10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2019

Commission File Number 000-55627

US ALLIANCE CORPORATION

Kansas	26-4824142
State of Incorporation	IRS Employer Identification Number
4123 SW Gage Center Drive, Suite 240 Topeka, Kansas 66604	(785) 228-0200
Address, including zip code, of principal executive offices	Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Securities registered pursuant to Section 12(g) of the Act: 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value per share	N/A	N/A

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☑
						Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☑

As of February 1, 2020 the aggregate market value of voting and non-voting common equity held by non-affiliates of US Alliance could not be calculated as no established public trading market for our equity exists.

Applicable only to registrants involved in bankruptcy proceedings during the preceding five years

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

No established public trading market for our common stock currently exists. As of February 3, 2019, 7,735,116 shares of our common stock were outstanding.

Documents Incorporated By Reference

Information required by Part III of this Annual Report on Form 10-K is incorporated by reference to portions of our definitive proxy statement for our 2020 annual meeting of stockholders which we will file with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2019.

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	11
Item 4.	Mine Safety Disclosures	11
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	Selected Financial Data	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative And Qualitative Disclosures About Market Risk	24
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	24
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	24
Item 11.	Executive Compensation	24
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
Item 13.	Certain Relationships and Related Transactions and Director Independence	25
Item 14.	Principal Accountant Fees and Services	25
PART IV
Item 15.	Exhibits and Financial Statement Schedules	26
	Exhibit Index	26
	Signatures	29

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, and the Annual Report to Shareholders of which this report is a part, contain forward-looking statements within the meaning of the U.S. federal securities laws. You can identify forward-looking statements by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” “may,” “will” or “should,” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties, and similar references to future periods.

We base these and other forward-looking statements on our current expectations and assumptions regarding our business, the economy and other future conditions; however, our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Forward-looking statements, which by their nature relate to the future, are subject to inherent uncertainties, risks and changes in circumstances which we cannot easily predict. Important factors that could cause actual results to differ materially and adversely from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions.

Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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PART I

ITEM 1. BUSINESS.

Overview and History - US Alliance Corporation ("USAC") was formed as a Kansas corporation on April 24, 2009 to raise capital to form a new Kansas-based life insurance company. Our offices are located at 4123 SW Gage Center Drive, Suite 240, Topeka, Kansas 66604. Our telephone number is 785-228-0200 and our website address is www.usalliancecorporation.com.

USAC has five wholly-owned operating subsidiaries. US Alliance Life and Security Company ("USALSC") was formed June 9, 2011, to serve as our life insurance company. US Alliance Marketing Corporation ("USAMC") was formed April 23, 2012, to serve as a marketing resource. US Alliance Investment Corporation ("USAIC") was formed April 23, 2012 to serve as investment manager for USAC. Dakota Capital Life Insurance Company (“DCLIC”), was acquired on August 1, 2017 when USAC merged with Northern Plains Capital Corporation (“NPCC”). US Alliance Life and Security Company - Montana (USALSC-Montana), was acquired December 14, 2018. Both DCLIC and USALSC-Montana are wholly-owned subsidiaries of USALSC. Unless the context otherwise indicates, references in this registration statement to "we", "us", "our", or the "Company" refer collectively to USAC and its subsidiaries.

We initially capitalized our subsidiaries with proceeds from intrastate public offering(s) registered by qualification with the office of Kansas Securities Commissioner.

USALSC received a Certificate of Authority from the Kansas Insurance Department ("KID") effective January 2, 2012, and sold its first insurance product on May 1, 2013. USALSC currently offers the following eight product categories:

► Solid Solutions Term Life Series®, Registered Trademark No 4,740,828. This simplified issue term life insurance product is designed to provide coverage with a face value of $250,000 or less. This product features limited underwriting and is offered with 10, 20, 25, and 30 year terms.

► Sound Solutions Term Life Series®, Registered Trademark No, 4,740,827. This is a fully underwritten term life insurance product designed to provide coverage for higher face amounts. This product features multiple risk classifications and is offered with 15, 20, 25 and 30 year terms.

► Pioneer Whole Life. This is a traditional whole life insurance product designed to provide permanent coverage with a limited premium paying period. This product is sold with death benefits typically ranging from $25,000 to $100,000.

► Legacy Juvenile Series®, Registered Trademark No. 4,577,835. This product is term life insurance to age 25 available for purchase on children up to the age of 16 in an amount of $10,000 or $20,000 with a one-time premium payment.

► American Annuity Series®, Registered Trademark No. 4,582,074. This product is a flexible premium deferred annuity with initial rates guaranteed for five years by company practice.

► Thoughtful Pre-Need Series®, Registered Trademark No 4,620,073. This series of products includes a single or multiple pay premium pre-need whole life insurance policy sold by funeral directors who are licensed by the KID in conjunction with a preplanned funeral. This product is typically sold with smaller death benefits than our traditional Pioneer Whole Life.

► Group Products. This is a series of group non-medical insurance products developed for the small group marketplace. These products are sold to employers and provide benefits for their employees. Our group suite of products includes group term life insurance, group long term disability, and group short term disability.

► Critical Illness. This individual policy provides cash benefits to the insured should certain defined illnesses or injuries occur.

DCLIC received a Certificate of Authority from the North Dakota Insurance Department ("NDID") effective January 24, 2012. DCLIC currently offers the following eight product categories:

► Prarie Term Life Series®, Registered Trademark No 5,266,633. This series of products include a simplified issue term life insurance product is designed to provide coverage with a face value of $250,000 or less and a fully underwritten term life insurance product designed to provide coverage for higher face amounts.

► Accumulator Whole Life. This is a hybrid product featuring a limited pay whole life insurance policy and a flexible premium deferred annuity rider.

► Frontier Whole Life. This is a traditional whole life insurance product designed to provide permanent coverage with a limited premium paying period. This product is sold with death benefits typically ranging from $25,000 to $100,000.

► Little Missouri Juvenile Series®, Registered Trademark No. 5,271,811. This product is term life insurance to age 25 available for purchase on children up to the age of 16 in an amount of $10,000 or $20,000 with a one-time premium payment.

► Badlands Annuity Series®, Registered Trademark No. 5,266,632. This product is a flexible premium deferred annuity with initial rates guaranteed for five years by company practice.

► Peace Garden Pre-Need Series®, Registered Trademark No. 5,271,810. This series of products includes a single or multiple pay premium pre-need whole life insurance policy sold by funeral directors who are licensed by the NDID in conjunction with a preplanned funeral. This product is typically sold with smaller death benefits than our traditional Frontier Whole Life.

► Dakota Group Series®, Registered Trademark No. 5,402,079. This is a series of group non-medical insurance products developed for the small group marketplace. These products are sold to employers and provide benefits for their employees. Our group suite of products includes group term life insurance, group long term disability, and group short term disability.

► Critical Illness. This individual policy provides cash benefits to the insured should certain defined illnesses or injuries occur.

USALSC-Montana is not marketing products at this time.

Our single pay life products (which include our Juvenile and Pre-Need products) accounted for 56% of 2019 direct premium revenue. Our individual life and Critical Illness products (which include Term Life and Whole Life products) accounted for 25% of 2019 direct premium revenue. Our group products accounted for 19% of 2019 direct written premiums.

USALSC and DCLIC seek opportunities to develop and market additional products.

Our business model also seeks the acquisition by USAC and/or its subsidiaries of other insurance and insurance related companies, including third-party administrators, marketing organizations, and rights to blocks of insurance business through reinsurance or other transactions.

Material Agreements and Partners - Effective January 1, 2013, USALSC entered into a reinsurance agreement with Unified Life Insurance Company (“ULIC”) to assume 20% of a certain block of health insurance policies. This agreement renews annually unless either party provides written notice of its intent not to renew at least 120 days prior to the expiration of the then-current term. The agreement provides for monthly settlement. For the year ended December 31, 2019, USALSC assumed premiums of $3,909,810.

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On September 1, 2015, USALSC entered into an agreement to provide certain insurance administrative functions, data processing systems, daily operational services, management consulting, and marketing development to Dakota Capital Life Insurance Company. This agreement has an initial term of 60 months (beginning on September 1, 2015), and requires 90-day advance written notice to terminate. In addition, the agreement requires that certain products will be exclusively administered by USALSC and administrative services with respect to such products may not be transferred without our consent. The agreement provides for monthly settlement. On August 1, 2017, DCLIC became a wholly-owned subsidiary of USALSC as described below. Subsequent to the acquisition of DCLIC, this agreement became an inter-company agreement and is eliminated as a part of the consolidation of the financial statements of the companies.

On August 1, 2017 the Company acquired NPCC pursuant to a Plan and Agreement of Merger dated May 23, 2017, under which Alliance Merger Sub, Inc. (“Acquisition”), a wholly owned subsidiary of the Company, merged with and into Northern Plains (“Merger”) with Acquisition being the surviving company. Pursuant to the agreement, the Company exchanged .5841 shares of the Company’s common stock for each share of Northern Plains common stock, or 1,644,458 shares. Subsequent to the merger, Acquisition was merged into the Company and DCLIC was contributed to USALSC.

On September 30, 2017, USALSC entered into a coinsurance agreement with American Life and Security Corporation (“ALSC”) to assume 100% of a certain block of life insurance policies. USALSC is also the servicer of this block of policies. USALSC paid a ceding commission of $1,850,000 and received $7,153,663 from ALSC. The agreement will remain in effect until all liabilities associated with this block of policies have been satisfied.

On December 14, 2018, USALSC acquired Great Western Life Insurance Company (GWLIC) pursuant to Stock Purchase agreement entered into on October 11, 2018 with Great Western Insurance Company, a wholly-owned subsidiary of American Enterprise Group, Inc. USALSC paid $500,000 to acquire all outstanding shares of GWLIC. Subsequent to the acquisition, GWLIC was renamed US Alliance Life and Security Company – Montana.

USAC uses the actuarial firm of Miller & Newberg to provide valuation, pricing and illustration actuarial services for USALSC and DCLIC.

Investments – USAC and USAIC contracted in 2013 with New England Asset Management (NEAM), a Berkshire Hathaway subsidiary, to manage the investments of USALSC and a portion of the investments of USAC. USALSC, DCLIC and USALSC-Montana have investment management agreements with USAIC, who has a sub-advisory agreement with NEAM. DCLIC was added to this agreement on August 1, 2017 and USALSC-Montana was added to this agreement on December 14, 2018. The investment parameters are determined by Kansas law, the KID, the North Dakota Insurance Department, and the Montana Insurance Department, as well as the internal investment policies of USALSC, DCLIC, USALSC-Montana and USAC.

USAC internally manages a portfolio of equities within its investment policy guidelines (as modified from time to time, "Investment Policy"), which consider type of investments and investment instruments, and establishes diversification benchmarks to help manage investment risk. USAC's investment in its subsidiaries is managed outside of its Investment Policy.

The USAC Investment Policy may be modified by USAC's Board of Directors (the "Board" or "Board of Directors") in compliance with applicable law.

The following summarizes USAC’s Investment Policy, effective September 13, 2018 as amended:

► Approved Investment Instruments. We may invest in the following approved investment classes in accordance with the restrictions and subject to the benchmark ranges set forth in our Investment Policy and described below:

♦ United States Government Securities — bonds or other evidences of indebtedness that are fully guaranteed or insured by the U.S. Government or any agency or instrumentality thereof.

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♦ Securities of the District of Columbia, State, Insular or Territorial Possession Government of the United States —bonds or other evidences of indebtedness, without limitation, of the District of Columbia, State, or any political subdivision of such, or Insular or Territorial Possession of the United States.

♦ Canadian Government, Provincial and Municipal Obligations —bonds or other evidences of indebtedness issued by the Dominion of Canada, or by any Province thereof, or by any municipality, agency or instrumentality thereof.

♦ Fixed Income Obligations — bonds or other evidence of indebtedness issued, assumed or guaranteed by a corporation.

♦ Equity Interests - preferred stocks, common stocks, mutual funds, exchange traded funds, master limited partnerships and other securities representing equity ownership interests in a corporation, provided that we may not own more than 2% of any corporation, mutual fund, exchange traded fund, master limited partnership or other equity security.

♦ Real Estate - real estate for use in the operations of the Company, which we refer to as "Home Office Real Estate," or for the production of income. We may also invest in shares of beneficial interest in or obligations issued by a Real Estate Investment Trust qualified under pertinent sections of the United States Internal Revenue Code.

♦ Mortgage Loans - first-lien mortgage loans on commercial or residential property with loan to value of no greater than 80% at the time of purchase.

♦ Mortgage - Backed Securities - mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), or a private entity. Any such securities must be rated investment grade by Moody's, S&P or Fitch.

♦ Asset-Backed Securities - asset-backed securities designated as investment grade by Moody's, S&P or Fitch or the equivalent rating by another nationally recognized statistical rating organization.

♦ Certificates of Deposit, Time Deposits, Overnight Bank Deposits, Banker's Acceptances and Repurchase Agreements - certificates of deposit, time deposits, overnight bank deposits, banker's acceptances issued by federally insured banks with maturities of 270 days or less from the date of acquisition, repurchase agreements with acceptable collateral and maturities of 270 days or less from date of acquisition.

♦ Commercial Paper - commercial paper of US corporations that are rated at least "A-2" by S&P or "P-2" by Moody's or the equivalent rating of another nationally recognized statistical rating organization if S&P or Moody's cease publishing ratings of these securities, and have maturities of 270 days or less from the date of acquisition.

♦ Money Market Accounts or Funds - money market accounts or funds that meet the following criteria:

■ A substantial portion of the assets of the money market account or fund must be comprised of certain qualifying investments instruments;

■ Issuers of the fund or account's investments must have a combined capital and surplus in excess of $500,000,000;

■ Maturities of 270 days or less from the date of acquisition;

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■ Have net assets of not less than $500,000,000; and

■ Have the highest rating available of S&P, Moody's, or Fitch, or carry an equivalent rating by a nationally recognized statistical rating organization if the named rating agencies cease publishing ratings of investments.

► Diversification. Our portfolio is constructed to diversify risk with respect to asset class, geographical location, quality, maturity, business sector and individual issuer and issue concentrations.

►     Benchmarks. We benchmark the allocation of our investments based on the criteria set forth in the table below to help assure our investments are appropriately diversified. The benchmarks may change to respond to market conditions. Based on market conditions and other considerations, investments in the approved investment instruments described are maintained in the following ranges:

% of Portfolio Cost Value
Asset Class	Minimum		Maximum
Cash/Short Term		0%		100%
Investment Grade Fixed Income		20%		100%
High Yield Fixed Income		0%		15%
Equity		0%		50%
Mortgage and Mortgage related		0%		50%
Real Estate (including REITs)		0%		20%

The Executive Committee of our Board of Directors may modify the above benchmark ranges at any time deemed appropriate based on current conditions. Any such modifications will be subject to approval by the full Board of Directors at its next regularly scheduled meeting. USALSC's, DCLIC’s, and USALSC-Montana’s investment policy, as a regulated insurance entity, contains additional investment limitations as required by law.

► Reporting. The President, CEO, or their respective designees shall provide monthly reports to the Board of Directors reflecting the securities purchased and sold during the quarter, securities held at the end of the quarter, current benchmarks and an overall evaluation of the portfolio's investment performance.

Marketing and Distribution - USALSC and DCLIC use independent consultants and referrals to market its products and build distribution channels among funeral homes, banks, accountants, independent insurance agencies, agents, insurance brokerage firms, business owners and other distribution channels as opportunities arise. USALSC and DCLIC works with other insurance companies who have captive or non-captive agents to broaden their product offerings.

Employees - As of December 31, 2019, USAC and its subsidiaries have thirteen full-time employees and one part-time employee.

Reports to Security Holders - We provide reports to our stockholders, along with our audited year-end financial statements. In addition, all periodic reports and other information we file with the U.S. Securities and Exchange Commission (the “SEC”) are available for inspection and copying at the public reference facilities of the Securities and Exchange Commission located at 100 F Street N E, Washington, D C 20549.

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Copies of such material may be obtained by mail from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, N E, Washington, D.C. 20549, at prescribed rates.

Information on the operation of the Public Reference Room may be obtained by calling the SEC at l-800-SEC-0330. In addition, the Commission maintains a World Wide Website on the Internet at: http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants, including USAC, that file electronically with the SEC. You may also find this information on our website (http://www.usalliancecorporation.com).

Implications of Emerging Growth Company Status - As a company with less than $1 billion in revenue in our last fiscal year, we are defined as an “emerging growth company” under the Jumpstart Our Business Startups (“JOBS”) Act. We will retain “emerging growth company” status until the earliest of:

• The last day of the fiscal year during which our annual revenues are equal to or exceed $1.07 billion;

• The last day of the fiscal year following the fifth anniversary of our first sale of common stock pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”);

• The date on which we have issued more than $1 billion in nonconvertible debt in a previous three-year period; or

• The date on which we qualify as a large accelerated filer under Rule 12b-2 adopted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (i.e., an issuer with a public float of $700 million that has been filing reports with the SEC under the Exchange Act for at least 12 months).

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to SEC reporting companies. For so long as we remain an emerging growth company we will not be required to:

• Comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

• Submit certain executive compensation matters to stockholder non-binding advisory votes;

• Submit for stockholder approval golden parachute payments not previously approved;

• Disclose certain executive compensation related items, as we will be subject to the scaled disclosure requirements of a smaller reporting company with respect to executive compensation disclosure.

Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates. Section 107 of the JOBS Act provides that our decision to opt into the extended transition period for complying with new or revised accounting standards is irrevocable.

Because the worldwide market value of our common stock held by non-affiliates, or public float, is below $75 million, we are also a “smaller reporting company” as defined under the Exchange Act. Some of the foregoing reduced disclosure and other requirements are also available to us because we are a smaller reporting company and may continue to be available to us even after we are no longer an emerging growth company under the JOBS Act but remain a smaller reporting company under the Exchange Act. As a smaller reporting company we are not required to:

• Have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and

• Present more than two years of audited financial statements in our registration statements and annual reports on Form 10-K and present any selected financial data in such registration statements and annual reports.

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ITEM 1A. RISK FACTORS.

Risks Associated with an Investment in USAC Stock

We face many significant risks in the operating of our business and may face significant unforeseen risks as well. Our significant material risks are set forth below:

SHARE OWNERSHIP RISK - An investment in our voting common stock is speculative. Shares of our voting common stock constitute a high-risk investment in a developing business that has incurred losses to date and expects to continue to incur losses for several years. No assurance or guaranty can be given that any of the potential benefits envisioned by our business plan will prove to be available to our stockholders, nor can any assurance or guaranty be given as to the actual amount of financial return, if any, which may result from ownership of our voting Common Stock. The entire value of the shares of USAC Common Stock may be lost.

OPERATING RISK - We face all of the risks inherent in establishing a new business, including limited capital, challenging product markets, lack of significant revenues, as well as competition from better capitalized and more seasoned companies. We have no control over general economic conditions, competitors’ products or their pricing, customer demand and costs of marketing or advertising. There can be no assurance that our life insurance operations will be successful. The likelihood of any success must be considered in light of our limited history of operations and operating losses incurred to date. These risks make it difficult to accurately predict our future revenues or results of operations. As a result, our financial results may fluctuate. The Company evaluates the financial condition of its reinsurers to minimize its exposure to losses from reinsurer insolvencies. Management believes that any liabilities arising from this contingency would not be material to the Company’s financial position.

LIQUIDITY RISK – Although USAC is considered a public company by the SEC, there is no public market for USAC Common Stock, and there is no assurance that one will develop or be sustained, or that USAC Common Stock will become publicly traded. It may be difficult to sell shares your shares USAC Common Stock. Our securities are not listed for trading on any national securities exchange nor are bid or asked quotations reported in any over-the-counter quotation service and we do not intend to seek any such listing in the foreseeable future.

PROFITABILITY - As is common among young life insurance companies, we have incurred significant losses for a number of years. As of December 31, 2019 we had a consolidated accumulated deficit of $9.9 million. These losses were attributable primarily to costs of administration, the substantial nonrecurring costs of writing new life insurance (which are deferred and amortized in accordance with our deferred acquisition policy) and include first year commissions payable to insurance agents, medical and investigation expenses as well as other expenses incidental to the issuance of new policies as well as with the reserves required to be established for each policy. 2019 was the first profitable year in our Company history.

DIVIDENDS - We have not paid a cash dividend on USAC Common Stock and we do not anticipate paying a cash dividend in the foreseeable future. We intend to retain available funds to be used in the expansion of operations. The success of any investment in USAC Common Stock will depend upon any future appreciation in its value which depends upon the success of our life insurance subsidiaries. We cannot guarantee that our common stock will appreciate in value or achieve or maintain a value equal to the price at which shares were purchased. Further, a market may never develop to sell shares of USAC Common Stock.

CAPITAL RISK - We are required by law to have adequate capital and surplus calculated in accordance with statutory accounting principles prescribed by state insurance regulatory authorities to meet regulatory requirements in the states in which we operate. The amount of capital and surplus required is based on certain “risk-based capital” standards established by statute and regulation and administered by regulators. The “risk-based capital” system establishes a framework for evaluating the adequacy of the minimum amount of capital and surplus, calculated in accordance with statutory accounting principles, necessary for an insurance company to support its overall business operations. If we fail to maintain required capital levels, our ability to conduct business would be compromised absent an infusion of capital.

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DILUTION RISK - We intend to conduct additional offerings of our securities to raise additional capital to fund our growth. In February, 2010, we filed a prospectus with the Kansas Securities Commission to register shares of USAC Common Stock and warrants to purchase USAC Common Stock. In February 2015, we filed a Prospectus with the Kansas Securities Commission to register the common stock to be issued upon the exercise of the warrants, and in January 2016, filed a Supplement to the Prospectus to register an additional 1,500,000 shares of USAC Common Stock. We also commenced a private placement of USAC Common Stock in North Dakota in 2017. Any additional offerings of USAC securities that we may conduct in the future will reduce the ownership interests and be accretive to existing stockholder book value.

KEY EXECUTIVE RISK - Our ability to operate is dependent primarily upon the efforts of our Chairman and Chief Executive Officer, Jack H. Brier, and Chief Operating Officer of USALSC, Jeff Brown. The loss of the services of these officers could have a material adverse effect on our ability to execute our business plan. We do not have an employment agreement with Mr. Brier. On June 4, 2018, the Company entered into an employment agreement with Mr. Brown retroactively effective as of February 1, 2018 for a term of three years. Annually, the agreement may be extended for an additional year if agreed upon by both parties.

SEC REGISTRATION - USAC is a public company. As a public company, we incur significant legal, accounting and other expenses under the Exchange Act and the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC. These rules impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and appropriate corporate governance practices. Our management and other personnel are required to devote a substantial amount of time to these compliance requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and are time-consuming and costly.

EMERGING GROWTH COMPANY - We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to the last day of the fifth fiscal year following the effective date of our S-4 registration statement for the sale of our common stock. However, if our annual revenues exceed $1.07 billion, our  non-convertible debt issued within a three-year period exceeds $1 billion, or the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we are not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will not adopt the new or revised standard until the time private companies are required to adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult because of the potential differences in accounting standards used.

POTENTIAL ACQUISITION RISK - In addition to our organic growth plans, we plan to pursue strategic acquisitions of insurance related companies that meet our acquisition criteria. However, suitable acquisition candidates may not be available on terms and conditions that are economically beneficial to us. In pursuing acquisitions, we compete with other companies, who may have greater financial and other resources than us. Further, if we succeed in consummating acquisitions, our business, financial condition and results of operations may be negatively affected.

