The Company owns an office complex in Springfield, Illinois, which houses a portion of the insurance operations. The office buildings in this complex contain 57,000 square feet of office and warehouse space. Excess space in Springfield, IL is currently being marketed for lease.
UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. The Company also encourages its staff to be involved on a personal level through monetary giving, volunteerism and use of their talents to assist those less fortunate than themselves. Through these efforts, the Company hopes to make a positive difference in the local community, state, nation and world.
Cost of Insurance Acquired - The costs of acquiring blocks of insurance from other companies or through the acquisition of other companies are deferred and recorded as deferred acquisition costs. The deferred amounts are recorded as an asset and amortized to expense in a systematic manner as indicated in Note 1 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.
Deferred Income Taxes - The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the Consolidated Financial Statements and the tax basis of existing assets and liabilities. A valuation allowance is recognized for the portion of deferred tax assets that, in Management's judgment, is not likely to be realized. The effect on deferred income taxes of a change in tax rates or laws is recognized in income tax expense in the period that includes the enactment date. The Tax Cuts & Jobs Act ("TCJA"), signed into law on December 22, 2017, reduces the corporate Federal income tax rate from 35% to 21%, effective for years beginning after December 31, 2017. Refer to Note 1 - Summary of Significant Accounting Policies and Note 6 - Income Taxes in the Notes to the Consolidated Financial Statements for further disclosure regarding the TCJA.
One-time events, primarily reflected in realized gains, comprise a substantial portion of the net income and revenue reported by the Company during 2018 and 2017. The magnitude of realized investment gains and losses in a given year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any impairments on investments. Future earnings will be significantly negatively impacted should earnings from these one-time items not be realizable in a future period. While Management believes there remain additional investments with such one-time earnings, when or if realized remains uncertain.
Total benefits and other expenses paid in 2018 were $24.8 million compared to $25.4 million in 2017.
Income from the fixed maturities investment portfolio is down approximately 16% when comparing 2018 and 2017 results. The decrease is attributable to the Company holding fewer bonds combined with upgrading credit quality. During 2017 and 2018, the Company sold some lower rated, higher yielding securities and replaced them with higher rated, lower yielding securities.
Income from the real estate portfolio was up approximately 39% as compared to the prior year. The increased earnings are the result of the Company receiving additional rental income from real estate owned. The Company also recognized an increase of approximately 82%, as compared to the prior year, in oil and gas royalties from real estate owned. The earnings from real estate are expected to vary from year to year depending on the occupancy of the real estate and the oil and gas market.
Net realized investment gains were up approximately 25% in 2018 as compared to 2017. As seen in the table above, the 2018 gains were the result of the sale of certain fixed maturities and real estate, which were offset by the recognition of an other-than-temporary impairment on a parcel of real estate. Realized investment gains are the result of one-time events and are expected to vary from year to year.
The 2018 realized gains from real estate are the result of the Company selling three real estate parcels. The 2017 realized gains from real estate are mainly attributable to the sale of two real estate parcels, which produced realized gains of approximately $3.5 million.
During 2018 and 2017, realized gains were offset by other-than-temporary impairments of $300,000 and $762,161, respectively. The other-than-temporary impairments were taken as a result of Management’s assessment and consideration of the length of time the securities have remained in an unrealized loss position and as a result of management’s analysis and determination of value. The investments were written down to better reflect their current estimated fair value.
As a result of adopting ASU 2016-01, the 2018 net investment gains included an increase in the fair value of equity securities of $10.4 million. The 2017 increase in the fair value of equity securities of $8.4 million was included in the change in net unrealized investment gains in other comprehensive income. See Note 2 to the Consolidated Financial Statements for details regarding the components of net investments gains (losses) and the change in net unrealized gains (losses) from investments.
The Company has seen significant unrealized gains on its equity investments during 2018. A significant portion of these gains are from two equity holdings, both in the area of oil and gas. While the Company has had very strong unrealized gains during 2018, a pull back in the stock market, particularly in the oil and gas arena, could slow these gains or even result in future period unrealized losses. Management believes these equity investments continue to be solid investments for the Company and have further growth potential; however, changes in market conditions could cause volatility in market prices.
The reclassification of the change in the fair value of equity securities to a component of net income, as a result of ASU 2016-01, resulted in several larger variances when comparing current and prior year numbers. As a result of ASU 2016-01, approximately $10.4 million of unralized gains from the change in the fair value of equity securities was reported as a component of net income in 2018 rather than as a component of accumulated other comprehensive income. If you excluded the change in the fair value of equity securities from the calculations, the revenues and expenses, as a percentage of the total, are comparable from the current and prior year.
