2. INVESTMENTS

NET INVESTMENT INCOME

A summary of net investment income for the years ended December 31, 2019 and 2018 is as follows:



	2019		2018
AFS, fixed maturity securities	$	2,998,342	$	2,943,083
Investment property		610,642		555,350
Equity securities		300,584		266,530
Cash and short-term investments		75,585		25,303
Investment revenue		3,985,153		3,790,266
Less investment expenses		(800,000)		(900,000)
Net investment income	$	3,185,153	$	2,890,266

INVESTMENT RELATED GAINS (LOSSES)

The following is a summary of the proceeds from sales, maturities, and calls of fixed maturity and equity securities and the related gross realized gains and losses for the years ended December 31, 2019 and 2018.


							Net Realized
	Proceeds		Gains		Losses		Gains
2019
Fixed maturity securities	$	27,033,200	$	321,032	$	(36,260)	$	284,772
Common stocks		8,238,753		1,443,507		(527,514)		915,993
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

The amortized cost and estimated fair value of fixed income securities at December 31, 2019, are shown as follows:



	Amortized Cost		Fair Value
Due in one year or less	$	3,228,881	$	3,244,534
Due after one year through five years		18,956,885		19,738,798
Due after five years through 10 years		15,091,864		16,340,507
Due after 10 years		17,267,874		18,472,738
Asset and mortgage backed securities without a specific due date		33,802,911		34,290,995
Total fixed maturity securities	$	88,348,415	$	92,087,572

Expected maturities may differ from contractual maturities due to call provisions on some existing securities.

The following table is a schedule of cost or amortized cost and estimated fair values of investments in securities classified as available for sale at December 31, 2019 and 2018.



					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2019
Fixed maturity securities:
U.S. Treasury	$	800,462	$	800,219	$	684	$	(927)
MBS/ABS/CMBS		33,802,911		34,290,995		540,743		(52,659)
Corporate		39,442,202		41,915,103		2,482,378		(9,477)
Municipal		14,302,840		15,081,255		808,081		(29,666)
Total AFS securities	$	88,348,415	$	92,087,572	$	3,831,886	$	(92,729)



	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 securities1		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)

1Effective January 1, 2019, the Company adopted ASU No. 2016-01. As a result, equity securities are no longer classified as available-for-sale. Prior periods have not been recast to conform to the current presentation.

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 $9,909,462 and $13,696,585 and commercial mortgage backed securities of $13,408,898 and $10,126,352 at December 31, 2019 and 2018, 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, 2019 and 2018. 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, 2019
			12 Months
	< 12 Months		& Greater		Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	—	$	699,391	$	699,391
Amortized cost		—		700,318		700,318
Unrealized loss		—		(927)		(927)
MBS/ABS/CMBS
Fair value		6,398,581		5,056,732		11,455,313
Amortized cost		6,420,488		5,087,484		11,507,972
Unrealized loss		(21,907)		(30,752)		(52,659)
Corporate
Fair value		1,396,706		—		1,396,706
Amortized cost		1,406,183		—		1,406,183
Unrealized loss		(9,477)		—		(9,477)
Municipal
Fair value		1,969,468		—		1,969,468
Amortized cost		1,999,134		—		1,999,134
Unrealized loss		(29,666)		—		(29,666)
Total debt securities available for sale
Fair value		9,764,755		5,756,123		15,520,878
Amortized cost		9,825,805		5,787,802		15,613,607
Unrealized loss	$	(61,050)	$	(31,679)	$	(92,729)


	December 31, 2018
			12 Months
	< 12 Months		& Greater		Total
U.S. Treasury
Fair value	$	—	$	1,328,925	$	1,328,925
Cost or amortized cost		—		1,348,575		1,348,575
Unrealized loss		—		(19,650)		(19,650)
MBS/ABS/CMBS
Fair value		16,890,857		11,956,493		28,847,350
Cost or amortized cost		17,039,357		12,415,057		29,454,414
Unrealized loss		(148,500)		(458,564)		(607,064)
Corporate
Fair value		14,304,322		5,745,289		20,049,611
Cost or amortized cost		14,550,153		5,892,700		20,442,853
Unrealized loss		(245,831)		(147,411)		(393,242)
Municipal
Fair value		3,069,720		838,980		3,908,700
Cost or amortized cost		3,100,036		869,008		3,969,044
Unrealized loss		(30,316)		(30,028)		(60,344)
Subtotal, fixed income
Fair value		34,264,899		19,869,687		54,134,586
Cost or amortized cost		34,689,546		20,525,340		55,214,886
Unrealized loss		(424,647)		(655,653)		(1,080,300)
Common stock1
Fair value		8,187,764		—		8,187,764
Cost or amortized cost		10,324,066		—		10,324,066
Unrealized loss		(2,136,302)		—		(2,136,302)
Total
Fair value		42,452,663		19,869,687		62,322,350
Cost or amortized cost		45,013,612		20,525,340		65,538,952
Unrealized loss	$	(2,560,949)	$	(655,653)	$	(3,216,602)

As of December 31, 2018, the Company held 200 equity securities that were in unrealized loss positions. Of these 200 securities, none were in an unrealized loss position for 12 consecutive months or longer prior to December 31, 2018.

The fixed income portfolio contained 32 securities in an unrealized loss position as of December 31, 2019. Of these 32 securities, 14 have been in an unrealized loss position for 12 consecutive months or longer and represent $31,679 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.

There were no other-than-temporary impairment losses recognized in net earnings during the year ended December 31, 2019. During 2018, the Company recognized $16,178 of OTTI on three common stock securities that were impaired during the fourth quarter of 2018. For all fixed income securities at a loss at December 31, 2019, 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 for each security, which may be maturity. The fixed income securities in an unrealized loss position were not other-than-temporarily impaired at December 31, 2019 and 2018.

As required by law, certain fixed maturity investments amounting to $3,827,627 and $3,742,450 at December 31, 2019 and 2018, respectively, were on deposit with either regulatory authorities or banks.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

The portion of net unrealized gains for the twelve months ended December 31, 2019 that relates to equity securities held as of December 31, 2019 was $2,350,513.

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, the carrying amount approximates fair value. As of December 31, 2019, 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, 2019, there were no outstanding borrowings with the FHLBC.

Also included in other invest assets is a promissory note with the option to borrow up to $1,275,000. The Company funded $625,000 on July 30, 2019. The note bears interest at 6.5%, and is amortized over 20 years with a balloon payment due July 30, 2029.

PROPERTY HELD FOR INVESTMENT

As of December 31, 2019, investment property comprised of 67 apartment rental units located in Milan, Illinois; Moline, Illinois; Rock Island, Illinois; Silvis, Illinois; and Le Claire, Iowa. As of December 31, 2018, investment property comprised of 57 apartment rental units located in Rock Island, Illinois; Moline, Illinois; Silvis, Illinois; and Le Claire, Iowa. Property held for investment is net of accumulated depreciation of $332,218 and $222,825 as of December 31, 2019, and 2018, respectively. Related depreciation expense was $109,393 and $95,664 for the years ended December 31, 2019, and 2018, respectively.