● An acquired business may not achieve anticipated revenues, earnings or cash flows;

● We may assume liabilities that were not disclosed or exceed estimates;

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● We may be unable to integrate acquired businesses successfully and realize anticipated economic, operational and other benefits in a timely manner;

● Acquisitions could disrupt our on-going business, distract our management and divert our financial and human resources;

● We may experience difficulties operating in markets in which we have no or only limited direct experience; and

● There is the potential for loss of customers and key employees of any acquired company.

MARKETING STRATEGY RISK - We market our products through several different distribution channels which require licensed insurance agents. These distribution channels include funeral directors, bankers, brokerages, accountants, and independent agents. The premium written will depend primarily on our products, product pricing and ability to choose and timely and adequately train and motivate agents, producers and brokers to sell our products.

Independent agents are not required to sell the Company’s products and are free to sell products from other licensed companies. We are committed to working to educate and incentivize independent agents to sell our products.

THE COMPANY’S INVESTMENTS ARE SUBJECT TO MARKET AND CREDIT RISKS - Our invested assets, are subject to customary risks of credit defaults and changes in fair value. Factors that may affect the overall default rate on and fair value of the Company’s invested assets include interest rate levels and changes, availability and cost of liquidity, financial market performance, and general economic conditions.

RATINGS RISK - We do not anticipate that USALSC, DCLIC, or USALSC-Montana will be rated by rating agencies for several years. This may have a negative impact on its ability to complete with rated insurance companies.

Insurance ratings reflect the rating agencies’ opinion of an insurance company’s history, financial strength, operating performance and ability to meet its obligations to policyholders. There can be no assurance that USALSC, DCLIC, or USALSC-Montana will be rated by a rating agency or that any rating, if and when received, will be favorable.

Risks Associated with Companies in the Life Insurance Industry, including USAC and its subsidiaries

GENERAL REGULATORY RISK -All insurance operations are subject to government regulation in each of the states in which they conduct business. Such regulatory authority is vested in state agencies having broad administrative power dealing with all aspects of the insurance business, including premium rates, policy forms, and capital adequacy, and is concerned with the protection of policyholders rather than stockholders. Among other matters, the regulations require prior approval of acquisitions of insurance companies, solvency standards, licensing of insurers and their agents, investment restrictions, deposits of securities for the benefit of policyholders, approval of policy forms and premium rates, periodic examinations, and reserves for unearned premiums, losses and other matters.

Compliance with insurance regulation is costly and time consuming, requiring the filing of detailed annual reports, and the business and accounts are subject to examination by the applicable state insurance regulator.

Increased scrutiny has been placed upon the insurance regulatory framework during the past several years, and certain state legislatures have considered or enacted laws that alter, and in many cases increase, state authority to regulate insurance companies and insurance holding company systems. The National Association of Insurance Commissioners (“NAIC”) and state insurance regulators reexamine existing laws and regulations on an ongoing basis, and focus on insurance company investments and solvency issues, risk-based capital guidelines, interpretations of existing laws, the development of new laws, the implementation of non-statutory guidelines and the circumstances under which dividends may be paid. Future NAIC initiatives, and other regulatory changes, could have a material adverse impact on the insurance industry. There is no assurance the regulatory requirements of the departments of insurance of their respective state of domicile or a similar department in any other state in which they may wish to transact business can be satisfied.

Individual state guaranty associations assess insurance companies to pay benefits to policyholders of insolvent or failed insurance companies. The amount of any future assessments to be made from known insolvencies cannot be predicted.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) reshaped financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act continue to be subject to regulatory interpretation and implementation rules requiring rulemaking that may take several years to complete. The ultimate outcome of the regulatory rulemaking proceedings cannot be predicted. The regulations promulgated could have a material impact on consolidated financial results or financial condition.

COMPETITION RISK - The operating results of life insurance companies are subject to significant fluctuations due to competition, economic conditions, interest rates, investment performance, maintenance of insurance ratings from rating agencies, the ability to choose and timely and adequately train agents, and other factors. Each company encounters significant competition from other insurance companies, as well as competition from other available products and investment alternatives.

Large life insurance companies who have greater financial resources, longer business histories, and who may have more products present significant competition to smaller insurance companies. These larger companies also generally have large distribution opportunities.

The ability to compete is dependent upon, among other things, the ability to develop competitive and profitable products, market the insurance products, and achieve efficient costs of placing policies.

ASSUMPTION RISK - In the life insurance business, assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of life insurance products are made. These assumptions are based on industry experience and are reviewed and revised regularly by an outside actuary to reflect actual experience on a current basis. Variation of actual experience from that assumed in developing such terms may affect a product’s profitability or sales volume and in turn adversely impact revenues.

LIABILITY RISK - Underestimating future policy benefits results in incurring additional expenses at the time a company becomes aware of the inadequacy. As a result, the ability to achieve profits would suffer as a result of such underestimates.

INTEREST RATE RISK - Spread is the difference between the amounts that the insurance company is required to pay under the contracts and the amounts the insurance company is able to earn on its investments intended to support its obligations under the contracts. Interest rate fluctuations could impair an insurance company’s ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Annuity products expose the risk that changes in interest rates will reduce any spread. Spread is a key component of revenues.

To the extent that interest rates credited are less than those generally available in the marketplace, policyholder lapses, policy loans and surrenders, and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to purchase products with higher returns. This process may result in cash outflows requiring that an insurance subsidiary sell investments as a time when the prices of those investments are adversely affected by the increase in market interest rates, which may result in realized investment losses.

Increases in market interest rates may negatively affect profitability in periods of increasing interest rates. The ability to replace invested assets with higher yielding assets needed to fund higher crediting rates that may be necessary to keep interest sensitive products competitive.

LAPSE AND WITHDRAWAL RISK - Policy lapses in excess of those actuarially anticipated would have a negative impact on financial performance. Profitability could be reduced if lapse and surrender rates exceed the assumptions upon which the insurance policies were priced. Policy sales costs are deferred and recognized over the life of a policy. Excess policy lapses, however, cause the immediate expensing or amortizing of deferred policy sales costs. In addition, some of our policies allow holders to withdraw all or some of the policy’s value, and withdrawals beyond those anticipated could impact our business.

OPERATIONAL RISK - In the insurance industry, successful incorporation and functionality of the internal audit function, the evolution of financial and administrative internal controls to safeguard human, facility and financial assets electronically including anti-fraud initiatives and compliance with anti-money laundering requirements as well as an effective disaster recovery program and effective business continuity programs are necessary.

TAX LAW RISK - Congress has considered legislation that would eliminate the deferral of taxation on the accretion of value within certain annuities and life insurance products. This and similar legislation, including a simplified “flat tax” income tax structure with an exemption from taxation for investment income, could adversely affect the sale of life insurance products compared with other financial products. There can be no assurance as to whether such legislation will be enacted or, if enacted, whether such legislation would contain provisions with possible adverse effects on any annuity and life insurance products that we and our operating subsidiaries develop.

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Under the Internal Revenue Code, income taxes payable by policyholders on investment earnings is deferred during the accumulation period of certain life insurance and annuity products. This favorable tax treatment may give certain insurance products a competitive advantage over other non-insurance products. To the extent that the Internal Revenue Code may be revised to reduce the tax-deferred status of life insurance and annuity products, or to increase the tax-deferred status of competing products, insurance companies would be adversely affected with respect to their ability to sell products. Also, depending on grandfathering provisions, the surrenders of existing annuity contracts and life insurance policies might increase. In addition, life insurance products are often used to fund estate tax obligations. We cannot predict what future tax initiatives may be proposed with respect to the estate tax or other taxes which may adversely affect us.

REINSURANCE RISK -In order to manage the risk of financial exposure to adverse underwriting results, reinsurers accept a portion of the risk of other insurance companies. However, the direct insurer remains liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed by the reinsurer.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

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.

DCLIC also maintains an office at 107 W. Main Avenue, Suite 325, Bismarck, North Dakota, 58501. The lease for the Bismarck office expired on September 30, 2018 and was renewed for an additional two year term. The lease rate for this location is $920 per month for the first year of the renewal. The Company paid $11,114 and $12,166 in rent for this location in 2019 and 2018, respectively.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor any of its principals are presently engaged in any material pending litigation which might have an adverse impact on its net assets.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Information

There is no established trading market for our voting common stock. Our securities are not listed for trading or quoted on any national securities exchange nor are bid or asked quotations reported in any over-the-counter quotation system.

As of December 31, 2019, we had issued and outstanding 7,734,004 shares of our voting common stock. No other equity securities of the company have been issued.

(b) Holders of Record

As of February 3, 2020 there are approximately 3,500 holders of record of our voting common stock.

(c) Dividends

We have not paid dividends on USAC Common Stock and do not anticipate paying dividends in the foreseeable future. We intend to retain any future earnings for reinvestment into our business.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

We have not established any equity compensation plans or granted any equity awards under such plans. As a result, there are no securities authorized for issuance under such plans.

(e) Recent Sales of Unregistered Securities

During the year ended December 31, 2019, the Company issued 23,025 shares of common stock, for aggregate consideration of $161,175, pursuant to an offering to residents of the state of Kansas that was registered with the Kansas Securities Commissioner.

The offering of shares in the above –described transaction was self-underwritten and sold through agents of the Company licensed to sell securities in Kansas. Proceeds from the sale of common stock were used to finance the growth of the Company’s life insurance subsidiary and to provide working capital for the Company. The offer and sale of common stock was exempt from registration under Section 3(a)11 of the Securities Act of 1933 for securities offered and sold on a wholly intrastate basis. The shares of common stock were sold only to bona fide residents of the state of Kansas.

During the year ended December 31, 2019, the Company issued 60,428 shares of common stock, for aggregate consideration of $422,996, pursuant to a private placement offering to accredited investor residents of the state of North Dakota (the “North Dakota Offering”).  Proceeds from the sale of shares in the North Dakota were used to finance the growth of DCLIC and to provide working capital for the Company. The North Dakota Offering and sales of shares thereunder were not registered with the SEC in reliance on an exemption for registration under Rule 506(b) of Regulation D under this Securities Act of 1933 (“Reg D”).  Shares were sold only to “accredited investors”, as that term is defined in Rule 501 of Reg D, and were not sold by any means of general advertisement or solicitation. 

ITEM 6. SELECTED FINANCIAL DATA.

As a “smaller reporting company”, the Company is not required to provide disclosure pursuant to this item.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Form 10-K. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview

USAC was formed as a Kansas corporation on April 24, 2009 for the purpose of raising capital to form a new Kansas-based life insurance company. We presently conduct our business through our five wholly-owned subsidiaries: USALSC, a life insurance corporation; DCLIC, a life insurance corporation; USALSC-Montana, a life insurance corporation; USAMC, an insurance marketing corporation; and USAIC, an investment management corporation.

On January 2, 2012, USALSC was issued a Certificate of Authority to conduct life insurance business in the State of Kansas. We began third party administrative services in 2015.

On August 1, 2017, the Company merged with Northern Plains Capital Corporation with the Company being the ultimate surviving entity. As a result of this merger, the Company acquired Dakota Capital Life Insurance Company which became a wholly owned subsidiary of USALSC.

On December 14, 2018, the Company acquired Great Western Life Insurance Company. Great Western Life Insurance Company was renamed US Alliance Life and Security Company – Montana and is a subsidiary of USALSC.

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.

Critical Accounting Policies and Estimates

Our accounting and reporting policies are in accordance with GAAP. Preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The following is an explanation of our accounting policies and the estimates considered most significant by management. These accounting policies inherently require significant judgment and assumptions and actual operating results could differ significantly from management’s estimates determined using these policies. We believe the following accounting policies, judgments and estimates are the most critical to the understanding of our results of operations and financial position. A detailed discussion of significant accounting policies is provided in this report in the Notes to Consolidated Financial Statements included with this annual report.

Valuation of Investments

The Company's principal investments are in fixed maturity and equity securities. Fixed maturity and equity securities, classified as available for sale, are carried at their fair value in the consolidated balance sheets, with unrealized gains or losses recorded in comprehensive income (loss). Our fixed income investment manager utilizes external independent third-party pricing services to determine the fair values of investment securities available for sale.

We have a policy and process in place to identify securities that could potentially have an impairment that is other-than-temporary. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. We consider severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings and whether we intend to sell a security, or it is more likely than not that we would be required to sell a security, prior to the recovery of the amortized cost. New England Asset Management, our investment manager, provides support to the Company in making these determinations.

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The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. Our membership in the Federal Home Loan Bank provides additional liquidity which further reduces the likelihood that we would be required to sell a security prior to recovery. As it relates to debt securities, if we do not expect to recover the amortized basis, do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the other-than-temporary impairment would be recognized. We would recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss.

Deferred Acquisition Costs

Incremental direct costs, net of amounts ceded to reinsurers, that result directly from and are essential to a product sale and would not have been incurred by us had the sale not occurred, are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense.

Value of Business Acquired

Value of business acquired (VOBA) represents the estimated value assigned to purchased companies or insurance in- force of the assumed policy obligations at the date of acquisition of a block of policies. At least annually, a review is performed of the models and the assumptions used to develop expected future profits, based upon management’s current view of future events. VOBA is reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. Management’s view primarily reflects our experience but can also reflect emerging trends within the industry. Short-term deviations in experience affect the amortization of VOBA in the period, but do not necessarily indicate that a change to the long-term assumptions of future experience is warranted. If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated. Certain assumptions, such as interest spreads and surrender rates, may be interrelated. As such, unlocking adjustments often reflect revisions to multiple assumptions. The VOBA balance is immediately impacted by any assumption changes, with the change reflected through the statements of comprehensive income as an unlocking adjustment in the amount of VOBA amortized. These adjustments can be positive or negative with adjustments reducing amortization limited to amounts previously deferred plus interest accrued through the date of the adjustment.

In addition, we may consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system upgrades. We consider such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality. To the extent they represent such improvements, these items are applied to the appropriate financial statement line items in a manner similar to unlocking adjustments.

VOBA is also reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. If it is determined from emerging experience that the premium margins or gross profits are less than the unamortized value of business acquired, then the asset will be adjusted downward with the adjustment recorded as an expense in the current period.

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Goodwill

Goodwill represents the excess of the amounts paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is tested for impairment at least annually in the fourth quarter or more frequently if events or circumstances change that would indicate that a triggering event has occurred.

We assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or circumstances suggest that the carrying value of an identifiable indefinite-lived intangible asset may exceed the sum of the future discounted cash flows expected to result from its use and eventual disposition. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

Reinsurance

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.

Future Policy Benefits

We establish liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by using a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables. Such liabilities are reviewed quarterly by an independent consulting actuary.

Income Taxes

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.

Recognition of Revenues

Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due.

Amounts received as payment for annuities are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of investment earnings of the deposits, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows.

Mergers and Acquisitions

On May 23, 2017 the Company entered into a definitive merger agreement with Northern Plains Capital Corporation. The merger transaction closed on July 31, 2017. NPCC shareholders received .5841 shares of US Alliance Corporation stock for each share of NPCC stock owned. USAC issued 1,644,458 shares of common stock to holders of NPCC shares.

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On October 11, 2018 the Company entered into a stock purchase agreement with Great Western Insurance Company to acquire Great Western Life Insurance Company. The transaction closed on December 14, 2018. USALSC paid $500,000 to acquire all of the outstanding shares of GWLIC.

New Accounting Standards

A detailed discussion of new accounting standards is provided in the Notes to Consolidated Financial Statements beginning on p. F-14 of this annual report.

Discussion of Consolidated Results of Operations

Revenues. Insurance revenues are primarily generated from premium revenues and investment income. Insurance revenues for the years ended December 31, 2019 and 2018 are summarized in the table below.

	Years Ended December 31,
	2019		2018
Income:
Premium income	$	9,076,205	$	8,807,779
Net investment income		1,790,601		1,477,403
Net investment gains (losses)		1,042,334		(4,499	)
Gain on bargain purchase		-		1,140,996
Other income		57,146		37,608
Total income	$	11,966,286	$	11,459,287

Our 2019 revenues grew to $11,966,286, an increase of $506,999 from 2018 revenues of $11,459,287. The Company was required to implement a new accounting standard in 2019 which results in unrealized gains and losses on equity securities being included in total income.

The following graph summarizes our five-year trend of GAAP revenues:

*2017 revenue includes one-time revenue of $3.9 million from the ALSC reinsurance transaction.

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.

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Direct, assumed and ceded premiums for the years ended December 31, 2019 and 2018 are summarized in the following table.

	Years Ended December 31,
	2019			2018
Direct	$	4,970,208		$	4,573,748
Assumed		4,906,522			4,863,227
Ceded		(800,525	)		(629,196	)
Total	$	9,076,205		$	8,807,779

The Company continues to search for new product and distribution opportunities to increase premium production on both a direct and assumed basis.

Investment income, net of expenses: The components of net investment income for the years ended December 31, 2019 and 2018 are as follows:

	Years Ended December 31,
	2019			2018
Fixed maturities	$	1,164,520		$	967,959
Equity securities		636,668			580,930
Cash and short term investments		36,359			9,881
		1,837,547			1,558,770
Less investment expenses		(46,946	)		(81,367	)
	$	1,790,601		$	1,477,403

Net investment income for the years ended December 31, 2019 was $1,790,601, compared to $1,477,403 in 2018, an increase of $313,198 or 21%. This increase in investment income is primarily a result of increased invested assets as a result of our premium income and an improvement in our book yield.

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:

	Years Ended December 31,
	2019			2018
Gross gains	$	43,935		$	530
Gross losses		(258,370	)		(5,029	)
Net security losses	$	(214,435	)	$	(4,499	)

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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.

Other income: Other income for the year ended December 31, 2019 was $57,146 compared to $37,608 in 2018, an increase of $19,538. The increase is driven by an increase in commission income.

Expenses. Expenses for the year ended December 31, 2019 and 2018 are summarized in the table below.

	Years Ended December 31,
	2019		2018
Expenses:
Death claims	$	1,287,893	$	959,005
Policyholder benefits		4,212,534		3,957,090
Increase in policyholder reserves		2,599,575		2,766,169
Commissions, net of deferrals		783,724		637,425
Amortization of deferred acquisition costs		433,218		454,906
Amortization of value of business acquired		20,303		20,304
Salaries & benefits		1,081,955		1,152,728
Other operating expenses		1,379,034		1,967,796
Total expense	$	11,798,236	$	11,915,423

        The following chart and graph summarizes our five-year expense trend:

	Increase in		Other						% of Operating
	Policyholder		Policy-related		Operating		Total		Expense to
Year	Reserves		Expenses		Expenses		Expenses		Total Expense
2015	$	1,214,695	$	3,005,220	$	1,584,591	$	5,804,506		27%
2016		1,686,841		4,224,156		1,961,649		7,872,646		25%
2017*		5,654,476		5,160,175		2,306,238		13,120,889		18%
2018		2,766,169		6,028,730		3,120,524		11,915,423		26%
2019		2,599,575		6,737,672		2,460,989		11,798,236		21%

* 2017 Increase in Reserves includes a one-time $3.9 million reserve increase from the ALSC transaction

Increases in policyholder reserves represents funds that we maintain and invest for the future benefit of our policyholders. Other policy-related expenses represent the other expenses associated with fulfilling our obligations to our policyholders and producers. Operating expenses represent the costs to operate the company. It is important to note that our 2017 operating expense ratio is impacted by the one-time reserve increase which resulted from our transaction with ALSC. Absent this transaction, our 2017 ratio would have been 25%.

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.

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Increase in policyholder reserves: Policyholder reserves increased $2,599,575 in the year ended December 31, 2019, compared to $2,766,169 in 2018, a decrease of $165,594. The decrease is driven reserves released in support of claim payments.

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.

Amortization of deferred acquisition costs: The amortization of deferred acquisition costs was $433,218 in the year ended December 31, 2019, compared to $454,906 in 2018, a decrease of $21,688. The amortization decrease is attributable to the reduction of our deferred acquisition cost asset related to our reinsurance transaction with ALSC.

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.  

Net Income: Our net income was $599,208 in the year ended December 31, 2019 compared to net loss of $456,136 in the same period of 2018, an increase of $1,055,344. Our net income per share increased to $0.08 from a net loss per share of $0.06 in 2018, basic and diluted. This increase is primarily attributable to income from unrealized gains on our equity securities and the recognition of a deferred tax asset.

The following graph illustrates our five-year trend of net income per share:

Discussion of Consolidated Balance Sheet

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 fixed maturity securities: As of December 31, 2019, we had available for sale fixed maturity assets of $33,152,892, an increase of $6,169,088 from the December 31, 2018 balance of $26,983,804. The increase is driven by the purchase of additional assets and by an increase in the market value of these securities. If we hold our fixed maturity securities to maturity, as we intend to do, any changes in market value is temporary.

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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.

Policy loans: As of December 31, 2019, our policy loans were $118,930, an increase of $62,391 from the December 31, 2018 balance of $56,539. The increase is a result of normal policy loan activity.

Reinsurance related assets: As of December 31, 2019, our reinsurance related assets were $188,382 compared to $161,846 as of December 31, 2018, an increase of $26,536. This increase is the result of an increase in amounts due from reinsurers.

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.

Goodwill: As of December 31, 2019 and 2018, our goodwill was $277,542. Goodwill was established as a result of our merger with Northern Plains and we had no previous goodwill balances. We have determined that there has been no impairment to our goodwill balance.

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.

Policy liabilities: Our total policy liabilities as of December 31, 2019 were $36,924,885 compared to $31,556,529 as of December 31, 2018, an increase of $5,368,356 or 17%. This increase is the result new policy sales and the growth of our in-force policies.

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.

Federal Home Loan Bank advance: In October of 2019, the Company took an advance of $1,000,000 from the Federal Home Loan Bank of Topeka (“FHLB”) which was outstanding as of December 31, 2019. The Company did not have any FHLB advances in 2018.

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.

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Investments

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.

	December 31, 2019					December 31, 2018
	Fair		Percent			Fair		Percent
	Value		of Total			Value		of Total
Fixed maturities:
US Treasury securities	$	632,639		1.3	%	$	569,940		1.4	%
Corporate bonds		20,084,397		40.2	%		15,842,361		39.6	%
Municipal bonds		7,055,059		14.1	%		6,598,113		16.5	%
Redeemable preferred stocks		2,133,893		4.3	%		192,405		0.5	%
Mortgage backed and asset backed securities		3,246,904		6.4	%		3,780,985		9.5	%
Total fixed maturities		33,152,892		66.3	%		26,983,804		67.5	%
Equities:
Common stock		9,214,694		18.4	%		10,735,934		26.9	%
Preferred stock		926,809		1.9	%		150,040		0.4	%
Total equities		10,141,503		20.3	%		10,885,974		27.3	%
Cash and cash equivalents		6,678,805		13.4	%		2,077,646		5.2	%
Total	$	49,973,200		100.0	%	$	39,947,424		100.0	%

The total value of our investments and cash and cash equivalents increased to $49,973,200 as of December 31, 2019 from $39,947,424 at December 31, 2018, an increase of $10,025,776. Increases in investments are primarily attributable to premiums and annuity deposits received by USALSC and DCLIC.

The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of December 31, 2019 and 2018.

