INVESTMENTS

The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of the Company’s fixed maturity investments, by major security type, and equity securities as of

September

30,

2018

and

December

31,

2017

are as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of September 30, 2018
Fixed maturity investments:
U.S. government agency securities	$	6,440,955	$	—	$	(104,934	)	$	6,336,021
Obligations of states and political subdivisions		1,915,053		4,220		(17,162	)		1,902,111
Corporate debt securities		6,167,202		—		(153,821	)		6,013,381
Total fixed maturity investments		14,523,210		4,220		(275,917	)		14,251,513
Equity securities		12,037,570		4,782,643		(230,731	)		16,589,482
Hedge fund		5,357		1,521		—			6,878
Total equity securities		12,042,927		4,784,164		(230,731	)		16,596,360
Total investments	$	26,566,137	$	4,788,384	$	(506,648	)	$	30,847,873

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of December 31, 2017
Fixed maturity investments:
U.S. government agency securities	$	4,394,864	$	948	$	(15,312	)	$	4,380,500
Obligations of states and political subdivisions		3,984,633		18,065		(9,565	)		3,993,133
Corporate debt securities		6,194,920		367		(58,293	)		6,136,994
Total fixed maturity investments		14,574,417		19,380		(83,170	)		14,510,627
Equity securities		10,403,952		5,098,001		(8,749	)		15,493,204
Hedge fund		7,795		3,698		—			11,493
Total equity securities		10,411,747		5,101,699		(8,749	)		15,504,697
Total investments	$	24,986,164	$	5,121,079	$	(91,919	)	$	30,015,324

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

	12 months or greater					Less than 12 months					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
As of September 30, 2018
Fixed maturity investments:
U.S. government agency securities	$	427,154	$	(22,257	)	$	5,908,868	$	(82,677	)	$	6,336,022	$	(104,934	)
Obligations of states and political subdivisions		766,715		(16,696	)		340,894		(466	)		1,107,609		(17,162	)
Corporate debt securities		2,730,492		(101,328	)		3,282,888		(52,493	)		6,013,380		(153,821	)
Total fixed maturity investments		3,924,361		(140,281	)		9,532,650		(135,636	)		13,457,011		(275,917	)
Equity securities		76,535		(4,847	)		815,746		(225,884	)		892,281		(230,731	)
Hedge fund		—		—			—		—			—		—
Total equity securities		76,535		(4,847	)		815,746		(225,884	)		892,281		(230,731	)
Total investments	$	4,000,896	$	(145,128	)	$	10,348,396	$	(361,520	)	$	14,349,292	$	(506,648	)

	12 months or greater					Less than 12 months					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
As of December 31, 2017
Fixed maturity investments:
U.S. government agency securities	$	—	$	—		$	3,424,024	$	(15,312	)	$	3,424,024	$	(15,312	)
Obligations of states and political subdivisions		—		—			1,286,103		(9,565	)		1,286,103		(9,565	)
Corporate debt securities		2,794,836		(51,149	)		1,974,024		(7,144	)		4,768,860		(58,293	)
Total fixed maturity investments		2,794,836		(51,149	)		6,684,151		(32,021	)		9,478,987		(83,170	)
Equity securities		—		—			207,701		(8,749	)		207,701		(8,749	)
Hedge fund		—		—			—		—			—		—
Total equity securities		—		—			207,701		(8,749	)		207,701		(8,749	)
Total investments	$	2,794,836	$	(51,149	)	$	6,891,852	$	(40,770	)	$	9,686,688	$	(91,919	)

As of

September

30,

2018

and

December

31,

2017,

there were

and

securities in an unrealized loss position with an estimated fair value of

$14,349,292

and

$9,686,688,

respectively. As of

September 30, 2018

and

December

31,

2017,

and

seven

of these securities had been in an unrealized loss position for

months or greater, respectively. As of

September 30, 2018

and

December

31,

2017,

none

of these securities were considered to be other-than-temporarily impaired. The Company has the intent to hold these securities for a sufficient period of time for the value to recover and it is

not

more likely than

not

that the Company will be required to sell these securities before their fair values recover above the adjusted cost. The unrealized losses from these securities were

not

as a result of credit, collateral or structural issues.

Other-Than-Temporary Impairment Process

The Company assesses whether declines in the fair value of its fixed maturity investments classified as available-for-sale represent impairments that are other-than-temporary by reviewing each fixed maturity investment that is impaired and (

) determining if the Company has the intent to sell the fixed maturity investment or if it is more likely than

not

that the Company will be required to sell the fixed maturity investment before its anticipated recovery; and (

) assessing whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the fixed maturity investment are less than the amortized cost basis of the investment.

