2. INVESTMENTS

NET INVESTMENT INCOME

A summary of net investment income for the years ended December 31, 2018 and 2017 is as follows:



	2018		2017
AFS, fixed maturity securities	$	2,943,083	$	2,500,136
Investment property		555,350		449,990
AFS, equity securities		266,531		434,950
Cash and short-term investments		25,303		42,426
Investment revenue		3,790,266		3,427,502
Less investment expenses		(900,000)		(795,004)
Net investment income	$	2,890,266	$	2,632,498

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, 2018 and 2017.


							Net realized
	Proceeds		Gains		Losses		gain
2018
Fixed maturity securities	$	16,966,599	$	122,900	$	(78,194)	$	44,706
Common stocks		11,843,798		1,290,148		(363,094)		927,054
Preferred stocks		3,927,722		86,862		(82,629)		4,233
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

The amortized cost and estimated fair value of fixed income AFS securities at December 31, 2018, are shown by contractual maturity below.



	Amortized Cost		Fair Value
Due in one year or less	$	2,242,382	$	2,234,271
Due after one year through five years		23,154,845		23,169,046
Due after five years through 10 years		13,837,642		13,902,040
Due after 10 years		15,645,904		15,876,778
Asset and mortgage backed securities without a specific due date		34,372,133		33,799,024
Total fixed maturity securities	$	89,252,906	$	88,981,159

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, 2018 and 2017



	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2018
Fixed maturity securities:
U.S. Treasury	$	1,348,575	$	1,328,925	$	—	$	(19,650)
MBS/ABS/CMBS		34,372,133		33,799,024		33,955		(607,064)
Corporate		37,383,903		37,366,690		376,029		(393,242)
Municipal		16,148,295		16,486,520		398,569		(60,344)
Total fixed maturity securities		89,252,906		88,981,159		808,553		(1,080,300)
Equity securities:
Common stocks		13,572,713		11,843,223		406,812		(2,136,302)
Total equity securities		13,572,713		11,843,223		406,812		(2,136,302)
Total AFS securities	$	102,825,619	$	100,824,382	$	1,215,365	$	(3,216,602)



	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)

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 $13,696,585 and $13,517,725 and commercial mortgage backed securities of $10,126,352 and $8,469,852 at December 31, 2018 and 2017, 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, 2018 and 2017. 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, 2018						December 31, 2017
			12 Months						12 Months
	< 12 Months		& Greater		Total		< 12 Months		& Greater		Total
U.S. Treasury
Fair value	$	—	$	1,328,925	$	1,328,925	$	1,038,297	$	295,428	$	1,333,725
Cost or amortized cost		—		1,348,575		1,348,575		1,046,508		300,204		1,346,712
Unrealized loss		—		(19,650)		(19,650)		(8,211)		(4,776)		(12,987)

MBS/ABS/CMBS
Fair value		16,890,857		11,956,493		28,847,350		9,754,119		7,445,071		17,199,190
Cost or amortized cost		17,039,357		12,415,057		29,454,414		9,778,528		7,645,085		17,423,613
Unrealized loss		(148,500)		(458,564)		(607,064)		(24,409)		(200,014)		(224,423)

Corporate
Fair value		14,304,322		5,745,289		20,049,611		5,583,942		2,023,856		7,607,798
Cost or amortized cost		14,550,153		5,892,700		20,442,853		5,610,093		2,048,963		7,659,056
Unrealized loss		(245,831)		(147,411)		(393,242)		(26,151)		(25,107)		(51,258)

Municipal
Fair value		3,069,720		838,980		3,908,700		478,019		1,171,520		1,649,539
Cost or amortized cost		3,100,036		869,008		3,969,044		479,904		1,186,663		1,666,567
Unrealized loss		(30,316)		(30,028)		(60,344)		(1,885)		(15,143)		(17,028)

Subtotal, fixed income
Fair value		34,264,899		19,869,687		54,134,586		16,854,377		10,935,875		27,790,252
Cost or amortized cost		34,689,546		20,525,340		55,214,886		16,915,033		11,180,915		28,095,948
Unrealized loss		(424,647)		(655,653)		(1,080,300)		(60,656)		(245,040)		(305,696)

Common stock
Fair value		8,187,764				8,187,764		637,100		—		637,100
Cost or amortized cost		10,324,066		—		10,324,066		654,800		—		654,800
Unrealized loss		(2,136,302)		—		(2,136,302)		(17,700)		—		(17,700)

Preferred stock
Fair value		—		—		—		842,530		520,710		1,363,240
Cost or amortized cost		—		—		—		870,755		540,421		1,411,176
Unrealized loss		—		—		—		(28,225)		(19,711)		(47,936)

Total
Fair value		42,452,663		19,869,687		62,322,350		18,334,007		11,456,585		29,790,592
Cost or amortized cost		45,013,612		20,525,340		65,538,952		18,440,588		11,721,336		30,161,924
Unrealized loss	$	(2,560,949)	$	(655,653)	$	(3,216,602)	$	(106,581)	$	(264,751)	$	(371,332)

As of December 31, 2018, the Company held 200 equity securities that were in unrealized loss positions. Of the 200 securities, none have been in an unrealized loss position for 12 consecutive months or longer. As of December 31, 2017, the Company held 13 equity securities that were in unrealized loss positions. Of these 13 securities, five were in an unrealized loss position for 12 consecutive months or longer and represented $19,711 in unrealized losses.

The fixed income portfolio contained 131 securities in an unrealized loss position as of December 31, 2018. Of these 131 securities, 51 have been in an unrealized loss position for 12 consecutive months or longer and represent $655,653 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 December 31, 2018, the Company recognized in net earnings $16,178 of OTTI losses on three common stock securities that were impaired during the fourth quarter of 2018. During 2017, the Company recognized $57,316 of OTTI on an ETF included in common stock that was impaired during the second quarter of 2017 and subsequently sold during the third quarter of 2017. For all fixed income securities at a loss at December 31, 2018, 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, 2018. Based on management’s analysis, it was concluded that the fixed income securities in an unrealized loss position were not other-than-temporarily impaired at December 31, 2018, and 2017.

As required by law, certain fixed maturity investments amounting to $3,742,450 and $3,962,291 at December 31, 2018 and 2017, respectively, were on deposit with either regulatory authorities or banks. In addition, $0 and $923,766 was pledged as of December 31, 2018 and 2017, respectively, as part of a capital lease arrangement.

OTHER INVESTED ASSETS

Other invested assets include privately held investments, including membership in the Federal Home Loan Bank of Chicago (FHLBC), which occurred in February 2018. Our investment in FHLBC stock is carried at cost. Due to the nature of our membership in the FHLBC, its carrying amount approximates fair value. As of December 31, 2018, there were no investments pledged as collateral with the FHLBC. There may be investments pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides. As of and during the twelve month period ending December 31, 2018, there were no outstanding borrowings with the FHLBC.

PROPERTY HELD FOR INVESTMENT

In 2018, investment property comprised of 57 apartment rental units located in Rock Island, Moline, Illinois, Silvis, Illinois and Le Claire, Iowa. Property held for investment is net of accumulated depreciation of $222,825 and $127,161 as of December 31, 2018, and 2017, respectively. Related depreciation expense was $95,664 and $76,213 for the years ended December 31, 2018, and 2017, respectively.