	December 31, 2019					December 31, 2018
	Fair		Percent			Fair		Percent
	Value		of Total			Value		of Total
	(unaudited)					(unaudited)
AAA and U.S. Government	$	1,201,046		3.6	%	$	1,690,399		6.3	%
AA		7,901,834		23.8	%		7,933,254		29.4	%
A		8,446,360		25.5	%		6,173,746		22.9	%
BBB		13,832,629		41.7	%		10,551,468		39.1	%
BB		1,579,423		4.8	%		434,937		1.6	%
Not Rated - Private Placement		191,600		0.6	%		200,000		0.7	%
Total	$	33,152,892		100.0	%	$	26,983,804		100.0	%

Reflecting the high quality of securities maintained by us, 94.6% of all fixed maturity securities were investment grade as of December 31, 2019. As of December 31, 2018, 97.7% of all fixed maturity securities were investment grade.

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The amortized cost and fair value of debt securities as of December 31, 2019 and 2018, by contractual maturity, are shown below. Equity securities do not have stated maturity dates and therefore are not included in the following maturity summary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	As of December 31, 2019				As of December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	99,987	$	100,239	$	-	$	-
After one year through five years		1,424,337		1,471,552		1,472,228		1,462,745
After five years through ten years		3,286,937		3,574,191		2,101,676		2,055,173
More than 10 years		20,743,310		22,626,113		20,430,838		19,492,496
Redeemable preferred stocks		2,097,206		2,133,893		211,313		192,405
Mortgage backed and asset backed securities		3,171,620		3,246,904		3,853,395		3,780,985
Total amortized cost and fair value	$	30,823,397	$	33,152,892	$	28,069,450	$	26,983,804

Market Risk of Financial Instruments

We hold a diversified portfolio of investments that primarily includes cash, bonds and equity securities. Each of these investments is subject to market risks that can affect their return and their fair value. A majority of the investments are fixed maturity securities including debt issues of corporations, US Treasury securities, or securities issued by government agencies. The primary market risks affecting the investment portfolio are interest rate risk, credit risk, and equity risk.

Interest Rate Risk

Interest rate risk arises from the price sensitivity of investments to changes in interest rates. Interest represents the greatest portion of an investment's return for most fixed maturity securities in stable interest rate environments. The changes in the fair value of such investments are inversely related to changes in market interest rates. As interest rates fall, the interest and dividend streams of existing fixed-rate investments become more valuable and fair values rise. As interest rates rise, the opposite effect occurs.

We attempt to mitigate our exposure to adverse interest rate movements through laddering the maturities of the fixed maturity investments and through maintaining cash and other short term investments to assure sufficient liquidity to meet our obligations and to address reinvestment risk considerations. Due to the composition of our book of insurance business, management believes it is unlikely that we would encounter large surrender activity due to an interest rate increase that would force the disposal of fixed maturities at a loss.

Credit Risk

We are exposed to credit risk through counterparties and within the investment portfolio. Credit risk relates to the uncertainty associated with an obligor's ability to make timely payments of principal and interest in accordance with the contractual terms of an instrument or contract. We manage our credit risk through established investment policies and guidelines which address the quality of creditors and counterparties, concentration limits, diversification practices and acceptable risk levels. These policies and guidelines are regularly reviewed and approved by senior management and USAC's Board of Directors.

Liquidity and Capital Resources

Our operations have generated operating losses since we were incorporated in 2009. In 2019, USAC has been profitable.

Premium income, deposits to policyholder account balances, investment income, and capital raising are the primary sources of funds while withdrawals of policyholder account balances, investment purchases, policy benefits in the form of claims, and operating expenses are the primary uses of funds. To ensure we will be able to pay future commitments, the funds received as premium payments and deposits are invested in primarily fixed income securities. Funds are invested with the intent that the income from investments, plus proceeds from maturities, will in the future meet our ongoing cash flow needs. The approach of matching asset and liability durations and yields requires an appropriate mix of investments. Our investments consist primarily of marketable debt securities that could be readily converted to cash for liquidity needs. Cash flow projections and cash flow tests under various market interest scenarios are also performed annually to assist in evaluating liquidity needs and adequacy. As a member of the Federal Home Loan Bank, USALSC has immediate access to additional cash liquidity.

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Net cash provided by operating activities was $2,270,041 for the year ended December 31, 2019. The primary sources of cash from operating activities were premiums and deposits received from policyholders. The primary uses of cash for operating activities were for payments of commissions to agents and settlement of policy liabilities. Net cash used in investing activities was $1,074,643. The primary source of cash was from sales of available for sale securities and our FHLB advance. Offsetting this source of cash was our purchases of investments in available-for-sale securities. Cash provided by financing activities was $3,405,761. The primary sources of cash were receipts on deposit-type contracts and issuance of USAC Common Stock.

The following chart and graph illustrate our five-year trend of cash flow from insurance activities:

Cash flow from insurance activities combines cash flow from operations with the net cash received from deposit type contracts to show the impact of our insurance operations on our cash flows. Cash flow from deposit type contracts is primarily made up of funds received into our annuity products.

At December 31, 2019, we had cash and cash equivalents totaling $6,678,805. We believe that our existing cash and cash equivalents will be sufficient to fund the anticipated operating expenses and capital expenditures for the foreseeable future. We have based this estimate upon assumptions that may prove to be wrong and we could use our capital resources sooner than we currently expect. The growth of USALSC and DCLIC, our insurance subsidiaries, is uncertain and will require additional capital if they continue to grow.

Impact of Inflation

Insurance premiums are established before the amount of losses, or the extent to which inflation may affect such losses and expenses, are known. We attempt, in establishing premiums, to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by us. Inflation also affects the rate of investment return on the investment portfolio with a corresponding effect on investment income.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 As a “smaller reporting company”, the Company is not required to provide disclosure pursuant to this item. 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 The consolidated financial statements are included as part of this reporting beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are not and have not been any disagreements between USAC and its auditor, Kerber, Eck and Braeckel LLP on any matter of accounting principles, practices or financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

     We have established disclosure controls and procedures to ensure, among other things, material information relating to our Company, including our consolidated subsidiaries, is made known to our officers who certify our financial reports and to the other members of our senior management and the Board of Directors.

     As required by Exchange Act Rule 13a-15(b), management of the Company, including the Chief Executive Officer and the Vice President and Principal Financial Officer conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e). Based upon an evaluation at the end of the period, the Chief Executive Officer and the Vice President concluded that the disclosure controls and procedures are effective in timely alerting them to material information relating to us and our consolidated subsidiaries required to be disclosed in our periodic reports under the exchange act.

     There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting.

ITEM 9B. OTHER INFORMATION

          None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

   The information required by this item is set forth under the captions “Proposal One-Election of Directors,” “Corporate Governance,” “Executive Officers” and “Beneficial Ownership Reporting Compliance” in our definitive proxy statement to be filed in connection with our 2020 annual stockholders’ meeting (“2020 Proxy Statement”) and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

   The information required by this item is set forth under the captions “Director and Management Compensation” in our 2020 Proxy Statement and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is set forth under the captions “Security Ownership” in our 2020 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is set forth under the captions “Certain Relationships and Related Parties” in our 2020 Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is set forth under the caption “Principal Accountant Fees and Services” in our 2020 Proxy Statement and is incorporated herein by reference

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Consolidated financial statements:

The list of financial statements filed with this Annual Report on Form 10-K is provided on page F-1.

Financial Statement Schedules

We have omitted schedules required by applicable SEC accounting regulations because they are either not required under the related instructions, are inapplicable, or we present the required information in the financial statements or notes thereto.

Exhibit Index

2.1	Plan and Agreement of Merger amount Northern Plains Capital Corporation, US Alliance Corporation and Acquisition Merger Sub, Inc., filed as Exhibit 2.1 to the Company's Registration Statement on Form S-4 filed on June 1, 2017 (File No. 333-218389), is incorporated herein by reference as Exhibit 2.1.
2.2	Amendment dated May 21, 2017 to Plan and Agreement of Merger among Northern Plains Capital Corporation, US Alliance Corporation and Acquisition Merger Sub, Inc., filed as Exhibit 2.2 to the Company's Registration Statement on Form S-4 filed on June 1, 2017 (File No. 333-218389), is incorporated herein by reference as Exhibit 2.2.
2.3	Stock Purchase Agreement dated October 11, 2018 between Great Western Insurance Company and US Alliance Life and Security Company, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 16, 2018 (File No. 000-55627), is incorporated herein by reference as Exhibit 2.3.
3.1	Articles of Incorporation of US Alliance Corporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.1.
3.1.1	First Amendment to the Articles of Incorporation of US Alliance Corporation, filed as Exhibit 3.1.1 to the Company’s Current Report on Form 8-K filed on June 9, 2017 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.1.1.
3.1.2	Second Amendment to the Articles of Incorporation of US Alliance Corporation, filed as Exhibit 3.1.2 to the Company’s Current Report on Form 8-K filed on June 9, 2017 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.1.2.
3.2	Bylaws of US Alliance Corporation (filed as Exhibit 3.2 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.2.
3.2.1	Amendment No. 1 to the Bylaws of US Alliance Corporation, filed as Exhibit 3.2.1 to the Company’s Current Report on Form 8-K filed on June 9, 2017 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.2.1.
4.1	Form of Warrant to Purchase Common Shares of US Alliance Corporation, filed as Exhibit 4.1 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 4.1.
4.2*	Description of US Alliance Corporation's Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934
10.1	Commercial Lease Agreement dated October 11, 2011 between US Alliance Corporation and Lindemuth, Inc., DBA Gage Center, filed as Exhibit 10.1 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.1.
10.1.1*	Amendment dated January 1, 2019 to Commercial Lease Agreement dated October 11, 2011 between US Alliance Corporation and Lindemuth, Inc., DBA Gage Center

26

10.2	Automatic Yearly Term Reinsurance Agreement between US Alliance Life and Security Company and General Re Life Insurance Corporation, filed as Exhibit 10.2 to the amended Company's Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.2.
10.3	Group Long Term and Short Term Disability Reinsurance Agreement between US Alliance Life and Security Company and Reliance Standard Life Insurance Company, DBA Custom Disability Solutions, filed as Exhibit 10.3 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.3.
10.4	Automatic Reinsurance Agreement between US Alliance Life and Security Company and Optimum Re Insurance Company (schedules omitted), filed as Exhibit 10.4 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.4.
10.5	Bulk Reinsurance Agreement between US Alliance Life and Security Company and Optimum Re Insurance Company, filed as Exhibit 10.5 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.5.
10.6	Group Medical Reinsurance Agreement between US Alliance Life and Security Company and Unified Life Insurance Company, filed as Exhibit 10.6 to the Company's  amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.6.
10.7.1	Investment Management Agreement between US Alliance Investment Corporation and General Re - New England Asset Management, Inc., filed as Exhibit 10.7.1 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.7.1.
10.7.2	Subadvisory Investment Management Agreement between US Alliance Investment Corporation and General Re - New England Asset Management, Inc., filed as Exhibit 10.17.2 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.7.2.
10.8	Third Party Insurance Services Agreement between US Alliance Life and Security Company and Dakota Capital Life Insurance Company, as amended, filed as Exhibit 10.8 to the Company's amended Registration Statement on Form 10 filed June 29, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.8.
10.9	Critical Illness Reinsurance Treaty, Effective 9/1/16 between US Alliance Life and Security Company and General Re Life Corporation, filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K filed February 17, 2017 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.9.
10.10	Critical Illness Reinsurance Treaty, Effective 9/1/16 between US Alliance Life and Security Company and Unified Life Insurance Company, filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K filed February 17, 2017 (File No. 000-55627), is incorporated herein by reference as Exhibit 10.10.
10.11	Coinsurance Agreement between US Alliance Life and Security Company and American Life & Security Company of Nebraska effective as of September 30, 2017, filed as Exhibit 10.11 to the Company Annual Report filed on February 21, 2018 (File No. 000-55627) is incorporated herein by reference as Exhibit 10.11
21.1*	List of Subsidiaries

27

24.1 Power of Attorney (contained in the signature page herein)

31.1*	Certification of Chief Executive Officer of US Alliance Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer of US Alliance Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of the Chief Executive Officer of US Alliance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certifications of the Principal Financial Officer of US Alliance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*†	XBRL Instance
101.SCH*†	XBRL Taxonomy Extension Schema
101.CAL*†	XBRL Taxonomy Extension Calculation
101.DEF*†	XBRL Taxonomy Extension Definition
101.LAB*†	XBRL Taxonomy Extension Labels
101.PRE*†	XBRL Taxonomy Extention Presentation

* Filed herewith.

† XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		US ALLIANCE CORPORATION
		(Registrant)
Date:	By:	/s/ Jack H. Brier
		Jack H. Brier
		President and Chairman
		(principal executive officer)

29

POWER OF ATTORNEY

Know all people by these presents, that each person whose signature appears below constitutes and appoints Jack H. Brier his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he or she might or could do in person, hereby confirming all that said attorneys-in-fact and agents or either of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on January 29, 2016.

Signature	Title
/S/    Jack H. Brier	President and Chairman
Jack H. Brier
/S/    Jeff Brown	Vice-President and Principal Financial Officer
Jeff Brown
/S/    Rochelle Chronister	Director
Rochelle Chronister
/S/    Kurt Scott	Treasurer and Director
Kurt Scott
/S/    James Concannon	Director.
James Concannon
/S/    William Graves	Director.
William Graves

30

US Alliance Corporation

Consolidated Financial Statements

December 31, 2019 and 2018

(With Independent Auditor’s Report Thereon)

Contents

Report of Independent Registered Public Accounting Firm	F1
Consolidated Financial Statements
Consolidated Balance Sheets	F2
Consolidated Statements of Comprehensive Income (Loss)	F3
Consolidated Statements of Changes in Shareholders’ Equity	F4
Consolidated Statements of Cash Flows	F5
Supplemental Cash Flow Information	F6
Notes to Consolidated Financial Statements	F7 – F26

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of US Alliance Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of US Alliance Corporation and Subsidiaries (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Kerber, Eck & Braeckel, LLP

We have served as the US Alliance Corporation’s auditor since 2016.

Springfield, Illinois

February 20, 2020

F1

US Alliance Corporation

Consolidated Balance Sheets 

	December 31, 2019			December 31, 2018
Assets
Investments:
Available for sale fixed maturity securities (amortized cost: $30,823,397 and $28,069,450 as of December 31, 2019 and December 31, 2018, respectively)	$	33,152,892		$	26,983,803
Available for sale equity securities (cost: $9,982,950 and $11,984,735 as of December 31, 2019 and December 31, 2018, respectively)		10,141,503			10,885,975
Policy loans		118,930			56,539
Total investments		43,413,325			37,926,317
Cash and cash equivalents		6,678,805			2,077,646
Investment income due and accrued		321,362			286,890
Reinsurance related assets		188,382			161,846
Deferred acquisition costs, net		2,652,674			2,757,404
Value of business acquired, net		559,994			580,297
Property, equipment and software, net		43,841			54,078
Goodwill		277,542			277,542
Deferred tax asset, net of valuation allowance		431,158			-
Other assets		372,166			406,969
Total assets	$	54,939,249		$	44,528,989
Liabilities and Shareholders' Equity
Liabilities:
Policy liabilities
Deposit-type contracts	$	19,396,614		$	16,626,218
Policyholder benefit reserves		17,326,524			14,697,519
Dividend accumulation		123,038			176,056
Advance premiums		78,709			56,736
Total policy liabilities		36,924,885			31,556,529
Accounts payable and accrued expenses		122,981			311,082
Federal Home Loan Bank advance		1,000,000			-
Other liabilities		15,186			28,712
Total liabilities		38,063,052			31,896,323
Shareholders' Equity:
Common stock, $0.10 par value. Authorized 20,000,000 shares; issued and outstanding 7,734,004 and 7,650,551 shares as of December 31, 2019 and December 31, 2018, respectively		773,401			765,056
Additional paid-in capital		23,210,257			22,989,443
Accumulated deficit		(9,436,956	)		(8,937,404	)
Accumulated other comprehensive income (loss)		2,329,495			(2,184,429	)
Total shareholders' equity		16,876,197			12,632,666
Total liabilities and shareholders' equity	$	54,939,249		$	44,528,989

See Notes to Consolidated Financial Statements.

F2

US Alliance Corporation

Consolidated Statements of Comprehensive Income (Loss)

	Years Ended December 31,
	2019			2018
Income:
Premium income	$	9,076,205		$	8,807,779
Net investment income		1,790,601			1,477,403
Net investment gains (losses)		1,042,334			(4,499	)
Gain on bargain purchase		-			1,140,996
Other income		57,146			37,608
Total income		11,966,286			11,459,287
Expenses:
Death claims		1,287,893			959,005
Policyholder benefits		4,212,534			3,957,090
Increase in policyholder reserves		2,599,575			2,766,169
Commissions, net of deferrals		783,724			637,425
Amortization of deferred acquisition costs		433,218			454,906
Amortization of value of business acquired		20,303			20,304
Salaries & benefits		1,081,955			1,152,728
Other operating expenses		1,379,034			1,967,796
Total expense		11,798,236			11,915,423
Income (loss) before total federal income tax expense (benefit)	$	168,050		$	(456,136	)
Deferred federal income tax benefit		431,158			-
Total federal income tax benefit		431,158			-
Net lncome (loss)	$	599,208		$	(456,136	)
Net income (loss) per common share, basic and diluted	$	0.08		$	(0.06	)
Unrealized net holding gains (losses) arising during the period		3,420,928			(2,594,366	)
Reclassification adjustment for (gains) losses included in net income (loss)		(5,764	)		4,499
Other comprehensive income (loss)		3,415,164			(2,589,867	)
Comprehensive income (loss)	$	4,014,372		$	(3,046,003	)

See Notes to Consolidated Financial Statements.

F3

US Alliance Corporation

Consolidated Statements of Changes in Shareholders' Equity

Years Ended December 31, 2019 and 2018

								Accumulated
	Number of							Other
	Shares of		Common		Additional			Comprehensive			Accumulated
	Common Stock		Stock		Paid-in Capital			Income / (Loss)			Deficit			Total
Balance, December 31, 2017		7,310,939	$	731,095	$	21,280,437		$	405,438		$	(8,481,268	)	$	13,935,702
Common stock issued, $7 per share		339,612		33,961		2,343,323			-			-			2,377,284
Costs associated with common stock issued		-		-		(634,317	)		-			-			(634,317	)
Other comprehensive loss		-		-		-			(2,589,867	)		-			(2,589,867	)
Net loss		-		-		-			-			(456,136	)		(456,136	)
Balance, December 31, 2018		7,650,551	$	765,056	$	22,989,443		$	(2,184,429	)	$	(8,937,404	)	$	12,632,666
Common stock issued, $7 per share		83,453		8,345		575,826			-			-			584,171
Costs associated with common stock issued		-		-		(355,012	)		-			-			(355,012	)
Cumulative effect, adoption of accounting guidance for equity securities		-		-		-			1,098,760			(1,098,760	)		-
Other comprehensive income		-		-		-			3,415,164			-			3,415,164
Net income		-		-		-			-			599,208			599,208
Balance, December 31, 2019		7,734,004	$	773,401	$	23,210,257		$	2,329,495		$	(9,436,956	)	$	16,876,197

See Notes to Consolidated Financial Statements.

F4

US Alliance Corporation

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2019			2018
Cash Flows from Operating Activities:
Net income (loss)	$	599,208		$	(456,136	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		10,237			172,332
Net realized investment losses on the sale of securities		214,435			4,499
Unrealized gain on equity securities		(1,256,769	)		-
Gain on bargain purchase		-			(1,140,996	)
Amortization of investment securities, net		45,133			42,628
Deferred acquisition costs capitalized		(328,488	)		(285,187	)
Deferred acquisition costs amortized		433,218			454,906
Value of business acquired amortized		20,303			20,304
Interest credited on deposit type contracts		593,794			579,038
(Increase) decrease in operating assets:
Investment income due and accrued		(34,472	)		(57,918	)
Reinsurance related assets		(26,536	)		88,033
Deferred tax asset, net of valuation allowance		(431,158	)		-
Other assets		34,803			(240,785	)
Increase (decrease) in operating liabilities:
Policyowner benefit reserves		2,629,005			2,786,098
Dividend Accumulation		(53,018	)		-
Advance premiums		21,973			49,229
Other liabilities		(13,526	)		19,836
Accounts payable and accrued expenses		(188,101	)		208,187
Net cash provided by operating activities		2,270,041			2,244,068
Cash Flows from Investing Activities:
Available-for-sale securities
Purchase of fixed income investments		(1,888,127	)		(4,643,809	)
Purchase of equity investments		(7,729,600	)		(1,333,779	)
Proceeds from fixed income sales and repayments		981,939			460,638
Proceeds from equity sales and repayments		7,623,536			-
Interest on policy loans		(8,122	)		(2,762	)
Increase in policy loans		(54,269	)		(7,107	)
Acquisition of Great Western Life Insurance Company		-			372,391
Purchase of property, equipment and software		-			(5,334	)
Net cash used in investing activities		(1,074,643	)		(5,159,762	)
Cash Flows from Financing Activities:
Receipts on deposit-type contracts		3,535,094			4,048,626
Withdrawals on deposit-type contracts		(1,358,492	)		(1,450,062	)
Proceeds from FHLB advance		1,000,000			-
Proceeds received from issuance of common stock, net of costs of issuance		229,159			1,742,967
Net cash provided by financing activities		3,405,761			4,341,531
Net increase in cash and cash equivalents		4,601,159			1,425,837
Cash and Cash Equivalents:
Beginning		2,077,646			651,809
Ending	$	6,678,805		$	2,077,646

See Notes to Consolidated Financial Statements.

F5

US Alliance Corporation

Supplemental Cash Flow Information

	Years Ended December 31,
	2019		2018
Supplemental Disclosure of Non-Cash Information
Fixed maturity securities acquired with the Great Western Life Acquisition	$	-	$	1,380,606
Deposit-type contract liabilities acquired with the Great Western Life acquisition		-		35,569

F6

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies

Description of business: US Alliance Corporation ("USAC") was formed as a Kansas corporation on April 24, 2009 to raise capital to form a new Kansas-based life insurance company. The Company's offices are located at 4123 SW Gage Center Drive, Suite 240, Topeka, Kansas 66604. The Company's telephone number is 785-228-0200 and website address is www.usalliancecorporation.com.

USAC has five wholly-owned operating subsidiaries. US Alliance Life and Security Company ("USALSC") was formed June 9, 2011, to serve as the Company's life insurance company. US Alliance Marketing Corporation ("USAMC") was formed April 23, 2012, to serve as a marketing resource. US Alliance Investment Corporation ("USAIC") was formed April 23, 2012 to serve as investment manager for USAC. Dakota Capital Life Insurance Company (“DCLIC”), was acquired on August 1, 2017 when USAC merged with Northern Plains Capital Corporation (“NPCC”). US Alliance Life and Security Company - Montana (USALSC-Montana), was acquired December 14, 2018. Both DCLIC and USALSC-Montana are wholly-owned subsidiaries of USALSC.

The Company terminated its initial public offering on February 24, 2013. During the balance of 2013, the Company achieved approval of an array of life insurance and annuity products, began development of various distribution channels and commenced insurance operations and product sales. The Company sold its first insurance product on May 1, 2013. The Company continued to expand its product offerings and distribution channels throughout 2014 and 2015. On February 24, 2015, the Company commenced a warrant exercise offering set to expire on February 24, 2016. On February 24, 2016, the Company extended the offering until February 24, 2017 and made additional shares available for purchase. All outstanding warrants expired on April 1, 2016. The Company further extended this offering to February 24, 2020. During the 4^th quarter of 2017, the Company began a private placement offering to accredited investors in the state of North Dakota.