The Company had

planned sales of its fixed maturity investments classified as available-for-sale that were in an unrealized loss position at

September

30,

2018.

In assessing whether it is more likely than

not

that the Company will be required to sell a fixed maturity investment before its anticipated recovery, the Company considers various factors including its future cash flow requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term investments and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the

nine

months ended

September 30, 2018,

the Company did

not

recognize any other-than-temporary impairments due to sales.

In evaluating credit losses, the Company considers a variety of factors in the assessment of a fixed maturity investment including: (

) the time period during which there has been a significant decline below cost; (

) the extent of the decline below cost and par; (

) the potential for the fixed maturity investment to recover in value; (

) an analysis of the financial condition of the issuer; (

) the rating of the issuer; and (

) failure of the issuer of the fixed maturity investment to make scheduled interest or principal payments.

If we conclude a fixed income investment is other-than-temporarily impaired, we write down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the investment portfolio as of

September 30, 2018

and

December

31,

2017,

relating to

and

fixed maturity securities, amounted to

$275,917

and

$83,170,

respectively. The unrealized losses on these available for sale fixed maturity securities were

not

as a result of credit, collateral or structural issues. During the

nine

months ended and

three

months ended

September

30,

2018,

other-than-temporary impairment charges were recorded.

Fair Value of Investments

Under existing U.S. GAAP, we are required to recognize certain assets at their fair value in our consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”)

820,

fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC

820

establishes a

three

-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level

) and unobservable inputs being the lowest level (Level

). A fair value measurement will fall within the level of the hierarchy based on the inputs that are significant to determining such measurement. The

three

levels are defined as follows:

•

Level

: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level

: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in active markets. Level

inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are

not

active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•

Level

: Inputs to the valuation methodology that are unobservable for the asset or liability.

At each measurement date, we estimate the fair value of the security using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are

not

available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of

September

30,

2018

and

December

31,

2017

and what level within the fair value hierarchy each valuation technique resides:

•

U.S. government agency securities

: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S. Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are classified as Level

in the fair value hierarchy. AmerInst considers a liquid market to exist for these types of securities held. Broker quotes are

not

used for fair value pricing.

•

Obligations of state and political subdivisions

: Comprised of fixed income obligations of state and local governmental municipalities. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level

in the fair value hierarchy. AmerInst considers a liquid market to exist for these types of securities held. Broker quotes are

not

used for fair value pricing.

•

Corporate debt securities

: Comprised of bonds issued by corporations. The fair values of these securities are based on quotes and current market spread relationships, and are classified as Level

in the fair value hierarchy. AmerInst considers a liquid market to exist for these types of securities held. Broker quotes are

not

used for fair value pricing.

•

Equity securities, at fair value

: Comprised primarily of investments in the common stock of publicly traded companies in the U.S. All of the Company’s equities are classified as Level

in the fair value hierarchy. The Company receives prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.

•

Hedge fund

: Comprised of a hedge fund whose objective was to seek attractive long-term returns with lower volatility by investing in a range of diversified investment strategies. The fair value of the hedge fund is based on the net asset value of the fund as reported by the external fund manager.

May 2016,

the manager of our hedge fund portfolio chose to liquidate the fund and return its capital to the investors.

While we obtain pricing from independent pricing services, management is ultimately responsible for determining the fair value measurements for all securities. To ensure fair value measurement is applied consistently and in accordance with U.S. GAAP, we periodically update our understanding of the pricing methodologies used by the independent pricing services. We also undertake further analysis with respect to prices we believe

may

not

be representative of fair value under current market conditions. Our review process includes, but is

not

limited to: (i) initial and ongoing evaluation of the pricing methodologies and valuation models used by outside parties to calculate fair value; (ii) quantitative analysis; (iii) a review of multiple quotes obtained in the pricing process and the range of resulting fair values for each security, if available, and (iv) randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates provided by the independent pricing sources.

There have been

material changes to our valuation techniques from what was used as of

December

31,

2017.

Since the fair value of a security is an estimate of what a willing buyer would pay for such security if we sold it, we cannot know the ultimate value of our securities until they are sold. We believe the valuation techniques utilized provide us with a reasonable estimate of the price that would be received if we were to sell our assets or transfer our liabilities in an orderly market transaction between participants at the measurement date. The following tables show the fair value of the Company’s investments in accordance with ASC

820

as of

September 30, 2018

and

December

31,

2017:

