement and motivation standards for the many roles that these executive officers fulfill for the Company.
Board Process and Conclusion
The Board of Directors discussed the Compensation Committee's recommended 2024 compensation and adopted the recommendations as proposed. The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement, which the Board of Directors approved.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
George E. Peintner, Chairman
Bill H. Hill
Will W. Klein
Gerald J. Kohout

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the beneficial ownership of the Company’s Class A and Class B common stock as of March 10, 2025 (i) by all persons known to the Company, based on statements filed by such persons pursuant to Section 13(d) or 13(g) of the exchange act, to be the beneficial owners of more than 5% of FTFC’s common stock, (ii) by the executive officers named in the Summary Compensation Table under “Executive Compensation”, (iii) by each director, and (iv) by all current directors and executive officers as a group.
Class A
Percentage
Common Stock
Beneficially
Name
Beneficially Owned (1)
Owned (1)
Gregg E. Zahn
636,366
6.78%
Francine M. Zahn
284,741
3.03%
Gary L. Sherrer
57,042
*
George E. Peintner
53,191
*
Charles W. Owens (2)
52,957
*
Bill H. Hill
36,989
*
William S. Lay
30,027
*
Will W. Klein
13,021
*
Jeffrey J. Wood
5,189
*
Gerald J. Kohout
3,121
*
All directors and executive officers as a group (10 persons)
1,172,644
12.50%
*
represents less than 1%
(1)
As of March 6, 2023, there were 9,384,340 Class A shares issued and outstanding and entitled to vote.
(2)
Includes 4,626 shares jointly owned by Mr. Owens and his children.
Class A
Percentage
Common Stock
Beneficially
Name
Beneficially Owned (1)
Owned (1)
Gregg E. Zahn
100,000
98.91 %
Francine M. Zahn
-
-
Gary L. Sherrer
-
-
George E. Peintner
-
-
Charles W. Owens (2)
-
-
Bill H. Hill
-
-
William S. Lay
-
-
Will W. Klein
-
-
Jeffrey J. Wood
-
-
Gerald J. Kohout
-
-
All directors and executive officers as a group (10 persons)
100,000
98.91 %

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Procedures for Reviewing Certain Transactions
We have adopted a written policy for the review, approval or ratification of related party transactions. All of our officers, Directors and employees are subject to the policy. Under this policy, the Audit Committee will review all related party transactions for potential conflict of interest situations. Generally, our policy defines a “related party transaction” as a transaction in which we are a participant and in which a related party has an interest. A “related party” is:
•
any of our Directors, Officers or employees or a nominee to become a Director;
•
an owner of more than 5% of our outstanding common stock;
•
certain family members of any of the above persons; and
•
any entity in which any of the above persons is employed or is a partner or principal or in which such person has a 5% or greater ownership interest.
Approval Procedures
Before entering into a related party transaction, the related party or our department responsible for the potential transaction must notify the Audit Committee of the facts and circumstances of the proposed transaction. If the amount involved is equal to or less than $100,000, generally the proposed transaction will be exempt from this approval policy. If the amount involved exceeds $100,000, in general the proposed transaction will be submitted to the Audit Committee. Matters to be submitted will include:
•
the related party’s relationship to us and interest in the transaction;
•
the material terms of the proposed transaction;
•
the benefits to us of the proposed transaction;
•
the availability of other sources of comparable properties or services; and
•
whether the proposed transaction is on terms comparable to terms available to an unrelated third party or to employees generally.
The Audit Committee will then consider all of the relevant facts and circumstances available, including the matters described above and, if applicable, the impact on a Director’s independence. No member of the Audit Committee is permitted to participate in any review, consideration or approval of any related party transaction if such person or any of his or her immediate family members is the related party. After review, the Audit Committee, as applicable, may approve, modify or disapprove the proposed transaction. Only those related party transactions that are in, or are not inconsistent with, our best interests and that of our shareholders will be approved.