USALSC received a Certificate of Authority from the Kansas Insurance Department ("KID") effective January 2, 2012, and sold its first insurance product on May 1, 2013. DCLIC received a Certificate of Authority from the North Dakota Insurance Department ("NDID") effective January 24, 2012.

The Company's single pay life products (which include our Juvenile and Pre-Need products) accounted for 56% of 2019 direct premium revenue. The Company's individual life and Critical Illness products (which include Term Life and Whole Life products) accounted for 25% of 2019 direct premium revenue. The Company's group products accounted for 19% of 2019 direct written premiums.

USALSC and DCLIC seek opportunities to develop and market additional products.

The Company's business model also anticipates the acquisition by USAC and/or USALSC of other insurance and insurance related companies, including third-party administrators, marketing organizations, and rights to other blocks of insurance business through reinsurance or other transactions.

Basis of presentation: The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated from the consolidated financial statements.

Area of Operation: US Alliance Life and Security Company is authorized to operate in the states of Kansas, North Dakota, Missouri, Nebraska and Oklahoma. DCLIC is authorized to operate in the states of North Dakota and South Dakota. USALSC-Montana is authorized to operate in the state of Montana.

F7

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

Cash and cash equivalents: For purposes of the statement of cash flows, the Company considers demand deposits and highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. The Company maintains its operating cash balances in one financial institution located in Topeka, Kansas. The FDIC insures aggregate balances, including interest-bearing and noninterest-bearing accounts, of $250,000 per depositor per insured institution. The Company’s financial institution is a member of a network that participates in the Insured Cash Sweep (ICS) program. By participating in ICS, the Company’s deposits in excess of the insured limit are apportioned and placed in demand deposit accounts at other financial institutions in amounts under the insured limit. As a result, the Company can access insurance coverage from multiple financial institutions while working directly with one. The Company had no amounts uninsured as of December 31, 2019. The Company also has funds deposited in an overnight deposit account at the Federal Home Loan Bank of Topeka which are included as part of its cash and cash equivalents.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Property, equipment and software: Property, equipment and software are stated at cost less accumulated depreciation. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to income currently. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Computer equipment is depreciated over no longer than a 5-year period. Furniture and equipment are depreciated over no longer than a 10-year period. Major categories of depreciable assets and the respective book values as of December 31, 2019 and 2018 are represented below.

	Year Ended			Year Ended
	December 31,			December 31,
	2019			2018
Computer	$	20,755		$	20,755
Furniture and equipment		97,410			97,410
Accumulated depreciation		(74,324	)		(64,087	)
Balance at end of period	$	43,841		$	54,078

Pre-paid expenses: The Company recognizes pre-paid expenses (reported in other assets) as the expenses are incurred. Pre-paid expenses consist of systems consulting hours and insurance. Systems consulting hours are charged as they are incurred on projects. Insurance expenses are charged straight line over the life of the contract.

Investments: Investments in available-for-sale securities are carried in the consolidated financial statements at fair value. Net unrealized holding gains (losses) on fixed maturity securities are included in accumulated other comprehensive income. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Net unrealized holding gains (losses) on equity securities are included as a component of net investment gains (losses).

Realized gains and losses on securities sold during the year are determined using the specific identification method and included in investment income as a component of net investment gains (losses). Investment income is recognized as earned.

Management has a policy and process in place to identify securities that could potentially have an impairment that is other-than-temporary. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. Management considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings and whether the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to the recovery of the amortized cost.

F8

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. As it relates to debt securities, if the Company does not expect to recover the amortized basis, do not plan to sell the security and if it is not more likely than not that the Company would be required to sell a security before the recovery of its amortized cost, the other-than-temporary impairment would be recognized. The Company would recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss. As of December 31, 2019 and 2018, the Company had no investment securities that were evaluated to be other than temporarily impaired.

Value of business acquired: Value of business acquired (VOBA) represents the estimated value assigned to purchased companies or insurance in- force of the assumed policy obligations at the date of acquisition of a block of policies. At least annually, a review is performed of the models and the assumptions used to develop expected future profits, based upon management’s current view of future events. VOBA is reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. Management’s view primarily reflects our experience but can also reflect emerging trends within the industry. Short-term deviations in experience affect the amortization of VOBA in the period, but do not necessarily indicate that a change to the long-term assumptions of future experience is warranted. If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated. Certain assumptions, such as interest spreads and surrender rates, may be interrelated. As such, unlocking adjustments often reflect revisions to multiple assumptions. The VOBA balance is immediately impacted by any assumption changes, with the change reflected through the statements of comprehensive income as an unlocking adjustment in the amount of VOBA amortized. These adjustments can be positive or negative with adjustments reducing amortization limited to amounts previously deferred plus interest accrued through the date of the adjustment.  VOBA is amortized on a straight-line method over 30 years.

In addition, managment may consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system upgrades. The Company considers such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality. To the extent they represent such improvements, these items are applied to the appropriate financial statement line items in a manner similar to unlocking adjustments.

Goodwill: Goodwill represents the excess of the amounts paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is tested for impairment at least annually in the fourth quarter or more frequently if events or circumstances change that would indicate that a triggering event has occurred.  Management assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or circumstances suggest that the carrying value of an identifiable indefinite-lived intangible asset may exceed the sum of the future discounted cash flows expected to result from its use and eventual disposition. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

Reinsurance: In the normal course of business, the Company seeks to limit aggregate and single exposure to losses on risks 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. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were no allowances as of December 31, 2019 and 2018.

F9

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

Benefit reserves: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy claims: Policy claims are based on reported claims plus estimated incurred but not reported claims developed from trends of historical data applied to current exposure. The Company’s current estimate of incurred but not reported claims as of December 31, 2019 and 2018 is $127,711 and $139,753 and is included as a part of policyholder benefit reserves.

Deposit-type contracts: Deposit-type contracts consist of amounts on deposit associated with deferred annuity contracts and premium deposit funds. The deferred annuity contracts credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate annually subject to minimums established by law or administrative regulation.

Liabilities for deferred annuity deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deferred annuity deposit-type contracts for the years ended December 31, 2019 and 2018.

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	16,201,166		$	12,931,900
Acquisition of Great Western Life		-			35,659
Deposits received		3,517,203			4,004,619
Interest credited		583,038			566,999
Withdrawals		(1,238,266	)		(1,338,011	)
Balance at end of period	$	19,063,141		$	16,201,166

The premium deposit funds credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate subject to minimums established by law or administrative regulation.

Liabilities for premium deposit fund deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less withdrawals. The table on the following page provides information about premium deposit fund deposit-type contracts for the years ended December 31, 2019 and 2018.

F10

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	425,052		$	516,991
Assumed from American Life & Security Corp		-			(35,934	)
Deposits received		17,891			44,007
Interest credited		10,756			12,039
Withdrawals		(120,226	)		(112,051	)
Balance at end of period	$	333,473		$	425,052

Revenue recognition and related expenses: Revenues on traditional life insurance products consist of direct premiums reported as earned when due. Premium income includes reinsurance assumed and is reduced by premiums ceded.

Amounts received as payment for annuity contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for contract-holder services, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts.

Deferred acquisition costs: The Company capitalizes and amortizes over the life of the premiums produced incremental direct costs that result directly from and are essential to the contract acquisition transaction and would not have been incurred by the Company had the contract acquisition not occurred. An entity may defer incremental direct costs of contract acquisition that are incurred in transactions with independent third parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts. Additionally, an entity may capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

The following table provides information about deferred acquisition costs for the years ended December 31, 2019 and 2018, respectively.

	Year ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	2,757,404		$	2,963,057
Deferred cost of reinsurance, American Life block acquisition		-			(35,934	)
Capitalization of commissions, sales and issue expenses		328,488			285,187
Amortization net of interest		(433,218	)		(454,906	)
Balance at end of period	$	2,652,674		$	2,757,404

Comprehensive loss: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable fixed maturity securities classified as available for sale, net of applicable taxes.

F11

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

Common stock and earnings (loss) per share: The par value for common stock is $0.10 per share with 20,000,000 shares authorized. As of December 31, 2019 and 2018 the company had 7,734,004 and 7,650,551 common shares issued and outstanding, respectively.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the net income (loss) and the weighted average number of shares outstanding during each year. The weighted average number of shares outstanding during the years ended December 31, 2019 and 2018 were 7,688,560 and 7,393,795 shares, respectively. Potential common shares are excluded from the computation when their effect is anti-dilutive. Basic and diluted net loss per common share is the same for the years ended December 31, 2019 and 2018.

Income taxes: The Company is subject to U.S. federal and state taxes. The provision for income taxes is based on income as reported in the consolidated financial statements. The income tax provision is calculated using the asset and liability method. Deferred income taxes are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted rates expected to apply to taxable income in the years in which the differences are expected to reverse. A valuation allowance is established for the amount of any deferred tax asset that exceeds the amount of the estimated future taxable income needed to utilize the future tax benefits.

All of the Company’s tax returns are subject to U.S. federal, state and local income tax examinations by tax authorities. The Company had no known uncertain tax benefits included in its provision for income taxes as of December 31, 2019 and 2018. The Company’s policy is to recognize interest and penalties (if applicable) as an element of the provision for income taxes in the consolidated statements of income.

The tax years which remain subject to examination by taxing authorities are the years ended December 31, 2016 through 2019.

Risk and uncertainties: Certain risks and uncertainties are inherent in the Company’s day-to-day operations and in the process of preparing its consolidated financial statements. The more significant of those risks and uncertainties, as well as the Company’s method for mitigating the risks, are presented below and throughout the notes to the consolidated financial statements.

- Use of Estimates:

The preparation of consolidated financial statements in conformity with US GAAP, generally accepted accounting principles in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- Regulatory Factors:

The insurance laws of Kansas, North Dakota, and Montana give insurance regulators broad regulatory authority, including powers to (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct, (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus; and (x) regulate the type and amount of permitted investments.

F12

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act") reshapes financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act continue to be subject to regulatory interpretation and implementation rules requiring rulemaking that may take several years to complete. The ultimate outcome of the regulatory rulemaking proceedings cannot be predicted with certainty. The regulations promulgated could have a material impact on consolidated financial results or financial condition.

- Reinsurance:	In order to manage the risk of financial exposure to adverse underwriting results, the Company reinsures a portion of its individual and group life risks with other insurance companies. The Company retains $35,000 on its Whole Life products and $25,000 on its term life products. The Company also reinsures 100% of the risk on its individual accidental death benefit rider. The Company retains 25% of the risk for each covered life on its group life product to a maximum of $100,000 on any individual person. The Company retains 25% of the risk for each covered life on its group accidental death and dismemberment product to a maximum of $25,000 on any individual person. The Company also has catastrophic reinsurance coverage to protect against three or more group life deaths resulting from a single event. The Company also reinsures 90% of the risk on its group disability products. The Company reinsurers 66% of the risk on its critical illness product. Optimum Re Insurance Company (a subsidiary of Optimum Group), General Reinsurance Corporation (a subsidiary of Berkshire Hathaway), Reliance Standard Life Insurance Company (a subsidiary of Tokio Marine Holdings), Hartford Life and Accident Company, and Unified Life Insurance Company provide reinsurance for USALSC and DCLIC. The Company evaluates the financial condition of its reinsurers to minimize its exposure to losses from reinsurer insolvencies. Management believes that any liabilities arising from this contingency would not be material to the Company’s financial position.
- Interest Rate Risk:	Interest rate fluctuations could impair an insurance company's ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Annuity products expose the risk that changes in interest rates will reduce any spread, or the difference between the amounts that the insurance company is required to pay under the contracts and the amounts the insurance subsidiary is able to earn on its investments intended to support its obligations under the contracts. Spread is a key component of revenues.
	To the extent that interest rates credited are less than those generally available in the marketplace, policyholder lapses, policy loans and surrenders, and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to purchase products with perceived higher returns. This process may result in cash outflows requiring that an insurance subsidiary sell investments at a time when the prices of those investments are adversely affected by the increase in market interest rates, which may result in realized investment losses.
	Increases in market interest rates may also negatively affect profitability in periods of increasing interest rates. The ability to replace invested assets with higher yielding assets needed to fund the higher crediting rates that may be necessary to keep interest sensitive products competitive.

F13

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

If interest rates were to increase by 1%, the market value of our fixed income securities would decrease by 9.4% as of December 31, 2019. The Company therefore may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts.

Conversely, in a period of prolonged low interest rates it is difficult to invest assets and earn the rate of return necessary to support insurance products. Some central banks currently have negative interest rates which contributes to the current low interest rate environment.

Policy lapses in excess of those actuarially anticipated would have a negative impact on our financial performance.

Profitability could be reduced if lapse and surrender rates exceed the assumptions upon which the insurance policies were priced. Policy sales costs are deferred and recognized over the life of a policy. Excess policy lapses, however, cause the immediate expensing or amortizing of deferred policy sales costs.

- Investment Risk:

Our invested assets are subject to customary risks of defaults and changes in market values. Factors that may affect the overall default rate on, and market value of, the invested assets include interest rate levels, financial market performance, and general economic conditions.

- Assumptions Risk:

In the life insurance business, assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of life insurance products are made. These assumptions are based on industry experience and are reviewed and revised regularly by an outside actuary to reflect actual experience on a current basis. However, variation of actual experience from that assumed in developing such terms may affect a product's profitability or sales volume and in turn adversely impact our revenues.

Reclassifications: Certain reclassifications of a minor nature have been made to prior-year balances to conform to current-year presentation with no net impact to net loss/income or equity.

New accounting standards:

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts and revenues from financial institutions are not within the scope of this updated guidance, the Company's fee income related to providing services will be subject to this updated guidance. The Company did not earn any fee income in 2019 or 2018.  The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. 

The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

F14

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

In July 2015, the FASB deferred the effective date of the updated guidance on revenue recognition by one year to the quarter ending March 31, 2018.  As an emerging growth company, the Company has chosen to defer implementation of this accounting standard until the year ending December 31, 2019. The adoption of this guidance did not have any effect on the Company’s result of operations, financial position or liquidity.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.

This guidance was effective for the Company for the year ended December 31, 2019 and required a cumulative effect adjustment to opening retained earnings to be recorded for equity investments with readily determinable fair values.  As of the adoption date, the Company held publicly traded equity investments with a fair value of $ 10,987,539 million in a net unrealized gain position of $ 1,098,760 million. The Company has recorded a cumulative-effect adjustment of $ 1,098,760 to decrease Accumulated Other Comprehensive Income (AOCI) with a corresponding increase to accumulated deficit for unrealized gains as of the beginning of fiscal year 2019. As a result of the implementation of ASU 2016-01, unrealized gains and losses in equity investments with readily determinable fair values are recorded on the Consolidated Statements of Comprehensive Income (Loss) within net investment gains (losses). The Company recorded a gain in net investment gains (losses) of $1.1 million for year ended December 31, 2019 as a result of adopting this standard. The implementation of this guidance is expected to increase volatility in our net income as the volatility previously recorded in Comprehensive Income (OCI) related to changes in the fair market value of available-for-sale equity investments will now be reflected in net income effective with the adoption date.

Leases

In February 2016, the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than 12 months.  The updated guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).  Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows.  Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset.  Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease.   The accounting by lessors is not significantly changed by the updated guidance.  The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after December 15, 2018, and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied.  Early adoption is permitted.  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after December 15, 2020. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

F15

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued updated guidance for the accounting for credit losses for financial instruments.  The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.  In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The updated guidance is effective for reporting periods beginning after December 15, 2019.  Early adoption is permitted for reporting periods beginning after December 15, 2018.  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after December 15, 2022. The Company will not be able to determine the impact that the updated guidance will have on its results of operations, financial position or liquidity until the updated guidance is adopted.

Classification of Certain Cash Receipts and Cash Payment 

In August 2016, the FASB issued new guidance that clarifies the classification of certain cash receipts and cash payments in the statement of cash flows under eight different scenarios including, but not limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. As an emerging growth company, the Company elected to defer implementation of this standard to fiscal years beginning after December 15, 2018. The implementation of this standard did not have a material impact on the Company’s statement of cash flows.

F16

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 1.     Description of Business and Significant Accounting Policies (Continued)

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act). In February 2018, FASB issued guidance to address certain issues related to the Tax Cuts and Jobs Act. This new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU 2018-12 requires periodic reassessment of actuarial and discount rate assumptions used in the valuation of policyholder liabilities and deferred acquisition costs arising from the issuance of long-duration insurance and reinsurance contracts, with the effects of the changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Under current accounting guidance, the actuarial and discount rate assumptions are set at the contract inception date and not subsequently changed, except in limited circumstances. ASU 2018-12 also requires new disclosures and is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is evaluating the effect this standard will have on our Consolidated Financial Statements.

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did not relate to accounting policies and procedures pertinent or material to the Company at this time.

F17

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 2.     Acquisitions

On December 14, 2018 the Company acquired USALSC-Montana (formerly Great Western Life Insurance Company, “GWLIC”) pursuant to a Stock Purchase Agreement (“SPA”) with Great Western Insurance Company, a wholly-owned subsidiary of American Enterprise Group, Inc. Pursuant to the SPA, the Company paid $500,000 to acquire all of the outstanding shares of GWLIC.

The acquisition was accounted for under the acquisition method of accounting, which requires the consideration transferred and all assets and liabilities assumed to be recorded at fair value. The following table summarizes the fair value of GWLIC’s assets acquired and liabilities assumed and the gain from purchase:

Preliminary amounts of indentifiable assets acquired and liabilities assumed
Investment securities	$	1,380,606
Cash		872,391
Other assets		26,669
Policyholder reserves		(422,442	)
Deposit type contracts		(35,659	)
Other liabilities		(180,569	)
Total indentifiable net assets	$	1,640,996
Cash paid as purchase consideration		(500,000	)
Gain from purchase of Great Western Life	$	1,140,996

F18

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 3.     Investments

The amortized cost and fair value of available for sale investments as of December 31 is as follows:

	December 31, 2019
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	608,477	$	24,162	$	-		$	632,639
Corporate bonds		18,407,211		1,697,265		(20,079	)		20,084,397
Municipal bonds		6,538,883		518,059		(1,883	)		7,055,059
Redeemable preferred stock		2,097,206		36,687		-			2,133,893
Mortgage backed and asset backed securities		3,171,620		77,593		(2,309	)		3,246,904
Total fixed maturities		30,823,397		2,353,766		(24,271	)		33,152,892
Equities:
Common stock		9,064,262		239,490		(89,058	)		9,214,694
Preferred stock		918,688		8,121		-			926,809
Total equities		9,982,950		247,611		(89,058	)		10,141,503
Total available for sale	$	40,806,347	$	2,601,377	$	(113,329	)	$	43,294,395

	December 31, 2018
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	597,265	$	-	$	(27,325	)	$	569,940
Corporate bonds		16,847,623		43,051		(1,048,313	)		15,842,361
Municipal bonds		6,559,854		118,890		(80,631	)		6,598,113
Redeemable preferred stock		211,313		-		(18,909	)		192,404
Mortgage backed and asset backed securities		3,853,395		11,425		(83,835	)		3,780,985
Total fixed maturities		28,069,450		173,366		(1,259,013	)		26,983,803
Equities:
Common stock		11,808,771		31,505		(1,104,341	)		10,735,935
Preferred stock		175,964		-		(25,924	)		150,040
Total equities		11,984,735		31,505		(1,130,265	)		10,885,975
Total available for sale	$	40,054,185	$	204,871	$	(2,389,278	)	$	37,869,778

The amortized cost and fair value of debt securities as of December 31, 2019 and 2018, by contractual maturity, are shown on the following page. Equity securities do not have stated maturity dates and therefore are not included in the following maturity summary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

F19

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 3.     Investments (Continued) 

	As of December 31, 2019				As of December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	99,987	$	100,239	$	-	$	-
After one year through five years		1,424,337		1,471,552		1,472,228		1,462,745
After five years through ten years		3,286,937		3,574,191		2,101,676		2,055,173
More than 10 years		20,743,310		22,626,113		20,430,838		19,492,496
Redeemable preferred stocks		2,097,206		2,133,893		211,313		192,404
Mortgage backed and asset backed securities		3,171,620		3,246,904		3,853,395		3,780,985
Total amortized cost and fair value	$	30,823,397	$	33,152,892	$	28,069,450	$	26,983,803

Proceeds from the sale of securities, maturities, and asset paydowns in 2019 and 2018 were $8,605,475 and $460,638, respectively. Realized gains and losses related to the sale of securities are summarized as follows:

	Years Ended December 31,
	2019			2018
Gross gains	$	43,935		$	530
Gross losses		(258,370	)		(5,029	)
Net security losses	$	(214,435	)	$	(4,499	)

Gross unrealized losses by duration are summarized as follows:

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2019
Available for sale:
Fixed maturities:
Corporate bonds	$	967,848	$	(20,079	)	$	-	$	-		$	967,848	$	(20,079	)
Municipal bonds		46,646		(1,883	)		-		-			46,646		(1,883	)
Mortgage backed and asset backed securities		-		-			296,576		(2,309	)		296,576		(2,309	)
Total fixed maturities		1,014,494		(21,962	)		296,576		(2,309	)		1,311,070		(24,271	)
Equities:
Common stock		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total equities		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total available for sale	$	1,083,283	$	(28,882	)	$	3,471,423	$	(84,447	)	$	4,554,706	$	(113,329	)

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2018
Available for sale:
Fixed maturities:
US Treasury securities	$	251,206	$	(27,325	)	$	-	$	-		$	251,206	$	(27,325	)
Corporate bonds		11,743,222		(948,539	)		830,239		(99,774	)		12,573,461		(1,048,313	)
Municipal bonds		2,114,260		(51,267	)		859,305		(29,364	)		2,973,565		(80,631	)
Redeemable preferred stock		90,840		(8,720	)		101,564		(10,189	)		192,404		(18,909	)
Mortgage backed and asset backed securities		544,714		(6,656	)		2,448,551		(77,179	)		2,993,265		(83,835	)
Total fixed maturities		14,744,242		(1,042,507	)		4,239,659		(216,506	)		18,983,901		(1,259,013	)
Equities:
Common stock		3,312,528		(228,148	)		7,188,900		(876,193	)		10,501,428		(1,104,341	)
Preferred stock		-		-			150,040		(25,924	)		150,040		(25,924	)
Total equities		3,312,528		(228,148	)		7,338,940		(902,117	)		10,651,468		(1,130,265	)
Total available for sale	$	18,056,770	$	(1,270,655	)	$	11,578,599	$	(1,118,623	)	$	29,635,369	$	(2,389,278	)

F20

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 3.     Investments (Continued)

Unrealized losses occur from market price declines that may be due to a number of factors, including economic downturns, changes in interest rates, competitive forces within an industry, issuer specific events, operational difficulties, lawsuits, and market pricing anomalies caused by factors such as temporary lack of liquidity.

The total number of securities in the investment portfolio in an unrealized loss position as of December 31, 2019 was 19, which represented an unrealized loss of $113,329 of the aggregate carrying value of those securities. The 19 securities breakdown as follows: 6 bonds, 6 mortgage and asset backed securities, 4 common stocks, 2 preferred stock index funds, and 1 senior loan fund. The Company determined that no securities were considered to be other-than-temporarily impaired as of December 31, 2019 and 2018.

The Company was required to implement a new accounting standard in the first quarter of 2019 which requires that the unrealized gains and losses on equity securities be reported as income on the Consolidated Statements of Comprehensive Income (Loss). For 2019, net investment gains (losses) is compromised of $1,256,769 of unrealized gains on our equity portfolio and net realized losses of $214,435. For 2018, net investment losses consist entirely of our realized losses of $4,499.  

