2. INVESTMENTS

NET INVESTMENT INCOME

A summary of net investment income for the years ended December 31, 2017 and 2016 is as follows:



	2017		2016
AFS, fixed maturity securities	$	2,500,136	$	2,050,205
Investment property		449,990		348,393
AFS, equity securities		434,950		372,151
Cash and short-term investments		42,426		17,189
Investment revenue		3,427,502		2,787,938
Less investment expenses		(795,004)		(820,000)
Net investment income	$	2,632,498	$	1,967,938

INVESTMENT RELATED GAINS (LOSSES)

The following is a summary of the proceeds from sales, maturities, and calls of AFS securities and the related gross realized gains and losses, excluding OTTI, for the years ended December 31, 2017 and 2016.


							Net realized
	Proceeds		Gains		Losses		gain
2017
Fixed maturity securities	$	7,431,133	$	29,436	$	(21)	$	29,415
Common stocks		5,481,197		1,025,909		(2,753)		1,023,156
Preferred stocks		260,119		12,006		—		12,006
2016
Fixed maturity securities	$	11,437,484	$	216,803	$	(3,737)	$	213,066
Common stocks		4,708,756		73,186		(26,287)		46,899
Preferred stocks		98,998		—		(10,042)		(10,042)

The amortized cost and estimated fair value of fixed income AFS securities at December 31, 2017, are shown by contractual maturity below.



	Amortized Cost		Fair Value
Due in one year or less	$	1,500,544	$	1,499,050
Due after one year through five years		22,428,557		22,911,341
Due after five years through 10 years		11,892,260		12,405,986
Due after 10 years		20,367,545		21,270,034
Asset and mortgage backed securities without a specific due date		31,584,141		31,518,662
Total fixed maturity securities	$	87,773,047	$	89,605,073

In addition, the following table is a schedule of amortized costs and estimated fair values of investments in fixed maturity and equity securities as of December 31, 2017 and 2016:



	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2017
Fixed maturity securities:
U.S. treasury	$	1,346,712	$	1,333,725	$	—	$	(12,987)
MBS/ABS/CMBS		31,584,141		31,518,662		158,944		(224,423)
Corporate		31,038,526		31,989,174		1,001,906		(51,258)
Municipal		23,803,668		24,763,512		976,872		(17,028)
Total fixed maturity securities		87,773,047		89,605,073		2,137,722		(305,696)
Equity securities:
Common stocks		7,631,180		8,534,109		920,629		(17,700)
Preferred stocks		3,783,311		3,867,429		132,054		(47,936)
Total equity securities		11,414,491		12,401,538		1,052,683		(65,636)
Total AFS securities	$	99,187,538	$	102,006,611	$	3,190,405	$	(371,332)



	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2016
Fixed maturity securities:
U.S. treasury	$	1,244,542	$	1,241,125	$	2,527	$	(5,944)
MBS/ABS/CMBS		19,751,138		19,677,200		183,175		(257,113)
Corporate		27,593,568		28,344,907		842,782		(91,443)
Municipal		14,339,843		14,870,791		665,790		(134,842)
Total fixed maturity securities		62,929,091		64,134,023		1,694,274		(489,342)
Equity securities:
Common stocks		6,311,708		6,982,547		704,768		(33,929)
Preferred stocks		2,925,434		2,798,413		5,425		(132,446)
Total equity securities		9,237,142		9,780,960		710,193		(166,375)
Total AFS securities	$	72,166,233	$	73,914,983	$	2,404,467	$	(655,717)

MORTGAGE-BACKED, COMMERCIAL MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

All of the Company’s collateralized securities carry an average credit rating of AA+ by one or more major rating agency and continue to pay according to contractual terms. Included within MBS/ABS/CMBS are residential mortgage backed securities with fair values of $13,517,725 and $10,288,405 and commercial mortgage backed securities of $8,469,852 and $7,600,109 at December 31, 2017 and 2016, respectively.

UNREALIZED LOSSES ON AFS SECURITIES

The following table is also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of December 31, 2017 and 2016. The table segregates the securities based on type, noting the fair value, cost (or amortized cost), and unrealized loss on each category of investment as well as in total. The table further classifies the securities based on the length of time they have been in an unrealized loss position.



