USAC and its subsidiaries share offices located at 4123 SW Gage Center Drive, Suite 240, Topeka, Kansas 66604. Effective January 1, 2015, the lease amount was $2,250 per month for three years with a one-year option under the same rate, terms, and conditions. Effective January 1, 2019 the company extended its lease for up to three additional years at a lease amount of $3,152 per month. Total rent expense was $34,671 and $27,000 for the years ended December 31, 2019 and 2018, respectively.
The Company assumes business under two reinsurance treaties. On January 1, 2013, the Company entered into an agreement to assume 20% of a certain block of health insurance policies from Unified Life Insurance Company. On September 30, 2018, the Company entered into a coinsurance agreement to assume 100% of a certain block of life insurance policies from American Life and Security Company.
In the normal course of business, we seek to limit aggregate and single exposure to losses on risk by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. We diversify our credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish our primary liability under the policies written. We regularly evaluate the financial condition of our reinsurers including their activities with respect to claim settlement practices and commutations, and establish allowances for uncollectible reinsurance recoverable as appropriate.
Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. We have no uncertain tax positions we believe are more-likely-than-not that the benefit will not to be realized.
Premium revenue: Premium revenue for the year ended December 31, 2019 was $9,076,205 compared to $8,807,779 in 2018, an increase of $268,426. The increase is a result of growth of our direct recurring premiums.
Net investment gains (losses): Net investment gains for the year ended December 31, 2019 were $1,042,334, compared to losses of $4,499 in 2018, an increase of $1,046,833. The increase in net investment gains is attributable to unrealized gains in our equity portfolio. Net investments gains for 2019 were comprised of $1,256,769 of unrealized gains in our equity portfolio and realized losses of $214,435. Realized gains and losses related to the sale of securities for the years ended December 31, 2019 and 2018 are summarized as follows:
Gain on bargain purchase: The Company acquired USALSC-Montana (Formerly Great Western Life Insurance Company) on December 14, 2018. The total identifiable net assets of the purchase were $1,640,996 and the Company paid $500,000 for the acquisition. This resulted in a gain on bargain purchase of $1,140,996 in 2018.
Expenses. Expenses for the year ended December 31, 2019 and 2018 are summarized in the table below.
Death claims: Death benefits were $1,287,893 in the year ended December 31, 2019 compared to $959,005 in 2018, an increase of $328,888. This increase is attributable to the growth of our in-force block of life insurance policies. The majority of death claims paid from inception have been on pre-need policies. We expect these claims to grow as we continue to increase the size of our in-force pre-need business.
Policyholder benefits: Policyholder benefits were $4,212,534 in the year ended December 31, 2019 compared to $3,957,090 in 2018, an increase of $255,444. The primary driver of this increase is the growth of our assumed policyholder benefits.
Commissions, net of deferrals: The Company pays commissions to the ceding company on a block of assumed policies as well as commissions to agents on directly written business. Commissions, net of deferrals, were $783,724 in the year ended December 31, 2019, compared to $637,425 in 2018, an increase of $146,299. This increase is due to an increase and changing mix of premiums.
Salaries and benefits: Salaries and benefits were $1,081,955 for the year ended December 31, 2019, compared to $1,152,728 in 2018, a decrease of $70,773. Staffing costs decreased due to reduced staffing and bonus payments.
Other expenses: Other operating expenses were $1,379,034 in the year ended December 31, 2019, compared to $1,967,796 in 2018, a decrease of $588,762. Operating costs were driven lower due to decreased information technology costs and decreased selling and marketing expenses. Additionally, updated interpretations of accounting guidance on leased software resulted in the full amortization of our software fixed assets in 2018 and there was not a similar expense in 2019.
Federal income tax benefit: In the year ended December 31, 2019, the Company recognized a deferred income tax benefit of $431,158. The benefit is the result in a reduction in the deferred tax asset valuation allowance. There was no such benefit in the year ended December 31, 2018.
Assets. Assets have increased to $54,939,249 as of December 31, 2019, an increase of $10,410,260 or 23% from December 31, 2018 assets of $44,528,989. This is primarily the result of the growth of our business and by an increase in the market value of our fixed maturity and equity investments.
Available for sale equity securities: As of December 31, 2019, we had available for sale equity assets of $10,141,503, a decrease of $744,471 from the December 31, 2018 balance of $10,885,974. This reduction is driven by a transition from exchanged traded funds to individual managed redeemable preferred stocks.
Cash and cash equivalents: As of December 31, 2019, we had cash and cash equivalent assets of $6,678,805, an increase of $4,601,159 from the December 31, 2018 balance of $2,077,646. This increase was strategic as beneficial long-term investment opportunities were limited in the last half of 2019.
Investment income due and accrued: As of December 31, 2019, our investment income due and accrued was $321,362 compared to $286,980 as of December 31, 2018, an increase of $34,382. This increase is attributable to the growth of our invested assets.
Deferred acquisition costs, net: As of December 31, 2019, our deferred acquisition costs were $2,652,674 compared to $2,757,404 as of December 31, 2018, a reduction of $104,730. The reduction is the result of amortization of the cost of reinsurance deferred on our coinsurance agreement with ALSC.
Value of business acquired, net: As of December 31, 2019 our value of business acquired asset was $559,994, compared to $580,297 as of December 31, 2018. This asset was established in the third quarter of 2017 as a result of our acquisition of DCLIC and is amortized on a straight-line basis.
Property, equipment and software, net: As of December 31, 2019 our property, equipment and software assets were $43,841, a decrease of $10,237 from the December 31, 2018 balance of $54,078. This decrease is the result of normal amortization of these assets.
Deferred tax asset, net of valuation allowance: The Company had a net deferred tax asset of $431,158 as of December 31, 2019 which was the result of a reduction in the deferred tax asset valuation allowance. The Company did not have a net deferred tax asset as of December 31, 2018 due to a 100% valuation allowance.
Other assets: As of December 31, 2019, our other assets were $372,166, a decrease of $34,803 from the December 31, 2018 balance of $406,969. This decrease was driven by a reduction in our pre-paid assets.
Liabilities. Our total liabilities were $38,063,052 as of December 31, 2019, an increase of $6,166,729 or 19% from our December 31, 2018 liabilities of $31,896,323.
Accounts payable and accrued expenses: As of December 31, 2019, our accounts payable and accrued expenses were $122,981 compared to $311,082 as of December 31, 2018, a decrease of $188,101. The decrease is driven by the release of expenses accrued as a result of our acquisition of USALSC-Montana.
Shareholders’ Equity. Our shareholders’ equity was $16,876,197 as of December 31, 2019, an increase of $4,243,531 from our December 31, 2018 shareholders’ equity of $12,632,666. The growth in shareholders’ equity was driven by an increase of $4,513,924 in other comprehensive income, from a loss of $2,184,429 as of December 31,2018 to a gain of $2,329,495 as of December 31, 2019. Other comprehensive income consists of the unrealized gains and losses on our fixed maturity portfolio. The increase in other comprehensive income is the result of lower interest rates which increases the market value of our fixed maturity securities.
Our overall investment philosophy is reflected in the allocation of our investments. We emphasize investment grade debt securities with smaller holdings in equity securities and other investments. The following table shows the carrying value of our investments by investment category and cash and cash equivalents, and the percentage of each to total invested assets as of December 31, 2019 and December 31, 2018.