Note 4.     Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement rate.

● Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

● Level 3 inputs are unobservable for the asset or liability and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Investments, available for sale: Fair values of available for sale fixed maturity securities are provided by a third-party pricing service. The pricing service uses a variety of sources to determine fair value of securities. The Company’s fixed maturity securities are highly liquid, which allows for a high percentage of the portfolio to be priced through pricing sources. Fair values for equity securities are also provided by a third-party pricing service and are derived from active trading on national market exchanges.  The Company's investment in FHLB stock is carried at redemption value which approximates fair value.

F21

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 4.     Fair Value Measurements (Continued)

The table below presents the amounts of assets measured at fair value on a recurring basis as of December 31, 2019 and 2018:   

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	632,639	$	632,639	$	-	$	-
Corporate bonds		20,084,397		-		19,892,797		191,600
Municipal bonds		7,055,059		-		7,055,059		-
Redeemable preferred stock		2,133,893		-		2,133,893		-
Mortgage backed and asset backed securities		3,246,904		-		3,246,904		-
Total fixed maturities		33,152,892		632,639		32,328,653		191,600
Equities:
Common stock		9,214,694		9,169,694		45,000		-
Preferred stock		926,809		-		926,809		-
Total equities		10,141,503		9,169,694		971,809		-
Total	$	43,294,395	$	9,802,333	$	33,300,462	$	191,600

	December 31, 2018
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	569,940	$	569,940	$	-	$	-
Corporate bonds		15,842,361		-		15,642,361		200,000
Municipal bonds		6,598,113		-		6,598,113		-
Redeemable preferred stock		192,404		-		192,404		-
Mortgage backed and asset backed securities		3,780,985		-		3,780,985		-
Total fixed maturities		26,983,803		569,940		26,213,863		200,000
Equities:
Common stock		10,735,935		10,735,935		-
Preferred stock		150,040		-		150,040
Total equities		10,885,975		10,735,935		150,040		-
Total	$	37,869,778	$	11,305,875	$	26,363,903	$	200,000

The Company discloses the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for other financial assets and financial liabilities are discussed below:

Cash and cash equivalents: The carrying amounts approximate fair value because of the short maturity of these instruments.

Investment income due and accrued: The carrying amounts approximate fair value because of the short maturity of these instruments.

Policy loans: Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value.

F22

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 4.     Fair Value Measurements (Continued)

Federal Home Loan Bank advance: FHLB advances are stated at the outstanding principal balance and the carrying value approximates their fair value.

Policyholder deposits in deposit-type contracts: The fair value for policyholder deposits deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach.  Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.

The estimated fair values of the Company’s financial assets and liabilities at December 31 are as follows:

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	6,678,805	$	6,678,805	$	6,678,805	$	-	$	-
Investment income due and accrued		321,362		321,362		-		-		321,362
Policy loans		118,930		118,930		-		-		118,930
Total Financial Assets (excluding available for sale investments)	$	7,119,097	$	7,119,097	$	6,678,805	$	-	$	440,292
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	19,396,614	$	19,186,265	$	-		-	$	19,186,265
Federal Home Loan Bank advance		1,000,000		1,000,000		-		-		1,000,000
Total Financial Liabilities	$	20,396,614	$	20,186,265	$	-		-	$	20,186,265

	December 31, 2018
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	2,077,646	$	2,077,646	$	2,077,646	$	-	$	-
Investment income due and accrued		286,890		286,890		-				286,980
Policy loans		56,539		56,539		-		-		56,539
Total Financial Assets (excluding available for sale investments)	$	2,241,075	$	2,241,075	$	2,077,646	$	-	$	343,519
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164
Total Financial Liabilities	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164

Note 5.     Federal Income Taxes

USAC files federal income taxes returns based on type of return.  USAC files a consolidated corporate federal income tax return with USAMC and USAIC.  USASLC, DCLIC, and USALSC-MT file a consolidated life insurance federal income tax return.  Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.

A reconciliation of federal income tax expense computed by applying the federal income tax rate of 21% to income before federal income tax expense for the years ended December 31, 2019 and 2018, respectively, is summarized as follows:

		2019		2018
Income (loss) before total federal income tax	$	168,050	$	(456,136)
Tax Rate		21%		21%
Expected income tax expense (benefit)		35,291		(95,789)
Effect of tax-exempt income		(11,925)		(9,808)
Disallowed deductions		693		-
Other GAAP to tax differences		(24,059)		105,597
Change in valuation allowance		(431,158)		-
Total income tax benefit	$	(431,158)	$	-

F23

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 5.     Federal Income Taxes (Continued)

 

For the year ended December 31, 2019, the Company recognized a deferred tax benefit related to the reduction of its deferred tax asset valuation allowance.  The net change in the allowance resulted in a net tax benefit of $431,158. Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2019 and 2018 are summarized as follows:

		12/31/2019		12/31/2018
Deferred Tax Assets
Net operating loss carryforwards	$	2,641,247	$	2,649,673
Unamortized Start-Up Costs		168,803		189,903
Policy owner benefit reserves		1,154,684		1,334,952
Unrealized Loss		-		458,730
Deferred tax asset valuation allowance		(2,423,438)		(4,179,283)
Deferred Tax Assets		1,541,296		453,975
Deferred Tax Liability
Deferred acquisition costs		227,921		306,614
Fixed assets		8,699		25,499
8 Year Spread		233,429		-
Value of business acquired		117,599		121,862
Unrealized Gain		522,490		-
		1,110,138		453,975
Net Deferred Tax Asset	$	431,158	$	-

As of December 31, 2019, the Company has net operating loss carryforwards of $12,577,367 of which $10,485,338 will expire between 2026 through 2037 and of which $2,092,029 is indefinite. The Company had net operating loss carryforwards of  $12,617,489 as of December 31, 2018.

The 2016 through 2019 U.S. federal tax years are subject to income tax examination by tax authorities. Penalties and interest assessed by taxing authorities are included in the provision for income taxes, if applicable.  There were no interest or penalties paid during 2019 and 2018.

F24

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 6.     Reinsurance

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 is listed in the following table.

	December 31, 2019		December 31, 2018
Balance Sheet
Benefits and claim reserves ceded	$	136,579	$	64,451
Amounts due from ceding company		50,824		97,395
Benefits and claim reserves assumed		12,597,007		11,521,657

	Years ended
	December 31, 2019		December 31, 2018
Statements of Comprehensive Income (Loss)
Ceded premium	$	800,525	$	629,196
Assumed premium		4,906,522		4,863,227
Allowances on ceded premium		17,672		19,347
Allowances paid on assumed premium		495,327		401,147
Assumed benefits and policyholder reserve increases		4,269,695		4,078,572

The company currently reinsures business in excess of its retention with General Re Life Corporation, Reliance Standard Life Insurance Company, Unified Life Insurance Company, Hartford Life and Accident Company, and Optimum Re Insurance Company. The Company also currently assumes business under agreements with Unified Life Insurance Company and American Life and Security Corporation.

Note 7.     Lease Commitments

Total rent expense was $45,785 and $39,166 for the years ended December 31, 2019 and 2018, respectively. The Company amended its lease on its Topeka headquarters effective January 1, 2019 which extended its termination date for two years with three additional optional years. The future rent payments required under the lease are $37,824 in 2020. The Company also maintains an office in Bismarck, ND with a lease that expires on September 30, 2020. The future rent payments required under this lease are $8,446 in 2020.

Note 8.     Related Party Transaction

Brier Development Company, Inc. is owned solely by Jack Brier, President and CEO of the Company. Brier Development Company, Inc. owns 20,000 shares of stock in USAC which are in escrow until 5 years after the termination of the public offering. The Company makes reimbursements to Brier Development Company, Inc. on behalf of Jack H. Brier for single coverage for long-term care and an allowance for vehicle expenses.  Reimbursements for these items were $19,421 and $19,421 for years ended December 31, 2019 and 2018, respectively.

Note 9.     Federal Home Loan Bank Advances

One of the Company’s subsidiaries, USALSC, is a member of the Federal Home Loan Bank of Topeka (FHLB), which provides access to collateralized borrowings.  Any borrowings from FHLB requires the purchase of FHLB common stock in an amount equal to 4.5% of the borrowing.  On October 31, 2019, USALSC received an advance of $ 1,000,000 based on USALSC purchasing $ 45,000 of FHLB common stock.   The Company had outstanding advances from the Federal Home Loan Bank of Topeka of $1,000,000 at December 31, 2019. Advances from the FHLB are secured by the Federal Home Loan Bank of Topeka stock and pledged assets consisting of mortgage backed securities and overnight deposit funds with a fair value of $1,132,099. This regular fixed convertible advance has a 10 year term with an FHLB option to convert to an adjustable rate on the 5^th anniversary. The interest rate at issue was 1.66%.

As of December 31, 2019, USALSC had pledged $932,099 of mortgage backed securities and $200,000 of overnight deposits to FHLB in support of its outstanding advance.

Note 10.   Restricted Funds

As required by Kansas law, US Alliance Life and Security Company maintains a trust account at Capitol Federal Savings Bank which is jointly owned by the Kansas Insurance Department. The life insurance company is required by the State of Kansas to hold $400,000 of asset book value in this account. The Company placed additional assets into this trust account in 2015 to meet the minimum deposit requirement for the State of Missouri. These assets were held in bonds and other invested assets with a statement value of $625,000 and $625,000 as of December 31, 2019 and 2018, respectively. Additionally, the Company has a special deposit with the State of Missouri with asset book value of $300,000. Dakota Capital Life Insurance Company has $200,000 of funds on deposit jointly owned with the North Dakota Insurance Department at the Bank of North Dakota. US Alliance Life and Security Company – Montana has $325,000 of funds on deposit jointly owned by the Montana Department of Insurance at Wells Fargo.

F25

US Alliance Corporation

Notes to Consolidated Financial Statements

Note 11.   Statutory Net Income and Surplus

US Alliance Life and Security Company is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Kansas Insurance Department. Dakota Capital Life Insurance Company is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the North Dakota Insurance Department. US Alliance Life and Security Company - Montana is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Montana Insurance Department. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.

The following table summarizes the statutory net income (loss) and statutory capital and surplus of US Alliance Life and Security Company, Dakota Capital Life Insurance Company, and US Alliance Life and Security Company - Montana as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018.

	Statutory Capital and Surplus as of
	December 31		December 31
	2019		2018
US Alliance Life and Security Company	$	5,831,153	$	5,239,874
Dakota Capital Life Insurance Company		1,472,930		1,373,390
US Alliance Life and Security Company - Montana		1,674,410		1,721,012

	Statutory Net Income (loss) for the years ended December 31,
	2019			2018
US Alliance Life and Security Company	$	6,120		$	28,883
Dakota Capital Life Insurance Company		116,748			70,393
US Alliance Life and Security Company - Montana		(44,873	)		42,957

The payment of dividends to US Alliance Corporation by US Alliance Life and Security Company is subject to limitations imposed by applicable insurance laws. For example, “extraordinary” dividends may not be paid without permission of the Kansas Insurance Department. An “extraordinary” dividend is defined, in general, as any dividend or distribution of cash or other property whose fair market value, compared with that of other dividends or distributions made within the preceding 12 months, exceeds the greater of (i) 10% of the policyholders’ surplus (total statutory capital stock and surplus) as of December 31 of the preceding year or (ii) the statutory net gain from operations excluding realized gains on investments) of the insurer for the 12 month period ending December 31 of the preceding year.

The payment of dividends to US Alliance Life and Security Company by Dakota Capital Life Insurance Company and US Alliance Life and Security Company – Montana is subject to similar limitations.

Note 12.   Subsequent Events

All of the effects of subsequent events that provide additional evidence about conditions that existed at the balance sheet date, including the estimates inherent in the process of preparing the consolidated financial statements, are recognized in the consolidated financial statements. The Company does not recognize subsequent events that provide evidence about conditions that did not exist at the balance sheet date but arose after, but before the consolidated financial statements are issued. In some cases, unrecognized subsequent events are disclosed to keep the consolidated financial statements from being misleading.

The Company has evaluated subsequent events through February 20, 2020, the date on which the consolidated financial statements were issued.

F26

EX-4.2

Exhibit 4.2

Description of Securities

As of January 1, 2020, US Alliance Corporation (“USAC” or the “Company”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Act”): Common Stock, par value $0.10 per share (the “Common Stock”). The Company is also authorized to issues 20,000,000 shares of preferred stock, par value $5.00 per share (“Preferred Stock”). As of January 1, 2020, no shares of Preferred Stock are issued or outstanding, and no class of Preferred Stock is registered under Section 12 of the Act.

The Company is authorized to issue 9,000,000 shares of Common Stock. Holders of Common Stock are entitled, subject to the prior right of any preferred stock outstanding (none at this time), to such dividends as the Board of Directors, in its discretion, may declare out of legally available funds. In the event of liquidation, holders of Common Stock are entitled, subject to the prior rights of holders of any preferred stock then outstanding and any creditors, to participate pro rata in all assets, if any, of USAC remaining after the payment of liabilities. Holders are entitled to one vote for each share of Common Stock held by them, and may not vote cumulatively in the election of directors. Holders of the Common Stock do not have preemptive rights.

EX-10.1

Exhibit 10.1.1

SECOND AMENDMENT TO COMMERCIAL LEASE AGREEMENT

THIS SECOND AMENDMENT TO COMMERCIAL LEASE AGREEMENT is made this  26^th  day of September, 2018 by and between LINDEMUTH, INC DBA GAGE CENTER, (hereinafter referred to as "LANDLORD") and US ALLIANCE CORPORATION (hereinafter referred to as "TENANT").

WITNESSETH:

WHEREAS, LANDLORD and TENANT executed and entered into a Lease which commenced on October, 11th, 2011, and First Amendment to Lease Agreement made on August 27^th 2014 for property located at 4123 SW Gage Center Dr. Suite 240 - Topeka, Kansas 66604 as the same has subsequently been renewed (hereinafter collectively referred to as "Lease") for those Premises consisting of approximately 4,067 +/- square feet located at 4123 SW Gage Center Dr. Suite 240 - Topeka, Kansas 66604 ("Premises").

WHEREAS, LANDLORD and TENANT desire to extend the term and amend the Lease as hereinafter set forth:

NOW, THEREFORE, in consideration of the promises and other good and valuable consideration, the sufficiency of which is hereby acknowledged, LANDLORD and TENANT hereby agree that the term of the Lease is amended as follows:

1)           LEASE TERM: Tenant hereby desires to extend its lease term for two (2) years starting 0l/01/19 through 12/31/20 at a monthly base rent of$3,151.93.

2)           OPTION TO RENEW: Provided Tenant is not in default of this Lease Agreement, Tenant shall have the option to renew this Lease Agreement for three (3), one (1) year options under the same terms and conditions with the Minimum rents to be adjusted upon the schedule below. Tenant must give Landlord written notice of Tenant's desire to exercise each individual Options to Renew ninety (90) days prior to the then lease expiration date. Failure to give such notice to renew will result in the individual Options to Renew becoming null and void.

Option 1: 01/01/21 - 12/31/21 at a monthly base rent of $3,151.93

Option 2: 0l/01/22 - 12/31/22 at a monthly base rent of $3,309.53

Option 3: 01/01/23 - 12/31/23 at a monthly base rent of $3,309.53

3)           Tenant understands and agrees that there is not an elevator within the building of the leased Premises and the language in section 7b of the original Lease Agreement referencing the Landlord being responsible for elevator service shall be deleted.

"All other terms and conditions of the original Lease which commenced on October 11th, 2011 and First Amendment to Lease Agreement made on August 27^th, 2014, shall remain unchanged and in full force and effect".

IN WITNESS WHEREOF, the parties have executed this instrument the day and year first above written.

LANDLORD:

LINDEMUTH, INC.

EX-21.1

Exhibit 21.1

US Alliance Corporation

Subsidiary	Jurisdiction	Percentage Ownership
US Alliance Life and Security Company	Kansas	100%
US Alliance Marketing Corporation	Kansas	100%
US Alliance Investment Corporation	Kansas	100%
Dakota Capital Life Insurance Corporation	North Dakota	100%
US Alliance Life and Security Company - Montana	Montana	100%

EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER'S CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jack H. Brier, certify that:

1. I have reviewed this annual report on Form 10-K of US Alliance Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Jack H. Brier

Jack H. Brier

President and Chief Executive Officer

Date: ____________, 2020

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER’S CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeff Brown, certify that:

1. I have reviewed this annual report on Form 10-K of US Alliance Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jeff Brown

Jeff Brown

Chief Operating Officer and Vice-President of US

Alliance Life and Security Company, a wholly-

owned subsidiary of US Alliance Corporation

Date: ______________, 2020

EX-32.1

Exhibit 32.1

PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of US Alliance Corporation (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack H. Brier, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jack H. Brier

Jack H. Brier

President and Chief Executive Officer

Date: ____________________, 2020

EX-32.2

Exhibit 32.2

PRINCIPAL FINANCIAL OFFICER’S CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of US Alliance Corporation (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff Brown, Chief Operating Officer and Vice-President of US Alliance Life and Security Company, a wholly-owned subsidiary of US Alliance Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeff Brown

Jeff Brown

Chief Operating Officer and Vice-President of US

Alliance Life and Security Company, a wholly-

owned subsidiary of US Alliance Corporation

Date: _____________________, 2020

XML

Note 3 - Investments - Gross Unrealized Losses (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Available-for-sale securities, less than 12 months, fair value	$ 1,083,283	$ 18,056,770
Available-for-sale securities, less than 12 months, unrealized loss	(28,882)	(1,270,655)
Available-for-sale securities, greater than 12 months, fair value	3,471,423	11,578,599
Available-for-sale securities, greater than 12 months, unrealized loss	(84,447)	(1,118,623)
Available-for-sale securities, fair value	4,554,706	29,635,369
Available-for-sale securities, unrealized loss	(113,329)	(2,389,278)
Fixed Maturities [Member]
Available-for-sale securities, less than 12 months, fair value	1,014,494	14,744,242
Available-for-sale securities, less than 12 months, unrealized loss	(21,962)	(1,042,507)
Available-for-sale securities, greater than 12 months, fair value	296,576	4,239,659
Available-for-sale securities, greater than 12 months, unrealized loss	(2,309)	(216,506)
Available-for-sale securities, fair value	1,311,070	18,983,901
Available-for-sale securities, unrealized loss	(24,271)	(1,259,013)
Fixed Maturities [Member] | Corporate Debt Securities [Member]
Available-for-sale securities, less than 12 months, fair value	967,848	11,743,222
Available-for-sale securities, less than 12 months, unrealized loss	(20,079)	(948,539)
Available-for-sale securities, greater than 12 months, fair value		830,239
Available-for-sale securities, greater than 12 months, unrealized loss		(99,774)
Available-for-sale securities, fair value	967,848	12,573,461
Available-for-sale securities, unrealized loss	(20,079)	(1,048,313)
Fixed Maturities [Member] | US Treasury Securities [Member]
Available-for-sale securities, less than 12 months, fair value		251,206
Available-for-sale securities, less than 12 months, unrealized loss		(27,325)
Available-for-sale securities, greater than 12 months, fair value
Available-for-sale securities, greater than 12 months, unrealized loss
Available-for-sale securities, fair value		251,206
Available-for-sale securities, unrealized loss		(27,325)
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities, less than 12 months, fair value	46,646	2,114,260
Available-for-sale securities, less than 12 months, unrealized loss	(1,883)	(51,267)
Available-for-sale securities, greater than 12 months, fair value		859,305
Available-for-sale securities, greater than 12 months, unrealized loss		(29,364)
Available-for-sale securities, fair value	46,646	2,973,565
Available-for-sale securities, unrealized loss	(1,883)	(80,631)
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities, less than 12 months, fair value		544,714
Available-for-sale securities, less than 12 months, unrealized loss		(6,656)
Available-for-sale securities, greater than 12 months, fair value	296,576	2,448,551
Available-for-sale securities, greater than 12 months, unrealized loss	(2,309)	(77,179)
Available-for-sale securities, fair value	296,576	2,993,265
Available-for-sale securities, unrealized loss	(2,309)	(83,835)
Fixed Maturities [Member] | Redeemable Preferred Stock [Member]
Available-for-sale securities, less than 12 months, fair value		90,840
Available-for-sale securities, less than 12 months, unrealized loss		(8,720)
Available-for-sale securities, greater than 12 months, fair value		101,564
Available-for-sale securities, greater than 12 months, unrealized loss		(10,189)
Available-for-sale securities, fair value		192,404
Available-for-sale securities, unrealized loss		(18,909)
Equity Securities [Member]
Available-for-sale securities, less than 12 months, fair value	68,789	3,312,528
Available-for-sale securities, less than 12 months, unrealized loss	(6,920)	(228,148)
Available-for-sale securities, greater than 12 months, fair value	3,174,847	7,338,940
Available-for-sale securities, greater than 12 months, unrealized loss	(82,138)	(902,117)
Available-for-sale securities, fair value	3,243,636	10,651,468
Available-for-sale securities, unrealized loss	(89,058)	(1,130,265)
Equity Securities [Member] | Common Stock [Member]
Available-for-sale securities, less than 12 months, fair value	68,789	3,312,528
Available-for-sale securities, less than 12 months, unrealized loss	(6,920)	(228,148)
Available-for-sale securities, greater than 12 months, fair value	3,174,847	7,188,900
Available-for-sale securities, greater than 12 months, unrealized loss	(82,138)	(876,193)
Available-for-sale securities, fair value	3,243,636	10,501,428
Available-for-sale securities, unrealized loss	$ (89,058)	(1,104,341)
Equity Securities [Member] | Preferred Stock [Member]
Available-for-sale securities, less than 12 months, fair value
Available-for-sale securities, less than 12 months, unrealized loss
Available-for-sale securities, greater than 12 months, fair value		150,040
Available-for-sale securities, greater than 12 months, unrealized loss		(25,924)
Available-for-sale securities, fair value		150,040
Available-for-sale securities, unrealized loss		$ (25,924)

XML

Note 3 - Investments (Details Textual)	12 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Proceeds from Sale, Maturity and Collection of Investments, Total	$ 8,605,475	$ 460,638
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	19
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	$ 113,329	2,389,278
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	0	0
Debt and Equity Securities, Unrealized Gain (Loss), Total	1,256,769
Debt and Equity Securities, Realized Gain (Loss), Total	$ (214,435)	$ (4,499)
Fixed Income Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	6
Collateralized Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	6
Common Stock [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	4
Preferred Stock [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	2
Senior Loan Fund [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	1

XML

Note 11 - Statutory Net Income and Surplus

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Statutory Accounting Practices Disclosure [Text Block]

Note

11.

   Statutory Net Income and Surplus

US Alliance Life and Security Company is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Kansas Insurance Department. Dakota Capital Life Insurance Company is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the North Dakota Insurance Department. US Alliance Life and Security Company - Montana is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Montana Insurance Department. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.

The following table summarizes the statutory net income (loss) and statutory capital and surplus of US Alliance Life and Security Company, Dakota Capital Life Insurance Company, and US Alliance Life and Security Company - Montana as of

December 31, 2019

and

2018

and for the years ended

December 31, 2019

and

2018.