					Fair value measurement using:
	Carrying amount		Total fair value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of September 30, 2018
U.S. government agency securities	$	6,336,021	$	6,336,021	$	—	$	6,336,021	$	—
Obligations of U.S. state and political subdivisions		1,902,111		1,902,111				1,902,111
Corporate debt securities		6,013,381		6,013,381				6,013,381
Total fixed maturity investments		14,251,513		14,251,513
Equity securities (excluding the hedge fund)		16,589,482		16,589,482		16,589,482
Total equity securities (excluding the hedge fund)		16,589,482		16,589,482
Hedge fund measured at net asset value (a)		6,878		6,878
Total investments	$	30,847,873	$	30,847,873	$	16,589,482	$	14,251,513	$	—

					Fair value measurement using:
	Carrying amount		Total fair value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of December 31, 2017
U.S. government agency securities	$	4,380,500	$	4,380,500	$	—	$	4,380,500	$	—
Obligations of U.S. state and political subdivisions		3,993,133		3,993,133				3,993,133
Corporate debt securities		6,136,994		6,136,994				6,136,994
Total fixed maturity investments		14,510,627		14,510,627
Equity securities (excluding the hedge fund)		15,493,204		15,493,204		15,493,204
Total equity securities (excluding the hedge fund)		15,493,204		15,493,204
Hedge fund measured at net asset value (a)		11,493		11,493
Total investments	$	30,015,324	$	30,015,324	$	15,493,204	$	14,510,627	$	—

(a)

In accordance with Subtopic

820

10,

certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have

not

been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the balance sheets.

There were

transfers between Levels

and

during the

nine

months ended

September 30, 2018

and the year ended

December

31,

2017.

Contractual Maturities

The cost or amortized cost and estimated fair value of fixed maturity investments as of

September 30, 2018

and

December

31,

2017

by contractual maturity are shown below. Expected maturities

may

differ from contractual maturities as borrowers

may

have the right to call or prepay obligations without penalties.

	Amortized Cost		Estimated Fair Value
As of September 30, 2018
Due in one year or less	$	3,085,969	$	3,079,224
Due after one year through five years		10,912,590		10,654,028
Due after five years through ten years		—		—
Due after ten years		524,651		518,261
Total	$	14,523,210	$	14,251,513

	Amortized Cost		Estimated Fair Value
As of December 31, 2017
Due in one year or less	$	1,970,793	$	1,971,237
Due after one year through five years		10,852,417		10,805,684
Due after five years through ten years		1,215,724		1,200,086
Due after ten years		535,483		533,620
Total	$	14,574,417	$	14,510,627

Information on sales and maturities of investments during the

nine

months ended

September

30,

2018

and

2017

are as follows:

	September 30, 2018			September 30, 2017
Total proceeds on sales of available-for-sale securities	$	3,419,578		$	4,144,366
Proceeds from redemptions of hedge fund investments		3,085			75,160
Proceeds from redemptions of fixed maturity investments		—			691,540
Total proceeds from maturities of fixed maturity investments		2,370,000			1,450,000

Gross gains on sales		1,448,841			1,245,755
Gross losses on sales		(13,983	)		(18,493	)
Impairment losses		—			(98,918	)
Net unrealized losses on equity investments (1)		(539,518	)		—
Net realized and unrealized gain (loss) on investments	$	895,340		$	1,128,344

Information on sales and maturities of investments during the

three

months ended

September 30, 2018

and

2017

are as follows:

	September 30, 2018			September 30, 2017
Total proceeds on sales of available-for-sale securities	$	489,440		$	1,115,439
Proceeds from redemptions of hedge fund investments		—			22,692
Proceeds from redemptions of fixed maturity investments		—			80,000
Total proceeds from maturities of fixed maturity investments		400,000			500,000

Gross gains on sales		135,997			366,562
Gross losses on sales		(13,367	)		(16,144	)
Impairment losses		—			(73,646	)
Net unrealized losses on equity investments (1)		444,424			—
Net realized and unrealized gain (loss) on investments	$	567,054		$	276,772

(

)

Effective

January

2018,

the Company adopted ASU

No.

2016

01.

The change in fair value of equity securities is now recognized in net realized and unrealized gain (loss) on investment.

Net Investment Income

Major categories of net investment income during the

nine

months ended

September 30, 2018

and

2017

are summarized as follows:

	September 30, 2018			September 30, 2017
Interest earned:
Fixed maturity investments	$	249,287		$	187,541
Short term investments and cash and cash equivalents		10,876			14,488
Dividends earned		116,432			213,358
Investment expenses		(108,687	)		(109,385	)
Net investment income	$	267,908		$	306,002

Major categories of net investment income during the

three

months ended

September

30,

2018

and

2017

are summarized as follows:

	September 30, 2018			September 30, 2017
Interest earned:
Fixed maturity investments	$	83,688		$	64,440
Short term investments and cash and cash equivalents		5,287			3,139
Dividends earned		40,362			39,497
Investment expenses		(37,122	)		(37,234	)
Net investment income	$	92,215		$	69,842