Ratification Procedures
If one of our officers or Directors becomes aware of a related party transaction that has not been previously approved or ratified by the Audit Committee, if the transaction is pending or ongoing, the transaction must be submitted, based on the amount involved, to the Audit Committee to consider the matters described above. Based on the conclusions reached, the Audit Committee will evaluate all options, including ratification, amendment or termination of the related party transaction. If the transaction is completed, the Audit Committee will (i) evaluate the transaction, taking into account the same factors as described above, to determine if rescission of the transaction or any disciplinary action is appropriate; and (ii) will request that we evaluate our controls and procedures to determine the reason the transaction was not submitted to the Audit Committee for prior approval, and whether any changes to the procedures are recommended.
We did not have any related party transactions in 2024 with our officers or Directors.
Director Independence
Although our common stock is not traded on a stock exchange or quotation system, we maintain a Board with a majority of independent directors. The Board has determined that each of the following eight members of the Board are “independent” within the meaning of applicable listing standards of the Nasdaq Stock Market and as set forth in our Corporate Governance Policy: Bill H. Hill, Will W. Klein, Gerald J. Kohout, William S. Lay, Charles W. Owens, George E. Peinter, Gary L. Sherrer and Francine M. Zahn. The Board has made an affirmative determination that each of Directors named above satisfies these categorical standards. In making its determination, the Board examined relationships between Directors or their affiliates with us and our affiliates and determined that each such relationship, if any, did not impair the Director’s independence. A copy of our governance policy is available at our website, https://firsttrinityfinancial.com/company-charters-corporate-governance.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2024 with the Company’s management. The Company’s management has primary responsibility for the Company’s financial reporting process and internal controls as well as preparation of the Company’s consolidated financial statements. The independent registered public accounting firm is responsible for performing an audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) to obtain reasonable assurance that the Company’s consolidated financial statements are free from material misstatement and expressing an opinion on the conformity of such financial statements with accounting principles generally accepted in the United States. The Audit Committee is responsible for overseeing and monitoring the independent registered accounting firm’s audit process on behalf of the Board of Directors.
The Audit Committee has discussed with KEB, the Company’s independent registered public accounting firm for the year ended December 31, 2024, the matters required to be discussed by PCAOB Auditing Standard No. 1301, “Communications with Audit Committees” as amended and adopted by PCAOB. PCAOB Auditing Standard No. 1301 requires an auditor to discuss with the Audit Committee, among other things, the auditor’s judgments about the quality, not just the acceptability, of the accounting principles applied in the Company’s financial reporting. The Audit Committee has also received the written disclosures and the letter from KEB required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence,” and has discussed with KEB its independence from FTFC.
Based on the review and discussions referred to above, the Audit Committee recommended to FTFC’s Board of Directors and the Company’s Board of Directors approved the recommendation that the audited financial statements were properly included in FTFC’s Annual Report on Form 10-K for the year ended December 31, 2024, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Will W. Klein, Chairman
Bill H. Hill
Gerald J. Kohout
Gary L. Sherrer
Principal Accounting Fees and Service
The following table shows the fees paid or accrued by the Company for the audit and other services provided by its independent registered public accounting firm, Kerber, Eck & Braeckel LLP.
Years Ended December 31,
Audit Fees (including expenses)
$ 173,000
$ 161,737
Audit Related Fees
52,755
47,700
Tax Fees
12,750
12,000
All Other Fees
1,290
Total
$ 239,173
$ 222,727
Audit fees primarily represent fees for financial services provided in connection with the audit of the Company’s consolidated financial statements, statutory financial statements of TLIC and FBLIC and Securities and Exchange Commission Form 10-K. Audit related services primarily represent fees for financial services in connection with the review of the Company’s quarterly reports and Securities and Exchange Commission Form 10-Q. The tax fees are related to the filing of the Company’s annual tax return with the Internal Revenue Service.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits
The exhibits are listed in the Exhibit Index, which is incorporated herein by reference.