	Statutory Capital and Surplus as of
	December 31		December 31
	2019		2018
US Alliance Life and Security Company	$	5,831,153	$	5,239,874
Dakota Capital Life Insurance Company		1,472,930		1,373,390
US Alliance Life and Security Company - Montana		1,674,410		1,721,012

	Statutory Net Income (loss) for the years ended December 31,
	2019			2018
US Alliance Life and Security Company	$	6,120		$	28,883
Dakota Capital Life Insurance Company		116,748			70,393
US Alliance Life and Security Company - Montana		(44,873	)		42,957

The payment of dividends to US Alliance Corporation by US Alliance Life and Security Company is subject to limitations imposed by applicable insurance laws. For example, “extraordinary” dividends

may

not

be paid without permission of the Kansas Insurance Department. An “extraordinary” dividend is defined, in general, as any dividend or distribution of cash or other property whose fair market value, compared with that of other dividends or distributions made within the preceding

12

months, exceeds the greater of (i)

10%

of the policyholders’ surplus (total statutory capital stock and surplus) as of

December 31

of the preceding year or (ii) the statutory net gain from operations excluding realized gains on investments) of the insurer for the

12

month period ending

December 31

of the preceding year.

The payment of dividends to US Alliance Life and Security Company by Dakota Capital Life Insurance Company and US Alliance Life and Security Company – Montana is subject to similar limitations.

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Assets
Available for sale fixed maturity securities (amortized cost: $30,823,397 and $28,069,450 as of December 31, 2019 and December 31, 2018, respectively)	$ 43,294,395	$ 37,869,778
Policy loans	118,930	56,539
Total investments	43,413,325	37,926,317
Cash and cash equivalents	6,678,805	2,077,646
Investment income due and accrued	321,362	286,890
Reinsurance related assets	188,382	161,846
Deferred acquisition costs, net	2,652,674	2,757,404
Value of business acquired, net	559,994	580,297
Property, equipment and software, net	43,841	54,078
Goodwill	277,542	277,542
Deferred tax asset, net of valuation allowance	431,158
Other assets	372,166	406,969
Total assets	54,939,249	44,528,989
Liabilities:
Deposit-type contracts	19,396,614	16,626,218
Policyholder benefit reserves	17,326,524	14,697,519
Dividend accumulation	123,038	176,056
Advance premiums	78,709	56,736
Total policy liabilities	36,924,885	31,556,529
Accounts payable and accrued expenses	122,981	311,082
Federal Home Loan Bank advance	(1,000,000)
Other liabilities	15,186	28,712
Total liabilities	38,063,052	31,896,323
Shareholders' Equity:
Common stock, $0.10 par value. Authorized 20,000,000 shares; issued and outstanding 7,734,004 and 7,650,551 shares as of December 31, 2019 and December 31, 2018, respectively	773,401	765,056
Additional paid-in capital	23,210,257	22,989,443
Accumulated deficit	(9,436,956)	(8,937,404)
Accumulated other comprehensive income (loss)	2,329,495	(2,184,429)
Total shareholders' equity	16,876,197	12,632,666
Total liabilities and shareholders' equity	54,939,249	44,528,989
Fixed Maturities [Member]
Assets
Available for sale fixed maturity securities (amortized cost: $30,823,397 and $28,069,450 as of December 31, 2019 and December 31, 2018, respectively)	33,152,892	26,983,803
Equities, Including Equity Securities and Other Equity Investments [Member]
Assets
Available for sale fixed maturity securities (amortized cost: $30,823,397 and $28,069,450 as of December 31, 2019 and December 31, 2018, respectively)	$ 10,141,503	$ 10,885,975

XML

Note 3 - Investments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Investment Holdings [Text Block]

Note

3.

     Investments

The amortized cost and fair value of available for sale investments as of

December 

31

is as follows:

	December 31, 2019
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	608,477	$	24,162	$	-		$	632,639
Corporate bonds		18,407,211		1,697,265		(20,079	)		20,084,397
Municipal bonds		6,538,883		518,059		(1,883	)		7,055,059
Redeemable preferred stock		2,097,206		36,687		-			2,133,893
Mortgage backed and asset backed securities		3,171,620		77,593		(2,309	)		3,246,904
Total fixed maturities		30,823,397		2,353,766		(24,271	)		33,152,892
Equities:
Common stock		9,064,262		239,490		(89,058	)		9,214,694
Preferred stock		918,688		8,121		-			926,809
Total equities		9,982,950		247,611		(89,058	)		10,141,503
Total available for sale	$	40,806,347	$	2,601,377	$	(113,329	)	$	43,294,395

	December 31, 2018
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	597,265	$	-	$	(27,325	)	$	569,940
Corporate bonds		16,847,623		43,051		(1,048,313	)		15,842,361
Municipal bonds		6,559,854		118,890		(80,631	)		6,598,113
Redeemable preferred stock		211,313		-		(18,909	)		192,404
Mortgage backed and asset backed securities		3,853,395		11,425		(83,835	)		3,780,985
Total fixed maturities		28,069,450		173,366		(1,259,013	)		26,983,803
Equities:
Common stock		11,808,771		31,505		(1,104,341	)		10,735,935
Preferred stock		175,964		-		(25,924	)		150,040
Total equities		11,984,735		31,505		(1,130,265	)		10,885,975
Total available for sale	$	40,054,185	$	204,871	$	(2,389,278	)	$	37,869,778

The amortized cost and fair value of debt securities as of

December 31, 2019

and

2018,

by contractual maturity, are shown on the following page. Equity securities do

not

have stated maturity dates and therefore are

not

included in the following maturity summary. Actual maturities

may

differ from contractual maturities because borrowers

may

have the right to call or prepay obligations with or without call or prepayment penalties.

	As of December 31, 2019				As of December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	99,987	$	100,239	$	-	$	-
After one year through five years		1,424,337		1,471,552		1,472,228		1,462,745
After five years through ten years		3,286,937		3,574,191		2,101,676		2,055,173
More than 10 years		20,743,310		22,626,113		20,430,838		19,492,496
Redeemable preferred stocks		2,097,206		2,133,893		211,313		192,404
Mortgage backed and asset backed securities		3,171,620		3,246,904		3,853,395		3,780,985
Total amortized cost and fair value	$	30,823,397	$	33,152,892	$	28,069,450	$	26,983,803

Proceeds from the sale of securities, maturities, and asset paydowns in

2019

and

2018

were

$8,605,475

and

$460,638,

respectively. Realized gains and losses related to the sale of securities are summarized as follows:

	Years Ended December 31,
	2019			2018
Gross gains	$	43,935		$	530
Gross losses		(258,370	)		(5,029	)
Net security losses	$	(214,435	)	$	(4,499	)

Gross unrealized losses by duration are summarized as follows:

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2019
Available for sale:
Fixed maturities:
Corporate bonds	$	967,848	$	(20,079	)	$	-	$	-		$	967,848	$	(20,079	)
Municipal bonds		46,646		(1,883	)		-		-			46,646		(1,883	)
Mortgage backed and asset backed securities		-		-			296,576		(2,309	)		296,576		(2,309	)
Total fixed maturities		1,014,494		(21,962	)		296,576		(2,309	)		1,311,070		(24,271	)
Equities:
Common stock		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total equities		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total available for sale	$	1,083,283	$	(28,882	)	$	3,471,423	$	(84,447	)	$	4,554,706	$	(113,329	)

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2018
Available for sale:
Fixed maturities:
US Treasury securities	$	251,206	$	(27,325	)	$	-	$	-		$	251,206	$	(27,325	)
Corporate bonds		11,743,222		(948,539	)		830,239		(99,774	)		12,573,461		(1,048,313	)
Municipal bonds		2,114,260		(51,267	)		859,305		(29,364	)		2,973,565		(80,631	)
Redeemable preferred stock		90,840		(8,720	)		101,564		(10,189	)		192,404		(18,909	)
Mortgage backed and asset backed securities		544,714		(6,656	)		2,448,551		(77,179	)		2,993,265		(83,835	)
Total fixed maturities		14,744,242		(1,042,507	)		4,239,659		(216,506	)		18,983,901		(1,259,013	)
Equities:
Common stock		3,312,528		(228,148	)		7,188,900		(876,193	)		10,501,428		(1,104,341	)
Preferred stock		-		-			150,040		(25,924	)		150,040		(25,924	)
Total equities		3,312,528		(228,148	)		7,338,940		(902,117	)		10,651,468		(1,130,265	)
Total available for sale	$	18,056,770	$	(1,270,655	)	$	11,578,599	$	(1,118,623	)	$	29,635,369	$	(2,389,278	)

Unrealized losses occur from market price declines that

may

be due to a number of factors, including economic downturns, changes in interest rates, competitive forces within an industry, issuer specific events, operational difficulties, lawsuits, and market pricing anomalies caused by factors such as temporary lack of liquidity.

The total number of securities in the investment portfolio in an unrealized loss position as of

December 

31,

2019

was

19,

which represented an unrealized loss of

$113,329

of the aggregate carrying value of those securities. The

19

securities breakdown as follows:

6

bonds,

6

mortgage and asset backed securities,

4

common stocks,

2

preferred stock index funds, and

1

senior loan fund. The Company determined that

no

securities were considered to be other-than-temporarily impaired as of

December 31, 2019

and

2018.

The Company was required to implement a new accounting standard in the

first

quarter of

2019

which requires that the unrealized gains and losses on equity securities be reported as income on the Consolidated Statements of Comprehensive Income (Loss). For

2019,

net investment gains (losses) is compromised of

$1,256,769

of unrealized gains on our equity portfolio and net realized losses of

$214,435.

For

2018,

net investment losses consist entirely of our realized losses of

$4,499.

 

XML

Note 7 - Lease Commitments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

Note

7.

     Lease Commitments

Total rent expense was

$45,785

 and

$39,166

 for the years ended

December 31, 2019

and

2018,

respectively. The Company amended its lease on its Topeka headquarters effective

January 1, 2019

which extended its termination date for

two

 years with

three

additional optional years. The future rent payments required under the lease are

$37,824

in

2020.

The Company also maintains an office in Bismarck, ND with a lease that expires on

September 30, 2020.

The future rent payments required under this lease are

$8,446

in

2020.

XML

Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Common Stock [Member]
Common stock, price per share (in dollars per share)	$ 7	$ 7

XML

Note 2 - Acquisitions (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Preliminary amounts of indentifiable assets acquired and liablities assumed
Investment securities	$	1,380,606
Cash		872,391
Other assets		26,669
Policyholder reserves		(422,442	)
Deposit type contracts		(35,659	)
Other liabilities		(180,569	)
Total indentifiable net assets	$	1,640,996
Cash paid as purchase consideration		(500,000	)
Gain from purchase of Great Western Life	$	1,140,996

XML

Note 6 - Reinsurance (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Effects of Reinsurance [Table Text Block]

	December 31, 2019		December 31, 2018
Balance Sheet
Benefits and claim reserves ceded	$	136,579	$	64,451
Amounts due from ceding company		50,824		97,395
Benefits and claim reserves assumed		12,597,007		11,521,657

	Years ended
	December 31, 2019		December 31, 2018
Statements of Comprehensive Income (Loss)
Ceded premium	$	800,525	$	629,196
Assumed premium		4,906,522		4,863,227
Allowances on ceded premium		17,672		19,347
Allowances paid on assumed premium		495,327		401,147
Assumed benefits and policyholder reserve increases		4,269,695		4,078,572

XML

Note 10 - Restricted Funds (Details Textual) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Assets Held-in-trust, Total	$ 625,000	$ 625,000
State of Missouri [Member]
Deposit Assets, Total	300,000
North Dakota Insurance Department [Member] | Dakota Capital Life [Member]
Deposit Assets, Total	200,000
Montana Department of Insurance [Member] | US Alliance Life and Security Company ("USALSC") [Member]
Deposit Assets, Total	325,000
Minimum [Member]
Assets Held-in-trust, Total	$ 400,000

XML

Note 6 - Reinsurance - Summary of Significant Reinsurance Amounts (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Benefits and claim reserves ceded	$ 136,579	$ 64,451
Amounts due from ceding company	50,824	97,395
Benefits and claim reserves assumed	12,597,007	11,521,657
Ceded premium	800,525	629,196
Assumed premium	4,906,522	4,863,227
Allowances on ceded premium	17,672	19,347
Allowances paid on assumed premium	495,327	401,147
Assumed benefits and policyholder reserve increases	$ 4,269,695	$ 4,078,572

XML

Note 3 - Investments (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Available-for-sale Securities [Table Text Block]

	December 31, 2019
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	608,477	$	24,162	$	-		$	632,639
Corporate bonds		18,407,211		1,697,265		(20,079	)		20,084,397
Municipal bonds		6,538,883		518,059		(1,883	)		7,055,059
Redeemable preferred stock		2,097,206		36,687		-			2,133,893
Mortgage backed and asset backed securities		3,171,620		77,593		(2,309	)		3,246,904
Total fixed maturities		30,823,397		2,353,766		(24,271	)		33,152,892
Equities:
Common stock		9,064,262		239,490		(89,058	)		9,214,694
Preferred stock		918,688		8,121		-			926,809
Total equities		9,982,950		247,611		(89,058	)		10,141,503
Total available for sale	$	40,806,347	$	2,601,377	$	(113,329	)	$	43,294,395

	December 31, 2018
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	597,265	$	-	$	(27,325	)	$	569,940
Corporate bonds		16,847,623		43,051		(1,048,313	)		15,842,361
Municipal bonds		6,559,854		118,890		(80,631	)		6,598,113
Redeemable preferred stock		211,313		-		(18,909	)		192,404
Mortgage backed and asset backed securities		3,853,395		11,425		(83,835	)		3,780,985
Total fixed maturities		28,069,450		173,366		(1,259,013	)		26,983,803
Equities:
Common stock		11,808,771		31,505		(1,104,341	)		10,735,935
Preferred stock		175,964		-		(25,924	)		150,040
Total equities		11,984,735		31,505		(1,130,265	)		10,885,975
Total available for sale	$	40,054,185	$	204,871	$	(2,389,278	)	$	37,869,778

Investments Classified by Contractual Maturity Date [Table Text Block]

	As of December 31, 2019				As of December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	99,987	$	100,239	$	-	$	-
After one year through five years		1,424,337		1,471,552		1,472,228		1,462,745
After five years through ten years		3,286,937		3,574,191		2,101,676		2,055,173
More than 10 years		20,743,310		22,626,113		20,430,838		19,492,496
Redeemable preferred stocks		2,097,206		2,133,893		211,313		192,404
Mortgage backed and asset backed securities		3,171,620		3,246,904		3,853,395		3,780,985
Total amortized cost and fair value	$	30,823,397	$	33,152,892	$	28,069,450	$	26,983,803

Realized Gain (Loss) on Investments [Table Text Block]

	Years Ended December 31,
	2019			2018
Gross gains	$	43,935		$	530
Gross losses		(258,370	)		(5,029	)
Net security losses	$	(214,435	)	$	(4,499	)

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2019
Available for sale:
Fixed maturities:
Corporate bonds	$	967,848	$	(20,079	)	$	-	$	-		$	967,848	$	(20,079	)
Municipal bonds		46,646		(1,883	)		-		-			46,646		(1,883	)
Mortgage backed and asset backed securities		-		-			296,576		(2,309	)		296,576		(2,309	)
Total fixed maturities		1,014,494		(21,962	)		296,576		(2,309	)		1,311,070		(24,271	)
Equities:
Common stock		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total equities		68,789		(6,920	)		3,174,847		(82,138	)		3,243,636		(89,058	)
Total available for sale	$	1,083,283	$	(28,882	)	$	3,471,423	$	(84,447	)	$	4,554,706	$	(113,329	)

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2018
Available for sale:
Fixed maturities:
US Treasury securities	$	251,206	$	(27,325	)	$	-	$	-		$	251,206	$	(27,325	)
Corporate bonds		11,743,222		(948,539	)		830,239		(99,774	)		12,573,461		(1,048,313	)
Municipal bonds		2,114,260		(51,267	)		859,305		(29,364	)		2,973,565		(80,631	)
Redeemable preferred stock		90,840		(8,720	)		101,564		(10,189	)		192,404		(18,909	)
Mortgage backed and asset backed securities		544,714		(6,656	)		2,448,551		(77,179	)		2,993,265		(83,835	)
Total fixed maturities		14,744,242		(1,042,507	)		4,239,659		(216,506	)		18,983,901		(1,259,013	)
Equities:
Common stock		3,312,528		(228,148	)		7,188,900		(876,193	)		10,501,428		(1,104,341	)
Preferred stock		-		-			150,040		(25,924	)		150,040		(25,924	)
Total equities		3,312,528		(228,148	)		7,338,940		(902,117	)		10,651,468		(1,130,265	)
Total available for sale	$	18,056,770	$	(1,270,655	)	$	11,578,599	$	(1,118,623	)	$	29,635,369	$	(2,389,278	)

XML

Note 11 - Statutory Net Income and Surplus (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Statutory Accounting Practices Disclosure [Table Text Block]

	Statutory Capital and Surplus as of
	December 31		December 31
	2019		2018
US Alliance Life and Security Company	$	5,831,153	$	5,239,874
Dakota Capital Life Insurance Company		1,472,930		1,373,390
US Alliance Life and Security Company - Montana		1,674,410		1,721,012

	Statutory Net Income (loss) for the years ended December 31,
	2019			2018
US Alliance Life and Security Company	$	6,120		$	28,883
Dakota Capital Life Insurance Company		116,748			70,393
US Alliance Life and Security Company - Montana		(44,873	)		42,957

XML

Note 9 - Federal Home Loan Bank Advances (Details Textual) - USD ($)		12 Months Ended
	Oct. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Proceeds from FHLBank Borrowings, Financing Activities		$ 1,000,000
Long-term Federal Home Loan Bank Advances, Total		1,000,000
Collateralized Mortgage Backed Securities [Member]
Pledged Assets Separately Reported, Securities Pledged for Federal Home Loan Bank, at Fair Value		932,099
Deposits [Member]
Pledged Assets Separately Reported, Securities Pledged for Federal Home Loan Bank, at Fair Value		$ 200,000
Federal Home Loan Bank of Topeka [Member]
FHLB Stock to be Purchased upon FHLB Borrowing, Percent		4.50%
Proceeds from FHLBank Borrowings, Financing Activities	$ 1,000,000
Payments to Acquire Federal Home Loan Bank Stock	$ 45,000
Long-term Federal Home Loan Bank Advances, Total		$ 1,000,000
Pledged Assets Separately Reported, Securities Pledged for Federal Home Loan Bank, at Fair Value		$ 1,132,099
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate		1.66%
Federal Home Loan Bank of Topeka [Member] | Federal Home Loan Bank Advances [Member]
Debt Instrument, Term		10 years

XML

Note 5 - Federal Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Net operating loss carryforwards	$ 2,641,247	$ 2,649,673
Unamortized Start-Up Costs	168,803	189,903
Policy owner benefit reserves	1,154,684	1,334,952
Unrealized Loss		458,730
Deferred tax asset valuation allowance	(2,423,438)	(4,179,283)
Deferred Tax Assets	1,541,296	453,975
Deferred acquisition costs	227,921	306,614
Fixed assets	8,699	25,499
8 Year Spread	233,429
Value of business acquired	117,599	121,862
Unrealized Gain	522,490
	1,110,138	453,975
Net Deferred Tax Asset	$ 431,158

XML

Note 3 - Investments - Realized Gains and Losses Related to the Sale of Securities (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Gross gains	$ 43,935	$ 530
Gross losses	(258,370)	(5,029)
Net security losses	$ (214,435)	$ (4,499)

XML

Note 2 - Acquisitions - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($)		12 Months Ended
	Dec. 14, 2018	Dec. 31, 2019	Dec. 31, 2018
Gain from purchase of Great Western Life			$ 1,140,996
GWLIC [Member]
Investment securities	$ 1,380,606
Cash	872,391
Other assets	26,669
Policyholder reserves	(422,442)
Deposit type contracts	(35,659)
Other liabilities	(180,569)
Total indentifiable net assets	1,640,996
Cash paid as purchase consideration	(500,000)
Gain from purchase of Great Western Life	$ 1,140,996

XML

Note 4 - Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

4.

     Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement rate.

● Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

● Level 3 inputs are unobservable for the asset or liability and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Investments

, available for sale

: Fair values of available for sale fixed maturity securities are provided by a

third

-party pricing service. The pricing service uses a variety of sources to determine fair value of securities. The Company’s fixed maturity securities are highly liquid, which allows for a high percentage of the portfolio to be priced through pricing sources. Fair values for equity securities are also provided by a

third

-party pricing service and are derived from active trading on national market exchanges.  The Company's investment in FHLB stock is carried at redemption value which approximates fair value.

The table below presents the amounts of assets measured at fair value on a recurring basis as of

December 31, 2019

and

2018:

   

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	632,639	$	632,639	$	-	$	-
Corporate bonds		20,084,397		-		19,892,797		191,600
Municipal bonds		7,055,059		-		7,055,059		-
Redeemable preferred stock		2,133,893		-		2,133,893		-
Mortgage backed and asset backed securities		3,246,904		-		3,246,904		-
Total fixed maturities		33,152,892		632,639		32,328,653		191,600
Equities:
Common stock		9,214,694		9,169,694		45,000		-
Preferred stock		926,809		-		926,809		-
Total equities		10,141,503		9,169,694		971,809		-
Total	$	43,294,395	$	9,802,333	$	33,300,462	$	191,600

	December 31, 2018
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	569,940	$	569,940	$	-	$	-
Corporate bonds		15,842,361		-		15,642,361		200,000
Municipal bonds		6,598,113		-		6,598,113		-
Redeemable preferred stock		192,404		-		192,404		-
Mortgage backed and asset backed securities		3,780,985		-		3,780,985		-
Total fixed maturities		26,983,803		569,940		26,213,863		200,000
Equities:
Common stock		10,735,935		10,735,935		-
Preferred stock		150,040		-		150,040
Total equities		10,885,975		10,735,935		150,040		-
Total	$	37,869,778	$	11,305,875	$	26,363,903	$	200,000

The Company discloses the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are

not

measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for other financial assets and financial liabilities are discussed below:

Cash

and

cash equivalents

: The carrying amounts approximate fair value because of the short maturity of these instruments.

Investment income due and accrued:

 The carrying amounts approximate fair value because of the short maturity of these instruments.

Policy loans

:Policy loans are stated at unpaid principal balances. As these loans are fully collateralized by the cash surrender value of the underlying insurance policies, the carrying value of the policy loans approximates their fair value.

Federal Home Loan Bank advance

: FHLB advances are stated at the outstanding principal balance and the carrying value approximates their fair value.

Policyholder deposits in

deposit-

type contracts

: The fair value for policyholder deposits deposit-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach.  Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.