The Company reported total benefits and other expenses of $24.8 million and $25.4 million for the twelve-month periods ended December 31, 2018 and 2017, respectively. Benefits, claims and settlement expenses represented approximately 63% and 66% of the Company’s total expenses for 2018 and 2017, respectively. The other major expense category of the Company is operating expenses, which represented 34% and 31% of the Company’s total expenses for 2018 and 2017, respectively.
As of December 31, 2018, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders’ equity or results from operations. To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments available for sale". Investments available for sale are carried at market value, with changes in market value charged directly to the other comprehensive component of shareholders' equity. Changes in the market value of available for sale securities resulted in net unrealized gains (losses) of approximately $(7.7) million and $17.2 million as of December 31, 2018 and 2017, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to changes in interest rates in the market place.
Management continues to view the Company’s investment portfolio with utmost priority. Significant time has been spent internally researching the Company’s risk and communicating with outside investment advisors about the current investment environment and ways to ensure preservation of capital and mitigate losses. Management has put extensive efforts into evaluating the investment holdings. Additionally, members of the Company’s Board of Directors and investment committee have been solicited for advice and provided with information. Management reviews the Company’s entire portfolio on a security level basis to be sure all understand our holdings, potential risks and underlying credit supporting the investments. Management intends to continue its close monitoring of its bond holdings and other investments for possible deterioration or market condition changes. Future events may result in Management’s determination that certain current investment holdings may need to be sold which could result in gains or losses in future periods. Such future events could also result in other than temporary declines in value that could result in future period impairment losses.
Liquidity provides the Company with the ability to meet on demand the cash commitments required by its business operations and financial obligations. The Company’s liquidity is primarily derived from a portfolio of marketable securities and line of credit facilities. The Company has two principal needs for cash - the insurance company’s contractual obligations to policyholders and the payment of operating expenses.
The Company expects to have readily available funds for the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiary through internally generated cash flow and the credit facilities. In the unlikely event that more liquidity is needed, the Company could generate additional funds through such sources as a short-term credit facility and intercompany borrowing.
Cash used in operating activities was approximately $5.4 million and $13.2 million in 2018 and 2017, respectively. Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments. Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses. The Company has not marketed any significant new products for several years. As such, premium revenues continue to decline. Management anticipates future cash flows from operations to remain similar to historic trends.
The Company had cash and cash equivalents of approximately $20.2 million and $25.4 million as of December 31, 2018 and 2017, respectively. The Company has a portfolio of marketable fixed and equity securities that are available for sale, if an unexpected event were to occur. These securities had a fair value of approximately $240.7 million and $238 million at December 31, 2018 and 2017, respectively. However, the strong cash flows from investing activities, investment maturities and the availability of the line of credit facilities make it unlikely that the Company would need to sell securities for liquidity purposes. See Note 2 - Investments in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company’s investment portfolio.
The Company’s capital structure consists of available short-term debt, long-term debt and shareholders’ equity. A complete analysis and description of the short-term and long-term debt issues available as of December 31, 2018 and 2017 are presented in Note 7 - Credit Arrangements in the Notes to the Consolidated Financial Statements.
Effective January 1, 2018, the Company adopted ASU 2016-01. As a result equity securities are no longer classified as available-for-sale with unrealized gains and losses recognized in other comprehensive income; rather, all changes in the fair value of equity securities are now recognized in net income. The Company reclassified approximately $18.3 million of unrealized gains from equity securities from being a component of accumulated other comprehensive income to a component of retained earnings.
The Company's investments provide sufficient return to cover future obligations. The Company carries all of its fixed maturity holdings as available for sale, which are reported in the Consolidated Financial Statements at their fair value.
UTG’s life insurance subsidiary has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.
Equity Securities at Fair Value - Investments in equity securities, which include common and preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss) upon adoption of ASU 2016-01.
Equity Securities at Cost - The Company adopted ASU 2016-01 during the current year and transferred equity securities of $12,118,617, that do not have a readily determinable fair value, from equity securities at fair value to equity securities at cost on the financial statements. There was no impact to the Consolidated Statements of Operations or net Shareholders' Equity as a result of the change. These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Impairment of Investments - The Company evaluates its investment portfolio for other-than-temporary impairments as described in Note 2 - Investments. If a security is deemed to be other-than-temporarily impaired, the cost basis of the security is written down to fair value and is treated as a realized loss.
Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the underlying reinsured contracts. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.
Property and Equipment - Company-occupied property, data processing equipment and furniture and office equipment are stated at cost less accumulated depreciation of $5,655,593 and $5,225,333 at December 31, 2018 and 2017, respectively. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of 3 to 30 years. Depreciation expense was $430,260 and $446,117 for the years ended December 31, 2018 and 2017, respectively.