	December 31, 2017						December 31, 2016
			12 Mos						12 Mos
	< 12 Mos.		& Greater		Total		< 12 Mos.		& Greater		Total
U.S. Treasury
Fair value	$	1,038,297	$	295,428	$	1,333,725	$	993,576	$	—	$	993,576
Cost or Amortized cost		1,046,508		300,204		1,346,712		999,520		—		999,520
Unrealized Loss		(8,211)		(4,776)		(12,987)		(5,944)		—		(5,944)

MBS/ABS/CMBS
Fair value		9,754,119		7,445,071		17,199,190		10,712,987		322,641		11,035,628
Cost or Amortized cost		9,778,528		7,645,085		17,423,613		10,968,840		323,901		11,292,741
Unrealized Loss		(24,409)		(200,014)		(224,423)		(255,853)		(1,260)		(257,113)

Corporate
Fair value		5,583,942		2,023,856		7,607,798		5,476,442		984,115		6,460,557
Cost or Amortized cost		5,610,093		2,048,963		7,659,056		5,552,624		999,376		6,552,000
Unrealized Loss		(26,151)		(25,107)		(51,258)		(76,182)		(15,261)		(91,443)

Municipal
Fair value		478,019		1,171,520		1,649,539		2,995,362		—		2,995,362
Cost or Amortized cost		479,904		1,186,663		1,666,567		3,130,204		—		3,130,204
Unrealized Loss		(1,885)		(15,143)		(17,028)		(134,842)		—		(134,842)

Subtotal, fixed income
Fair value		16,854,377		10,935,875		27,790,252		20,178,367		1,306,756		21,485,123
Cost or Amortized cost		16,915,033		11,180,915		28,095,948		20,651,188		1,323,277		21,974,465
Unrealized Loss		(60,656)		(245,040)		(305,696)		(472,821)		(16,521)		(489,342)

Common Stock
Fair value		637,100		—		637,100		—		445,872		445,872
Cost or Amortized cost		654,800		—		654,800		—		479,801		479,801
Unrealized Loss		(17,700)		—		(17,700)		—		(33,929)		(33,929)

Preferred Stock
Fair value		842,530		520,710		1,363,240		2,328,345		—		2,328,345
Cost or Amortized cost		870,755		540,421		1,411,176		2,460,791		—		2,460,791
Unrealized Loss		(28,225)		(19,711)		(47,936)		(132,446)		—		(132,446)

Total
Fair value		18,334,007		11,456,585		29,790,592		22,506,712		1,752,628		24,259,340
Cost or amortized cost		18,440,588		11,721,336		30,161,924		23,111,979		1,803,078		24,915,057
Unrealized Loss	$	(106,581)	$	(264,751)	$	(371,332)	$	(605,267)	$	(50,450)	$	(655,717)

As of December 31, 2017, the Company held 13 equity securities that were in unrealized loss positions. Of the 13 securities, 5 have been in an unrealized loss position for 12 consecutive months or longer and represent $19,711 in unrealized losses. As of December 31, 2016, the Company held 21 equity securities that were in unrealized loss positions. Of these 21 securities, 2 were in an unrealized loss position for 12 consecutive months or longer and represented $33,929 in unrealized losses.

The fixed income portfolio contained 64 securities in an unrealized loss position as of December 31, 2017. Of these 64 securities, 29 have been in an unrealized loss position for 12 consecutive months or longer and represent $245,040 in unrealized losses. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Credit-related impairments on fixed income securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net earnings. Any non-credit related impairment is recognized in comprehensive earnings. Based on management’s analysis, the fixed income portfolio is of a high credit quality and it is believed it will recover the amortized cost basis of the fixed income securities. Management monitors the credit quality of the fixed income investments to assess if it is probable that the Company will receive its contractual or estimated cash flows in the form of principal and interest.

For the year ended Decemeber 31, 2017, the Company recognized in net earnings $57,316 of OTTI losses on an ETF included in common stock that was impaired during the second quarter of 2017 and subsequently sold during in the third quarter of 2017. During 2016, the Company recognized $205,834 of OTTI on one common stock security and $6,897 of OTTI on one fixed income security. For all fixed income securities at a loss at December 31, 2017, management believes it is probable that the Company will receive all contractual payments in the form of principal and interest. In addition, the Company is not required to, nor does it intend to sell these investments prior to recovering the entire amortized cost basis of each security, which may be maturity. Management does not consider these investments to be other-than-temporarily impaired at December 31, 2017. Based on management’s analysis, it was concluded that the securities in an unrealized loss position were not other-than-temporarily impaired at December 31, 2017, and 2016.

As required by law, certain fixed maturity investments amounting to $3,962,291 and $2,958,297 at December 31, 2017 and 2016, respectively, were on deposit with either regulatory authorities or banks. In addition, $923,766 and $1,808,523 was pledged as of December 31, 2017 and 2016, respectively, as part of a capital lease arrangement.

PROPERTY HELD FOR INVESTMENT

In 2017, investment property comprised of 54 apartment rental units located in Rock Island, Moline, and Silvis, Illinois. Property held for investment is net of accumulated depreciation of $127,161 and $50,948 as of December 31, 2017, and 2016, respectively. Related depreciation expense was $76,213 and $47,793 for the years ended December 31, 2017, and 2016, respectively.