The estimated fair values of the Company’s financial assets and liabilities at

December 31

are as follows:

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	6,678,805	$	6,678,805	$	6,678,805	$	-	$	-
Investment income due and accrued		321,362		321,362		-		-		321,362
Policy loans		118,930		118,930		-		-		118,930
Total Financial Assets (excluding available for sale investments)	$	7,119,097	$	7,119,097	$	6,678,805	$	-	$	440,292
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	19,396,614	$	19,186,265	$	-		-	$	19,186,265
Federal Home Loan Bank advance		1,000,000		1,000,000		-		-		1,000,000
Total Financial Liabilities	$	20,396,614	$	20,186,265	$	-		-	$	20,186,265

	December 31, 2018
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	2,077,646	$	2,077,646	$	2,077,646	$	-	$	-
Investment income due and accrued		286,890		286,890		-				286,980
Policy loans		56,539		56,539		-		-		56,539
Total Financial Assets (excluding available for sale investments)	$	2,241,075	$	2,241,075	$	2,077,646	$	-	$	343,519
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164
Total Financial Liabilities	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Available for sale securities, amortized cost	$ 40,806,347	$ 40,054,185
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	7,734,004	7,650,551
Common stock, shares outstanding (in shares)	7,734,004	7,650,551
Fixed Maturities [Member]
Available for sale securities, amortized cost	$ 30,823,397	$ 28,069,450
Equities, Including Equity Securities and Other Equity Investments [Member]
Available for sale securities, amortized cost	$ 9,982,950	$ 11,984,735

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows from Operating Activities:
Net income (loss)	$ 599,208	$ (456,136)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	10,237	172,332
Net realized investment losses on the sale of securities	214,435	4,499
Unrealized gain on equity securities	(1,256,769)
Gain on bargain purchase		(1,140,996)
Amortization of investment securities, net	45,133	42,628
Deferred acquisition costs capitalized	(328,488)	(285,187)
Deferred acquisition costs amortized	433,218	454,906
Value of business acquired amortized	20,303	20,304
Interest credited on deposit type contracts	593,794	579,038
(Increase) decrease in operating assets:
Investment income due and accrued	(34,472)	(57,918)
Reinsurance related assets	(26,536)	88,033
Deferred tax asset, net of valuation allowance	(431,158)
Other assets	34,803	(240,785)
Increase (decrease) in operating liabilities:
Policyowner benefit reserves	2,629,005	2,786,098
Dividend Accumulation	(53,018)
Advance premiums	21,973	49,229
Other liabilities	(13,526)	19,836
Accounts payable and accrued expenses	(188,101)	208,187
Net cash provided by operating activities	2,270,041	2,244,068
Cash Flows from Investing Activities:
Purchase of fixed income investments	(1,888,127)	(4,643,809)
Purchase of equity investments	(7,729,600)	(1,333,779)
Proceeds from fixed income sales and repayments	981,939	460,638
Proceeds from equity sales and repayments	7,623,536
Interest on policy loans	(8,122)	(2,762)
Increase in policy loans	(54,269)	(7,107)
Acquisition of Great Western Life Insurance Company		372,391
Purchase of property, equipment and software		(5,334)
Net cash used in investing activities	(1,074,643)	(5,159,762)
Cash Flows from Financing Activities:
Receipts on deposit-type contracts	3,535,094	4,048,626
Withdrawals on deposit-type contracts	(1,358,492)	(1,450,062)
Proceeds from FHLB advance	1,000,000
Proceeds received from issuance of common stock, net of costs of issuance	229,159	1,742,967
Net cash provided by financing activities	3,405,761	4,341,531
Net increase in cash and cash equivalents	4,601,159	1,425,837
Cash and Cash Equivalents:
Beginning	2,077,646	651,809
Ending	6,678,805	2,077,646
GWLIC [Member]
Supplemental Disclosure of Non-Cash Information
Securities acquired		1,380,606
Fixed Maturities [Member] | GWLIC [Member]
Supplemental Disclosure of Non-Cash Information
Securities acquired
Policyholder Contract Deposits [Member] | GWLIC [Member]
Supplemental Disclosure of Non-Cash Information
Deposit-type contract liabilities assumed		$ 35,569

XML

Note 8 - Related Party Transaction

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

8.

     Related Party Transaction

Brier Development Company, Inc. is owned solely by Jack Brier, President and CEO of the Company. Brier Development Company, Inc. owns

20,000

shares of stock in USAC which are in escrow until

5

years after the termination of the public offering. The Company makes reimbursements to Brier Development Company, Inc. on behalf of Jack H. Brier for single coverage for long-term care and an allowance for vehicle expenses.  Reimbursements for these items were

$19,421

 and

$19,421

 for years ended

December 31, 2019

and

2018,

respectively.

XML

Note 12 - Subsequent Events

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

12.

  Subsequent Events

All of the effects of subsequent events that provide additional evidence about conditions that existed at the balance sheet date, including the estimates inherent in the process of preparing the consolidated financial statements, are recognized in the consolidated financial statements. The Company does

not

recognize subsequent events that provide evidence about conditions that did

not

exist at the balance sheet date but arose after, but before the consolidated financial statements are issued. In some cases, unrecognized subsequent events are disclosed to keep the consolidated financial statements from being misleading.

The Company has evaluated subsequent events through

February 20, 2020,

the date on which the consolidated financial statements were issued.

XML

Note 1 - Description of Business and Significant Accounting Policies - Major Categories of Depreciable Assets and Respective Book Values (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Accumulated depreciation	$ (74,324)	$ (64,087)
Property, equipment and software, net	43,841	54,078
Computer Equipment [Member]
Property, equipment and software, gross	20,755	20,755
Furniture and Equipment [Member]
Property, equipment and software, gross	$ 97,410	$ 97,410

XML

Note 1 - Description of Business and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Year Ended			Year Ended
	December 31,			December 31,
	2019			2018
Computer	$	20,755		$	20,755
Furniture and equipment		97,410			97,410
Accumulated depreciation		(74,324	)		(64,087	)
Balance at end of period	$	43,841		$	54,078

Information About Deposit-type Contracts [Table Text Block]

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	16,201,166		$	12,931,900
Acquisition of Great Western Life		-			35,659
Deposits received		3,517,203			4,004,619
Interest credited		583,038			566,999
Withdrawals		(1,238,266	)		(1,338,011	)
Balance at end of period	$	19,063,141		$	16,201,166

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	425,052		$	516,991
Assumed from American Life & Security Corp		-			(35,934	)
Deposits received		17,891			44,007
Interest credited		10,756			12,039
Withdrawals		(120,226	)		(112,051	)
Balance at end of period	$	333,473		$	425,052

	Year ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	2,757,404		$	2,963,057
Deferred cost of reinsurance, American Life block acquisition		-			(35,934	)
Capitalization of commissions, sales and issue expenses		328,488			285,187
Amortization net of interest		(433,218	)		(454,906	)
Balance at end of period	$	2,652,674		$	2,757,404

XML

Note 5 - Federal Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

		2019		2018
Income (loss) before total federal income tax	$	168,050	$	(456,136)
Tax Rate		21%		21%
Expected income tax expense (benefit)		35,291		(95,789)
Effect of tax-exempt income		(11,925)		(9,808)
Disallowed deductions		693		-
Other GAAP to tax differencees		(24,059)		105,597
Change in valuation allowance		(431,158)		-
Total income tax benefit	$	(431,158)	$	-

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

		12/31/2019		12/31/2018
Deferred Tax Assets
Net operating loss carryforwards	$	2,641,247	$	2,649,673
Unamortized Start-Up Costs		168,803		189,903
Policy owner benefit reserves		1,154,684		1,334,952
Unrealized Loss		-		458,730
Deferred tax asset valuation allowance		(2,423,438)		(4,179,283)
Deferred Tax Assets		1,541,296		453,975
Deferred Tax Liability
Deferred acquisition costs		227,921		306,614
Fixed assets		8,699		25,499
8 Year Spread		233,429		-
Value of business acquired		117,599		121,862
Unrealized Gain		522,490		-
		1,110,138		453,975
Net Deferred Tax Asset	$	431,158	$	-

XML

Note 7 - Lease Commitments (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Operating Leases, Rent Expense, Net, Total	$ 45,785	$ 39,166
Topeka Headquarters [Member]
Lessee, Operating Lease, Term of Contract	2 years
Lessee, Operating Lease, Renewal Term	3 years
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 37,824
Office in Bismarck, ND [Member]
Operating Leases, Future Minimum Payments, Due in Two Years	$ 8,446

XML

Note 5 - Federal Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%
Income Tax Expense (Benefit), Total	$ (431,158)
Operating Loss Carryforwards, Total	12,577,367	12,617,489
Operating Loss Carryforwards, Amount Subject to Expiration	10,485,338
Operating Loss Carryforwards, Amount not Subject to Expiration	2,092,029
Income Tax Examination, Penalties and Interest Expense, Total	$ 0	$ 0

XML

Note 11 - Statutory Net Income and Surplus - Statutory Accounting Practices Disclosure (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
KANSAS
Statutory Capital and Surplus	$ 5,831,153	$ 5,239,874
Statutory Net Loss	6,120	28,883
NORTH DAKOTA
Statutory Capital and Surplus	1,472,930	1,373,390
Statutory Net Loss	116,748	70,393
MONTANA 1 [Member]
Statutory Capital and Surplus	1,674,410	1,721,012
Statutory Net Loss	$ (44,873)	$ 42,957

XML

Document And Entity Information - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Feb. 01, 2020	Feb. 03, 2019
Document Information [Line Items]
Entity Registrant Name	US Alliance Corp
Entity Central Index Key	0001463913
Trading Symbol	usac
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)			7,735,116
Entity Public Float		$ 0
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false
Title of 12(g) Security	Common Stock, $0.10 par value per share

XML

Note 6 - Reinsurance

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Reinsurance [Text Block]

Note

6.

     Reinsurance

A summary of significant reinsurance amounts affecting the accompanying consolidated financial statements as of

December 31, 2019

and

2018

and for the years ended

December 31, 2019

and

2018

is listed in the following table.

	December 31, 2019		December 31, 2018
Balance Sheet
Benefits and claim reserves ceded	$	136,579	$	64,451
Amounts due from ceding company		50,824		97,395
Benefits and claim reserves assumed		12,597,007		11,521,657

	Years ended
	December 31, 2019		December 31, 2018
Statements of Comprehensive Income (Loss)
Ceded premium	$	800,525	$	629,196
Assumed premium		4,906,522		4,863,227
Allowances on ceded premium		17,672		19,347
Allowances paid on assumed premium		495,327		401,147
Assumed benefits and policyholder reserve increases		4,269,695		4,078,572

The company currently reinsures business in excess of its retention with General Re Life Corporation, Reliance Standard Life Insurance Company, Unified Life Insurance Company, Hartford Life and Accident Company, and Optimum Re Insurance Company. The Company also currently assumes business under agreements with Unified Life Insurance Company and American Life and Security Corporation.

XML

Note 10 - Restricted Funds

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Restricted Assets Disclosure [Text Block]

Note

10.

   Restricted Funds

As required by Kansas law, US Alliance Life and Security Company maintains a trust account at Capitol Federal Savings Bank which is jointly owned by the Kansas Insurance Department. The life insurance company is required by the State of Kansas to hold

$400,000

of asset book value in this account. The Company placed additional assets into this trust account in

2015

to meet the minimum deposit requirement for the State of Missouri. These assets were held in bonds and other invested assets with a statement value of

$625,000

and

$625,000

as of

December 31, 2019

and

2018,

respectively. Additionally, the Company has a special deposit with the State of Missouri with asset book value of

$300,000.

Dakota Capital Life Insurance Company has

$200,000

of funds on deposit jointly owned with the North Dakota Insurance Department at the Bank of North Dakota. US Alliance Life and Security Company – Montana has

$325,000

of funds on deposit jointly owned by the Montana Department of Insurance at Wells Fargo.

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2017	7,310,939
Balance at Dec. 31, 2017	$ 731,095	$ 21,280,437	$ 405,438	$ (8,481,268)	$ 13,935,702
Common stock issued, $7 per share (in shares)	339,612
Common stock issued, $7 per share	$ 33,961	2,343,323			2,377,284
Costs associated with common stock issued		(634,317)			(634,317)
Other comprehensive loss			(2,589,867)		(2,589,867)
Net income (loss)				(456,136)	(456,136)
Balance (in shares) at Dec. 31, 2018	7,650,551
Balance at Dec. 31, 2018	$ 765,056	22,989,443	(2,184,429)	(8,937,404)	12,632,666
Common stock issued, $7 per share (in shares)	83,453
Common stock issued, $7 per share	$ 8,345	575,826			584,171
Costs associated with common stock issued		(355,012)			(355,012)
Other comprehensive loss			3,415,164		3,415,164
Net income (loss)				599,208	599,208
Cumulative effect, adoption of accounting guidance for equity securities			1,098,760	(1,098,760)
Balance (in shares) at Dec. 31, 2019	7,734,004
Balance at Dec. 31, 2019	$ 773,401	$ 23,210,257	$ 2,329,495	$ (9,436,956)	$ 16,876,197

XML

Note 2 - Acquisitions

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note

2.

     Acquisitions

On

December 14, 2018

the Company acquired USALSC-Montana (formerly Great Western Life Insurance Company, “GWLIC”) pursuant to a Stock Purchase Agreement (“SPA”) with Great Western Insurance Company, a wholly-owned subsidiary of American Enterprise Group, Inc. Pursuant to the SPA, the Company paid

$500,000

to acquire all of the outstanding shares of GWLIC.

The acquisition was accounted for under the acquisition method of accounting, which requires the consideration transferred and all assets and liabilities assumed to be recorded at fair value. The following table summarizes the fair value of GWLIC’s assets acquired and liabilities assumed and the gain from purchase:

Preliminary amounts of indentifiable assets acquired and liablities assumed
Investment securities	$	1,380,606
Cash		872,391
Other assets		26,669
Policyholder reserves		(422,442	)
Deposit type contracts		(35,659	)
Other liabilities		(180,569	)
Total indentifiable net assets	$	1,640,996
Cash paid as purchase consideration		(500,000	)
Gain from purchase of Great Western Life	$	1,140,996

F18

Table of Contents

US Alliance Corporation

Notes to Consolidated Financial Statements

XML

Note 3 - Investments - Amortized Cost and Fair Value of Available-for-sale and Held-to-maturity Investments (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Debt securities, amortized cost	$ 40,806,347	$ 40,054,185
Gross Unrealized Gains	2,601,377	204,871
Gross Unrealized Losses	(113,329)	(2,389,278)
Investments in available-for-sale securities, at fair value	43,294,395	37,869,778
Fixed Maturities [Member]
Debt securities, amortized cost	30,823,397	28,069,450
Gross Unrealized Gains	2,353,766	173,366
Gross Unrealized Losses	(24,271)	(1,259,013)
Investments in available-for-sale securities, at fair value	33,152,892	26,983,803
Equity Securities [Member]
Debt securities, amortized cost	9,982,950	11,984,735
Gross Unrealized Gains	247,611	31,505
Gross Unrealized Losses	(89,058)	(1,130,265)
Investments in available-for-sale securities, at fair value	10,141,503	10,885,975
US Treasury Securities [Member] | Fixed Maturities [Member]
Debt securities, amortized cost	608,477	597,265
Gross Unrealized Gains	24,162
Gross Unrealized Losses		(27,325)
Investments in available-for-sale securities, at fair value	632,639	569,940
Corporate Debt Securities [Member] | Fixed Maturities [Member]
Debt securities, amortized cost	18,407,211	16,847,623
Gross Unrealized Gains	1,697,265	43,051
Gross Unrealized Losses	(20,079)	(1,048,313)
Investments in available-for-sale securities, at fair value	20,084,397	15,842,361
US States and Political Subdivisions Debt Securities [Member] | Fixed Maturities [Member]
Debt securities, amortized cost	6,538,883	6,559,854
Gross Unrealized Gains	518,059	118,890
Gross Unrealized Losses	(1,883)	(80,631)
Investments in available-for-sale securities, at fair value	7,055,059	6,598,113
Redeemable Preferred Stock [Member] | Fixed Maturities [Member]
Debt securities, amortized cost	2,097,206	211,313
Gross Unrealized Gains	36,687
Gross Unrealized Losses		(18,909)
Investments in available-for-sale securities, at fair value	2,133,893	192,404
Collateralized Mortgage Backed Securities [Member] | Fixed Maturities [Member]
Debt securities, amortized cost	3,171,620	3,853,395
Gross Unrealized Gains	77,593	11,425
Gross Unrealized Losses	(2,309)	(83,835)
Investments in available-for-sale securities, at fair value	3,246,904	3,780,985
Common Stock [Member] | Equity Securities [Member]
Debt securities, amortized cost	9,064,262	11,808,771
Gross Unrealized Gains	239,490	31,505
Gross Unrealized Losses	(89,058)	(1,104,341)
Investments in available-for-sale securities, at fair value	9,214,694	10,735,935
Preferred Stock [Member] | Equity Securities [Member]
Debt securities, amortized cost	918,688	175,964
Gross Unrealized Gains	8,121
Gross Unrealized Losses		(25,924)
Investments in available-for-sale securities, at fair value	$ 926,809	$ 150,040

XML

Note 1 - Description of Business and Significant Accounting Policies - Information About Deposit-type Contracts (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Balance at beginning of period	$ 16,626,218
Receipts on deposit-type contracts	3,535,094	$ 4,048,626
Interest credited	593,794	579,038
Withdrawals on deposit-type contracts	(1,358,492)	(1,450,062)
Balance at end of period	19,396,614	16,626,218
Balance at beginning of period	2,757,404	2,963,057
Deferred cost of reinsurance, American Life block acquisition		(35,934)
Capitalization of commissions, sales and issue expenses	328,488	285,187
Amortization net of interest	(433,218)	(454,906)
Balance at end of period	2,652,674	2,757,404
Deferred Annuity Deposit-type Contracts [Member]
Balance at beginning of period	16,201,166	12,931,900
Receipts on deposit-type contracts	3,517,203	4,004,619
Interest credited	583,038	566,999
Withdrawals on deposit-type contracts	(1,238,266)	(1,338,011)
Balance at end of period	19,063,141	16,201,166
Deferred Annuity Deposit-type Contracts [Member] | GWLIC [Member]
Acquisition of Great Western Life		35,659
Premium Deposit Fund Deposit-type Contracts [Member]
Balance at beginning of period	425,052	516,991
Receipts on deposit-type contracts	17,891	44,007
Interest credited	10,756	12,039
Withdrawals on deposit-type contracts	(120,226)	(112,051)
Assumed from American Life & Security Corp		(35,934)
Balance at end of period	$ 333,473	$ 425,052

XML

Note 4 - Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Investments in available-for-sale securities, at fair value	$ 43,294,395	$ 37,869,778
Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	43,294,395	37,869,778
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value	9,802,333	11,305,875
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	33,300,462	26,363,903
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value	191,600	200,000
Fixed Maturities [Member]
Investments in available-for-sale securities, at fair value	33,152,892	26,983,803
Fixed Maturities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	33,152,892	26,983,803
Fixed Maturities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value	632,639	569,940
Fixed Maturities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	32,328,653	26,213,863
Fixed Maturities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value	191,600	200,000
Fixed Maturities [Member] | US Treasury Securities [Member]
Investments in available-for-sale securities, at fair value	632,639	569,940
Fixed Maturities [Member] | US Treasury Securities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	632,639	569,940
Fixed Maturities [Member] | US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value	632,639	569,940
Fixed Maturities [Member] | US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Corporate Debt Securities [Member]
Investments in available-for-sale securities, at fair value	20,084,397	15,842,361
Fixed Maturities [Member] | Corporate Debt Securities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	20,084,397	15,842,361
Fixed Maturities [Member] | Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	19,892,797	15,642,361
Fixed Maturities [Member] | Corporate Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value	191,600	200,000
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member]
Investments in available-for-sale securities, at fair value	7,055,059	6,598,113
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	7,055,059	6,598,113
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	7,055,059	6,598,113
Fixed Maturities [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Redeemable Preferred Stock [Member]
Investments in available-for-sale securities, at fair value	2,133,893	192,404
Fixed Maturities [Member] | Redeemable Preferred Stock [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	2,133,893	192,404
Fixed Maturities [Member] | Redeemable Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Redeemable Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	2,133,893	192,404
Fixed Maturities [Member] | Redeemable Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member]
Investments in available-for-sale securities, at fair value	3,246,904	3,780,985
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	3,246,904	3,780,985
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	3,246,904	3,780,985
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Equity Securities [Member]
Investments in available-for-sale securities, at fair value	10,141,503	10,885,975
Equity Securities [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	10,141,503	10,885,975
Equity Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value	9,169,694	10,735,935
Equity Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	971,809	150,040
Equity Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Equity Securities [Member] | Common Stock [Member]
Investments in available-for-sale securities, at fair value	9,214,694	10,735,935
Equity Securities [Member] | Common Stock [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	9,214,694	10,735,935
Equity Securities [Member] | Common Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value	9,169,694	10,735,935
Equity Securities [Member] | Common Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	45,000
Equity Securities [Member] | Common Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value
Equity Securities [Member] | Preferred Stock [Member]
Investments in available-for-sale securities, at fair value	926,809	150,040
Equity Securities [Member] | Preferred Stock [Member] | Fair Value, Recurring [Member]
Investments in available-for-sale securities, at fair value	926,809	150,040
Equity Securities [Member] | Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Investments in available-for-sale securities, at fair value
Equity Securities [Member] | Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Investments in available-for-sale securities, at fair value	926,809	150,040
Equity Securities [Member] | Preferred Stock [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Investments in available-for-sale securities, at fair value

XML

Note 1 - Description of Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Business Description and Accounting Policies [Text Block]

Note

1.

     Description of Business and Significant Accounting Policies

Description of business

: US Alliance Corporation ("USAC") was formed as a Kansas corporation on

April 24, 2009

to raise capital to form a new Kansas-based life insurance company. The Company's offices are located at

4123

SW Gage Center Drive, Suite

240,

Topeka, Kansas

66604.

The Company's telephone number is

785

-

228

-

0200

and website address is

www.usalliancecorporation.com

.

USAC has

five

wholly-owned operating subsidiaries. US Alliance Life and Security Company ("USALSC") was formed

June 9, 2011,

to serve as the Company's life insurance company. US Alliance Marketing Corporation ("USAMC") was formed

April 23, 2012,

to serve as a marketing resource. US Alliance Investment Corporation ("USAIC") was formed

April 23, 2012

to serve as investment manager for USAC. Dakota Capital Life Insurance Company (“DCLIC”), was acquired on

August 1, 2017

when USAC merged with Northern Plains Capital Corporation (“NPCC”). US Alliance Life and Security Company - Montana (USALSC-Montana), was acquired

December 14, 2018.

Both DCLIC and USALSC-Montana are wholly-owned subsidiaries of USALSC.

The Company terminated its initial public offering on

February 24, 2013.

During the balance of

2013,

the Company achieved approval of an array of life insurance and annuity products, began development of various distribution channels and commenced insurance operations and product sales. The Company sold its

first

insurance product on

May 1, 2013.

The Company continued to expand its product offerings and distribution channels throughout

2014

and

2015.

On

February 24, 2015,

the Company commenced a warrant exercise offering set to expire on

February 24, 2016.

On

February 24, 2016,

the Company extended the offering until

February 24, 2017

and made additional shares available for purchase. All outstanding warrants expired on

April 1, 2016.

The Company further extended this offering to

February 24, 2020.

During the

4

th

quarter of

2017,

the Company began a private placement offering to accredited investors in the state of North Dakota.

USALSC received a Certificate of Authority from the Kansas Insurance Department ("KID") effective

January 2, 2012,

and sold its

first

insurance product on

May 1, 2013.

DCLIC received a Certificate of Authority from the North Dakota Insurance Department ("NDID") effective

January 24, 2012.

The Company's single pay life products (which include our Juvenile and Pre-Need products) accounted for

56%

of

2019

direct premium revenue. The Company's individual life and Critical Illness products (which include Term Life and Whole Life products) accounted for

25%

of

2019

direct premium revenue. The Company's group products accounted for

19%

of

2019

direct written premiums.

USALSC and DCLIC seek opportunities to develop and market additional products.

The Company's business model also anticipates the acquisition by USAC and/or USALSC of other insurance and insurance related companies, including

third

-party administrators, marketing organizations, and rights to other blocks of insurance business through reinsurance or other transactions.

Basis of presentation

: The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America.