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement or ASU 2018-13. ASU 2018-13 modifies certain disclosure requirements related to fair value measurements including requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements and a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
In August 2018, the FASB issued Accounting Standards Update No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts or ASU 2018-12. ASU 2018-12 significantly changes how insurers account for long-duration insurance contracts. The new guidance will require insurers to review and update, if necessary, the assumptions used to measure insurance liabilities periodically, rather than retain assumptions used at contract inception. The updated guidance also changes the recognition and measurement of deferred acquisition costs (DAC) and created a new category of benefit features called market risk benefits (MRB) that will be measured at fair value. The guidance also significantly expands the disclosure requirements for long-duration contracts. The ASU is effective for fiscal years, and interim periods within those years, for years beginning after December 15, 2020 and early adoption is permitted. The guidance on measuring the liabilities for future policy benefits and DAC will be adopted on a modified retrospective basis as of the earliest period presented in the year of adoption. The guidance on MRB will be adopted on a retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
In June 2018, the FASB issued Accounting Standards Update No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Non-Employee Share Based Payment Accounting or ASU 2018-07. The amendment in ASU 2018-07 simplifies the accounting for nonemployee share based payments by aligning the measurement and classification guidance for share based payments to nonemployees with share based payments to employees. Under this guidance, the measurement of equity classified awards will be fixed at the grant date. This guidance is effective in annual periods beginning after December 15, 2018. The Company has evaluated the impact of the ASU, and determined that it does not significantly impact the Company’s financial statements.
The following tables provide a summary of fixed maturities available for sale by original or amortized cost and estimated fair value:
(1) Effective January 1, 2018, the Company adopted ASU 2016-01 and equity securities are no longer classified as available-for-sale. Prior periods have not been restated to conform to the current presentation. See Note 1 to the Consolidated Financial Statements for additional information.
The Company held below investment grade investments with an estimated market value of $2,618,594 and $21,108,077 as of December 31, 2018 and December 31, 2017, respectively. The investments are all classified as “All other corporate bonds”.
Substantially all of the unrealized losses on fixed maturities available for sale at December 31, 2018 and 2017 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized losses on equity investments were primarily attributable to normal market fluctuations. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company’s evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of December 31, 2018 and 2017.
The Company held equity investments with an aggregate cost of $12,118,617 at December 31, 2018. These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management did not identify any events or changes in circumstances that might have a significant adverse effect on the reported value of those investments. Based on Management's evaluation of the expected cash flow of the investments, and the Company's ability and intent to hold the investments for a reasonable period of time, the Company does not deem an other-than-temporary impairment necessary at December 31, 2018.
Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Consolidated Statements of Operations. Trading Securities included exchange-traded equities and exchange-traded options. Trading securities carried as liabilities were securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, was recognized upon the termination of the short sale. Earnings from trading securities were classified in cash flows from operating activities. The Company did not hold any trading securities at December 31, 2018 or 2017.
During 2018 and 2017, the Company acquired $91,954 and $360,531 in mortgage loans, respectively, of participation mortgage loans. FSNB services the majority of the Company’s mortgage loan portfolio. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.
The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact.
A mortgage loan reserve is established and adjusted based on Management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The mortgage loan reserve was $0 at December 31, 2018 and December 31, 2017.
Investment Real estate acquired through foreclosure, consisting of properties obtained through foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is reported on an individual asset basis at the lower of cost or fair value, less disposal costs. Fair value is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources. When properties are acquired through foreclosure, any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recognized and charged to the Consolidated Statements of Operations. Based upon Management’s evaluation of the real estate acquired through foreclosure, additional expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations.
The other-than-temporary impairments recognized during 2017 and 2018 were taken as a result of Management's assessment and determination of value of the investments. The investments were written down to better reflect their current expected value.
Based on Management’s review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Consolidated Statements of Operations for the periods ended December 31:
The Company had investments with a fair value of $8,317,514 and $8,642,633 on deposit with various state insurance departments as of December 31, 2018 and 2017, respectively.
The Company measures its assets and liabilities recorded at fair value in the Consolidated Balance Sheets based on the framework set forth in the GAAP fair value accounting guidance. The framework establishes a fair value hierarchy of three levels based upon the transparency of information used in measuring the fair value of assets or liabilities as of the measurement date. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three categories.
The Company determines the existence of an active market for an asset or liability based on its judgment as to whether transactions for the asset or liability occur in such market with sufficient frequency and volume to provide reliable pricing information. If the Company concludes that there has been a significant decrease in the volume and level of activity for an investment in relation to normal market activity for such investment, adjustments to transactions and quoted prices are made to estimate fair value.
The following table presents the Company’s assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2018.
The Company transferred certain cost method investments out of Level 3 during 2018. Transfers occur when there is a lack of observable market information.
The carrying values and estimated fair values of certain of the Company’s financial instruments not recorded at fair value in the Consolidated Balance Sheets are shown below. Because the fair value for all Consolidated Balance Sheet items are not required to be disclosed, the aggregate fair value amounts presented below are not reflective of the underlying value of the Company.
Most recently, UG utilized reinsurance agreements with Optimum Re Insurance Company (“Optimum”), and Swiss Re Life and Health America Incorporated (“SWISS RE”). Optimum and SWISS RE currently hold an “A-” (Excellent) and "A+" (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993, and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000. Ceded amounts are shared equally between the two reinsurers on a yearly renewable term (“YRT”) basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers.
The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2018 and 2017 were as follows:
The expense for income taxes differed from the amounts computed by applying the applicable United States statutory rate of 21% and 35% as of December 31, 2018 and 2017, respectively, before income taxes as a result of the following differences:
As a result of the TCJA described above in Note 1 - Summary of Significant Accounting Policies, the Company has recognized a decrease to their net deferred tax liability as of December 31, 2017 in the amount of $7,330,936. The Company has determined that no other changes are required to the deferred tax liability, and the current income tax expense is unaffected by this change in the law.
At December 31, 2018 and 2017, the Company had gross deferred tax assets of $2,723,053 and $1,027,203, respectively, and gross deferred tax liabilities of $11,836,533 and $12,023,607, respectively, resulting from temporary differences primarily related to the life insurance subsidiary. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded (except as noted below) relating to the Company’s deferred tax assets since, in Management’s judgment, the Company will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.
The Company’s Federal income tax returns are periodically audited by the Internal Revenue Service (“IRS”). There are currently no examinations in process, nor is Management aware of any pending examination by the IRS. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company has evaluated its tax positions, expiring statutes of limitations, changes in tax law and new authoritative rulings and believes that no disclosure relative to a provision of income taxes is necessary, at this time, to cover any uncertain tax positions. Tax years that remain subject to examination are the years ended December 31, 2015, 2016, 2017 and 2018.
At December 31, 2018 and 2017, the Company had the following lines of credit available:
During May of 2018, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity.
The following table represents the total funding commitments and the unfunded commitment as of December 31, 2018 related to certain investments:
During 2018, the Company committed to invest in Master Mineral Holdings III, LP (“MMH”), which purchases land for leasing opportunities to those looking to harvest natural resources. MMH makes capital calls to its investors as funds are needed for continued land purchases.
During 2018, the Company committed to invest in Barton Springs Music, LLC (“Barton”), which invests in music royalties. Barton makes capital calls to its investors as funds are needed to acquire the royalty rights.
In December of 2018, the Company issued 2,994 shares of its common stock as compensation to the Directors. The shares were valued at $32.50 per share, the market value at the date of issue. During 2018, the Company recorded $97,305 in operating expense related to the stock issuance. In December of 2017, the Company issued 2,560 shares of its common stock as compensation to the Directors. The shares were valued at $25.00 per share, the market value at the date of issue. During 2017, the Company recorded $64,000 in operating expense related to the stock issuance.
The computation of diluted earnings per share is the same as basic earnings per share for the years ending December 31, 2018 and 2017, as there were no outstanding securities, options or other offers that give the right to receive or acquire common shares of UTG.
Statutory Restrictions - Restrictions exist on the flow of funds to UTG from its insurance subsidiary. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. UG is required to maintain minimum statutory surplus of $2,500,000. At December 31, 2018, substantially all of the consolidated shareholders' equity represents net assets of UTG’s subsidiaries.
UG is domiciled in the state of Ohio. Ohio requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior year statutory net income or b) 10% of statutory capital and surplus. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $5 million and $2 million to UTG in 2018 and 2017, respectively. No extraordinary dividends were paid during the two year period. UTG used the dividends received during 2018 and 2017 to purchase outstanding shares of UTG stock and for general operations of the Company.
The articles of incorporation of UG contain the following language under item 12 relative to related party transactions:
Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2018 and 2017, UG paid $7,093,227 and $7,213,590, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management’s opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.
As previously disclosed in the Notes Receivable section of Note 2 - Investments, several of the Company’s notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50%. The total amount of loans participated to FSF was $250,000 as of December 31, 2018 and
During 2016, UG and FSF established a partnership agreement and formed a limited liability company to purchase real estate. FSF contributed $140,000 to the partnership, which gave them a 10% ownership in the LLC. The property held by this LLC was sold in January of 2019 and the funds from the sale were subsequently distributed to the members. The LLC is expected to be dissolved during 2019.
The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 20% of total life insurance in force at December 31, 2018 and 2017, respectively. Insurance ceded represented 35% and 36% of premium income for 2018 and 2017, respectively. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.
The Company owns a variety of investments associated with the oil and gas industry. These investments represented approximately 25% and 27% of the Company’s total invested assets at December 31, 2018 and 2017, respectively.