Principles of consolidation

: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated from the consolidated financial statements.

Area of Operation:

US Alliance Life and Security Company is authorized to operate in the states of Kansas, North Dakota, Missouri, Nebraska and Oklahoma. DCLIC is authorized to operate in the states of North Dakota and South Dakota. USALSC-Montana is authorized to operate in the state of Montana.

Cash and cash equivalents

: For purposes of the statement of cash flows, the Company considers demand deposits and highly liquid investments with original maturities of

three

months or less when purchased to be cash and cash equivalents. The Company maintains its operating cash balances in

one

financial institution located in Topeka, Kansas. The FDIC insures aggregate balances, including interest-bearing and noninterest-bearing accounts, of

$250,000

per depositor per insured institution. The Company’s financial institution is a member of a network that participates in the Insured Cash Sweep (ICS) program. By participating in ICS, the Company’s deposits in excess of the insured limit are apportioned and placed in demand deposit accounts at other financial institutions in amounts under the insured limit. As a result, the Company can access insurance coverage from multiple financial institutions while working directly with one. The Company had

no

amounts uninsured as of

December 

31,

2019.

The Company also has funds deposited in an overnight deposit account at the Federal Home Loan Bank of Topeka which are included as part of its cash and cash equivalents.  The Company has

not

experienced any losses in such accounts and believes it is

not

exposed to any significant credit risk on cash and cash equivalents.

Property, equipment and software

: Property, equipment and software are stated at cost less accumulated depreciation. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to income currently. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Computer equipment is depreciated over

no

longer than a

5

-year period. Furniture and equipment are depreciated over

no

longer than a

10

-year period. Major categories of depreciable assets and the respective book values as of

December 31, 2019

and

2018

are represented below.

	Year Ended			Year Ended
	December 31,			December 31,
	2019			2018
Computer	$	20,755		$	20,755
Furniture and equipment		97,410			97,410
Accumulated depreciation		(74,324	)		(64,087	)
Balance at end of period	$	43,841		$	54,078

Pre-paid expenses:

The Company recognizes pre-paid expenses (reported in other assets) as the expenses are incurred. Pre-paid expenses consist of systems consulting hours and insurance. Systems consulting hours are charged as they are incurred on projects. Insurance expenses are charged straight line over the life of the contract.

Investments

: Investments in available-for-sale securities are carried in the consolidated financial statements at fair value. Net unrealized holding gains (losses) on fixed maturity securities are included in accumulated other comprehensive income. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Net unrealized holding gains (losses) on equity securities are included as a component of net investment gains (losses).

Realized gains and losses on securities sold during the year are determined using the specific identification method and included in investment income as a component of net investment gains (losses). Investment income is recognized as earned.

Management has a policy and process in place to identify securities that could potentially have an impairment that is other-than-temporary. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. Management considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings and whether the Company intends to sell a security or it is more likely than

not

that the Company would be required to sell a security prior to the recovery of the amortized cost.

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than

not

that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. As it relates to debt securities, if the Company does

not

expect to recover the amortized basis, do

not

plan to sell the security and if it is

not

more likely than

not

that the Company would be required to sell a security before the recovery of its amortized cost, the other-than-temporary impairment would be recognized. The Company would recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss. As of

December 31, 2019

and

2018,

the Company had

no

investment securities that were evaluated to be other than temporarily impaired.

Value of business acquired

: Value of business acquired (VOBA) represents the estimated value assigned to purchased companies or insurance in- force of the assumed policy obligations at the date of acquisition of a block of policies. At least annually, a review is performed of the models and the assumptions used to develop expected future profits, based upon management’s current view of future events. VOBA is reviewed on an ongoing basis to determine that the unamortized portion does

not

exceed the expected recoverable amounts. Management’s view primarily reflects our experience but can also reflect emerging trends within the industry. Short-term deviations in experience affect the amortization of VOBA in the period, but do

not

necessarily indicate that a change to the long-term assumptions of future experience is warranted. If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated. Certain assumptions, such as interest spreads and surrender rates,

may

be interrelated. As such, unlocking adjustments often reflect revisions to multiple assumptions. The VOBA balance is immediately impacted by any assumption changes, with the change reflected through the statements of comprehensive income as an unlocking adjustment in the amount of VOBA amortized. These adjustments can be positive or negative with adjustments reducing amortization limited to amounts previously deferred plus interest accrued through the date of the adjustment.  VOBA is amortized on a straight-line method over

30

years.

In addition, managment 

may

consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system upgrades. The Company considers such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality. To the extent they represent such improvements, these items are applied to the appropriate financial statement line items in a manner similar to unlocking adjustments.

Goodwill

: Goodwill represents the excess of the amounts paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is tested for impairment at least annually in the

fourth

quarter or more frequently if events or circumstances change that would indicate that a triggering event has occurred.  Management assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or circumstances suggest that the carrying value of an identifiable indefinite-lived intangible asset

may

exceed the sum of the future discounted cash flows expected to result from its use and eventual disposition. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

Reinsurance

: In the normal course of business, the Company seeks to limit aggregate and single exposure to losses on risks 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. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does

not

extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were

no

allowances as of

December 31, 2019

and

2018.

Benefit reserves

: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Policy claims

: Policy claims are based on reported claims plus estimated incurred but

not

reported claims developed from trends of historical data applied to current exposure. The Company’s current estimate of incurred but

not

reported claims as of

December 31, 2019

and

2018

is

$127,711

and

$139,753

 and is included as a part of policyholder benefit reserves.

Deposit-type contracts

: Deposit-type contracts consist of amounts on deposit associated with deferred annuity contracts and premium deposit funds. The deferred annuity contracts credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate annually subject to minimums established by law or administrative regulation.

Liabilities for deferred annuity deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deferred annuity deposit-type contracts for the years ended

December 31, 2019

and

2018.

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	16,201,166		$	12,931,900
Acquisition of Great Western Life		-			35,659
Deposits received		3,517,203			4,004,619
Interest credited		583,038			566,999
Withdrawals		(1,238,266	)		(1,338,011	)
Balance at end of period	$	19,063,141		$	16,201,166

The premium deposit funds credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate subject to minimums established by law or administrative regulation.

Liabilities for premium deposit fund deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less withdrawals. The table on the following page provides information about premium deposit fund deposit-type contracts for the years ended

December 31, 2019

and

2018.

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	425,052		$	516,991
Assumed from American Life & Security Corp		-			(35,934	)
Deposits received		17,891			44,007
Interest credited		10,756			12,039
Withdrawals		(120,226	)		(112,051	)
Balance at end of period	$	333,473		$	425,052

Revenue recognition and related expenses

: Revenues on traditional life insurance products consist of direct premiums reported as earned when due. Premium income includes reinsurance assumed and is reduced by premiums ceded.

Amounts received as payment for annuity contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for contract-holder services, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts.

Deferred acquisition costs

: The Company capitalizes and amortizes over the life of the premiums produced incremental direct costs that result directly from and are essential to the contract acquisition transaction and would

not

have been incurred by the Company had the contract acquisition

not

occurred. An entity

may

defer incremental direct costs of contract acquisition that are incurred in transactions with independent

third

parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts. Additionally, an entity

may

capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

The following table provides information about deferred acquisition costs for the years ended

December 31, 2019

and

2018,

respectively.

	Year ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	2,757,404		$	2,963,057
Deferred cost of reinsurance, American Life block acquisition		-			(35,934	)
Capitalization of commissions, sales and issue expenses		328,488			285,187
Amortization net of interest		(433,218	)		(454,906	)
Balance at end of period	$	2,652,674		$	2,757,404

Comprehensive loss

: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable fixed maturity securities classified as available for sale, net of applicable taxes.

Common stock and earnings (loss) per share:

The par value for common stock is

$0.10

per share with

20,000,000

shares authorized. As of

December 31, 2019

and

2018

the company had

7,734,004

and

7,650,551

common shares issued and outstanding, respectively.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the net income (loss) and the weighted average number of shares outstanding during each year. The weighted average number of shares outstanding during the years ended

December 31, 2019

and

2018

were

7,688,560

and

7,393,795

shares, respectively. Potential common shares are excluded from the computation when their effect is anti-dilutive. Basic and diluted net loss per common share is the same for the years ended

December 31, 2019

and

2018.

Income taxes

: The Company is subject to U.S. federal and state taxes. The provision for income taxes is based on income as reported in the consolidated financial statements. The income tax provision is calculated using the asset and liability method. Deferred income taxes are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted rates expected to apply to taxable income in the years in which the differences are expected to reverse. A valuation allowance is established for the amount of any deferred tax asset that exceeds the amount of the estimated future taxable income needed to utilize the future tax benefits.

All of the Company’s tax returns are subject to U.S. federal, state and local income tax examinations by tax authorities. The Company had

no

known uncertain tax benefits included in its provision for income taxes as of

December 31, 2019

and

2018.

The Company’s policy is to recognize interest and penalties (if applicable) as an element of the provision for income taxes in the consolidated statements of income.

The tax years which remain subject to examination by taxing authorities are the years ended

December 31, 2016

through

2019.

Risk and uncertainties:

Certain risks and uncertainties are inherent in the Company’s day-to-day operations and in the process of preparing its consolidated financial statements. The more significant of those risks and uncertainties, as well as the Company’s method for mitigating the risks, are presented below and throughout the notes to the consolidated financial statements.

- Use of Estimates:

The preparation of consolidated financial statements in conformity with US GAAP, generally accepted accounting principles in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- Regulatory Factors:

The insurance laws of Kansas, North Dakota, and Montana give insurance regulators broad regulatory authority, including powers to (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct, (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus; and ( x ) regulate the type and amount of permitted investments.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act") reshapes financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act continue to be subject to regulatory interpretation and implementation rules requiring rulemaking that

may

take several years to complete. The ultimate outcome of the regulatory rulemaking proceedings cannot be predicted with certainty. The regulations promulgated could have a material impact on consolidated financial results or financial condition.

- Reinsurance:	In order to manage the risk of financial exposure to adverse underwriting results, the Company reinsures a portion of its individual and group life risks with other insurance companies. The Company retains $35,000 on its Whole Life products and $25,000 on its term life products. The Company also reinsures 100% of the risk on its individual accidental death benefit rider. The Company retains 25% of the risk for each covered life on its group life product to a maximum of $100,000 on any individual person. The Company retains 25% of the risk for each covered life on its group accidental death and dismemberment product to a maximum of $25,000 on any individual person. The Company also has catastrophic reinsurance coverage to protect against three or more group life deaths resulting from a single event. The Company also reinsures 90% of the risk on its group disability products. The Company reinsurers 66% of the risk on its critical illness product. Optimum Re Insurance Company (a subsidiary of Optimum Group), General Reinsurance Corporation (a subsidiary of Berkshire Hathaway), Reliance Standard Life Insurance Company (a subsidiary of Tokio Marine Holdings), Hartford Life and Accident Company, and Unified Life Insurance Company provide reinsurance for USALSC and DCLIC. The Company evaluates the financial condition of its reinsurers to minimize its exposure to losses from reinsurer insolvencies. Management believes that any liabilities arising from this contingency would not be material to the Company’s financial position.
- Interest Rate Risk:	Interest rate fluctuations could impair an insurance company's ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Annuity products expose the risk that changes in interest rates will reduce any spread, or the difference between the amounts that the insurance company is required to pay under the contracts and the amounts the insurance subsidiary is able to earn on its investments intended to support its obligations under the contracts. Spread is a key component of revenues.
	To the extent that interest rates credited are less than those generally available in the marketplace, policyholder lapses, policy loans and surrenders, and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to purchase products with perceived higher returns. This process may result in cash outflows requiring that an insurance subsidiary sell investments at a time when the prices of those investments are adversely affected by the increase in market interest rates, which may result in realized investment losses.
	Increases in market interest rates may also negatively affect profitability in periods of increasing interest rates. The ability to replace invested assets with higher yielding assets needed to fund the higher crediting rates that may be necessary to keep interest sensitive products competitive.

If interest rates were to increase by

1%,

the market value of our fixed income securities would decrease by

9.4%

as of

December 31, 2019.

The Company therefore

may

have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts.

Conversely, in a period of prolonged low interest rates it is difficult to invest assets and earn the rate of return necessary to support insurance products. Some central banks currently have negative interest rates which contributes to the current low interest rate environment.

Policy lapses in excess of those actuarially anticipated would have a negative impact on our financial performance.

Profitability could be reduced if lapse and surrender rates exceed the assumptions upon which the insurance policies were priced. Policy sales costs are deferred and recognized over the life of a policy. Excess policy lapses, however, cause the immediate expensing or amortizing of deferred policy sales costs.

- Investment Risk:

Our invested assets are subject to customary risks of defaults and changes in market values. Factors that may affect the overall default rate on, and market value of, the invested assets include interest rate levels, financial market performance, and general economic conditions.

- Assumptions Risk:

In the life insurance business, assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of life insurance products are made. These assumptions are based on industry experience and are reviewed and revised regularly by an outside actuary to reflect actual experience on a current basis. However, variation of actual experience from that assumed in developing such terms may affect a product's profitability or sales volume and in turn adversely impact our revenues.

Reclassifications

: Certain reclassifications of a minor nature have been made to prior-year balances to conform to current-year presentation with

no

net impact to net loss/income or equity.

New accounting standards

:

Revenue from Contracts with Customers

In

May 2014,

the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts and revenues from financial institutions are

not

within the scope of this updated guidance, the Company's fee income related to providing services will be subject to this updated guidance. The Company did

not

earn any fee income in

2019

or

2018.

  The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. 

The following steps are applied in the updated guidance: (

1

) identify the contract(s) with a customer; (

2

) identify the performance obligations in the contract; (

3

) determine the transaction price; (

4

) allocate the transaction price to the performance obligations in the contract and (

5

) recognize revenue when, or as, the entity satisfies a performance obligation.

In

July 

2015,

the FASB deferred the effective date of the updated guidance on revenue recognitionby

one

year to the quarter ending

March 

31,

2018.

  As an emerging growth company, the Company has chosen to defer implementation of this accounting standard until the year ending

December 31, 2019.

The adoption of this guidance did

not

have any effect on the Company’s result of operations, financial position or liquidity.

Recognition and Measurement of Financial Assets and Financial Liabilities

In

January 2016,

the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.

This guidance was effective for the Company for the year ended

December 31, 2019

and required a cumulative effect adjustment to opening retained earnings to be recorded for equity investments with readily determinable fair values.  As of the adoption date, the Company held publicly traded equity investments with a fair value of $

10,987,539

million in a net unrealized gain position of $

1,098,760

million. The Company has recorded a cumulative-effect adjustment of $

1,098,760

to decrease Accumulated Other Comprehensive Income (AOCI) with a corresponding increase to accumulated deficit for unrealized gains as of the beginning of fiscal year

2019.

As a result of the implementation of ASU

2016

-

01,

unrealized gains and losses in equity investments with readily determinable fair values are recorded on the Consolidated Statements of Comprehensive Income (Loss) within net investment gains (losses). The Company recorded a gain in net investment gains (losses) of

$1.1

million for year ended

December 31, 2019

as a result of adopting this standard. The implementation of this guidance is expected to increase volatility in our net income as the volatility previously recorded in Comprehensive Income (OCI) related to changes in the fair market value of available-for-sale equity investments will now be reflected in net income effective with the adoption date.

Leases

In

February 

2016,

the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than

12

months.  The updated guidance retains the

two

classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).  Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows.  Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset.  Operating leases will recognize lease expense (with

no

separate recognition of interest expense) on a straight-line basis over the term of the lease.   The accounting by lessors is

not

significantly changed by the updated guidance.  The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after

December 

15,

2018,

and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied.  Early adoption is permitted.  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after

December 15, 2020.

The adoption of this guidance is

not

expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Measurement of Credit Losses on Financial Instruments

In

June 

2016,

the FASB issued updated guidance for the accounting for credit losses for financial instruments.  The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.  In addition, the length of time a security has been in an unrealized loss position will

no

longer impact the determination of whether a credit loss exists.

The updated guidance is effective for reporting periods beginning after

December 

15,

2019.

  Early adoption is permitted for reporting periods beginning after

December 

15,

2018.

  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after

December 15, 2022.

The Company will

not

be able to determine the impact that the updated guidance will have on its results of operations, financial position or liquidity until the updated guidance is adopted.

Classification of Certain Cash Receipts and Cash Payment

In

August 2016,

the FASB issued new guidance that clarifies the classification of certain cash receipts and cash payments in the statement of cash flows under

eight

different scenarios including, but

not

limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted. As an emerging growth company, the Company elected to defer implementation of this standard to fiscal years beginning after

December 15, 2018.

The implementation of this standard did

not

have a material impact on the Company’s statement of cash flows.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

On

December 22, 2017,

the U.S. federal government enacted a tax bill,

H.R.1,

An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year

2018

(Tax Cuts and Jobs Act). In

February 2018,

FASB issued guidance to address certain issues related to the Tax Cuts and Jobs Act. This new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. This guidance is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance did

not

have a material effect on the Company’s results of operations, financial position or liquidity.

Targeted Improvements to the Accounting for Long-Duration Contracts

In

August 2018,

the FASB issued ASU

2018

-

12

“Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU

2018

-

12

requires periodic reassessment of actuarial and discount rate assumptions used in the valuation of policyholder liabilities and deferred acquisition costs arising from the issuance of long-duration insurance and reinsurance contracts, with the effects of the changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Under current accounting guidance, the actuarial and discount rate assumptions are set at the contract inception date and

not

subsequently changed, except in limited circumstances. ASU

2018

-

12

also requires new disclosures and is effective for fiscal years beginning after

December 15, 2023,

with early adoption permitted. The Company is evaluating the effect this standard will have on our Consolidated Financial Statements.

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did

not

relate to accounting policies and procedures pertinent or material to the Company at this time.

XML

Note 5 - Federal Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

5

.     Federal Income Taxes

USAC files federal income taxes returns based on type of return.  USAC files a consolidated corporate federal income tax return with USAMC and USAIC.  USASLC, DCLIC, and USALSC-MT file a consolidated life insurance federal income tax return.  Certain items included in income reported for financial statement purposes are

not

included in taxable income for the current period, resulting in deferred income taxes.

A reconciliation of federal income tax expense computed by applying the federal income tax rate of

21%

to income before federal income tax expense for the years ended

December 31, 2019

and

2018,

respectively, is summarized as follows:

		2019		2018
Income (loss) before total federal income tax	$	168,050	$	(456,136)
Tax Rate		21%		21%
Expected income tax expense (benefit)		35,291		(95,789)
Effect of tax-exempt income		(11,925)		(9,808)
Disallowed deductions		693		-
Other GAAP to tax differencees		(24,059)		105,597
Change in valuation allowance		(431,158)		-
Total income tax benefit	$	(431,158)	$	-

For the year ended

December 31, 2019,

the Company recognized a deferred tax benefit related to the reduction of its deferred tax asset valuation allowance.  The net change in the allowance resulted in a net tax benefit of

$431,158.

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as of

December 31, 2019

and

2018

are summarized as follows:

		12/31/2019		12/31/2018
Deferred Tax Assets
Net operating loss carryforwards	$	2,641,247	$	2,649,673
Unamortized Start-Up Costs		168,803		189,903
Policy owner benefit reserves		1,154,684		1,334,952
Unrealized Loss		-		458,730
Deferred tax asset valuation allowance		(2,423,438)		(4,179,283)
Deferred Tax Assets		1,541,296		453,975
Deferred Tax Liability
Deferred acquisition costs		227,921		306,614
Fixed assets		8,699		25,499
8 Year Spread		233,429		-
Value of business acquired		117,599		121,862
Unrealized Gain		522,490		-
		1,110,138		453,975
Net Deferred Tax Asset	$	431,158	$	-

As of

December 31, 2019,

the Company has net operating loss carryforwards of

$12,577,367

 of which

$10,485,338

 will expire between 

2026

 through

2037

and of which

$2,092,029

 is indefinite. The Company had net operating loss carryforwards of 

$12,617,489

 as of

December 31, 2018.

The

2016

through

2019

U.S. federal tax years are subject to income tax examination by tax authorities. Penalties and interest assessed by taxing authorities are included in the provision for income taxes, if applicable.  There were

no

interest or penalties paid during

2019

and

2018.

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income:
Premium income	$ 9,076,205	$ 8,807,779
Net investment income	1,790,601	1,477,403
Net investment gains (losses)	1,042,334	(4,499)
Gain on bargain purchase		1,140,996
Other income	57,146	37,608
Total income	11,966,286	11,459,287
Expenses:
Death claims	1,287,893	959,005
Policyholder benefits	4,212,534	3,957,090
Increase in policyholder reserves	2,599,575	2,766,169
Commissions, net of deferrals	783,724	637,425
Amortization of deferred acquisition costs	433,218	454,906
Amortization of value of business acquired	20,303	20,304
Salaries & benefits	1,081,955	1,152,728
Other operating expenses	1,379,034	1,967,796
Total expense	11,798,236	11,915,423
Income (loss) before total federal income tax expense (benefit)	168,050	(456,136)
Deferred federal income tax benefit	431,158
Total federal income tax benefit	431,158
Net lncome (loss)	$ 599,208	$ (456,136)
Net income (loss) per common share, basic and diluted (in dollars per share)	$ 0.08	$ (0.06)
Unrealized net holding gains (losses) arising during the period	$ 3,420,928	$ (2,594,366)
Reclassification adjustment for (gains) losses included in net income (loss)	(5,764)	4,499
Other comprehensive income (loss)	3,415,164	(2,589,867)
Comprehensive income (loss)	$ 4,014,372	$ (3,046,003)

XML

Note 9 - Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note

9

.

Federal Home Loan Bank Advances

One of the Company’s subsidiaries, USALSC, is a member of the Federal Home Loan Bank of Topeka (FHLB), which provides access to collateralized borrowings.  Any borrowings from FHLB requires the purchase of FHLB common stock in an amount equal to

4.5%

of the borrowing.  On

October 31, 2019,

USALSC received an advance of $

1,000,000

based on USALSC purchasing $

45,000

of FHLB common stock.   The Company had outstanding advances from the Federal Home Loan Bank of Topeka of

$1,000,000

at

December 31, 2019.

Advances from the FHLB are secured by the Federal Home Loan Bank of Topeka stock and pledged assets consisting of mortgage backed securities and overnight deposit funds with a fair value of

$1,132,099.

This regular fixed convertible advance has a

10

year term with an FHLB option to convert to an adjustable rate on the

5

th

anniversary. The interest rate at issue was

1.66%.

As of

December 31, 2019,

USALSC had pledged

$932,099

of mortgage backed securities and

$200,000

of overnight deposits to FHLB in support of its outstanding advance.

XML

Note 4 - Fair Value Measurements - Estimated Fair Values of the Company's Financial Assets and Liabilities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Reported Value Measurement [Member]
Cash and cash equivalents	$ 6,678,805	$ 2,077,646
Investment income due and accrued	321,362	286,890
Policy loans	118,930	56,539
Total Financial Assets (excluding available for sale investments)	7,119,097	2,241,075
Policyholder deposits in deposit-type contracts	19,396,614	16,626,218
Federal Home Loan Bank advance	1,000,000
Total Financial Liabilities	20,396,614	16,626,218
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	6,678,805	2,077,646
Investment income due and accrued	321,362	286,890
Policy loans	118,930	56,539
Total Financial Assets (excluding available for sale investments)	7,119,097	2,241,075
Policyholder deposits in deposit-type contracts	19,186,265	15,361,164
Federal Home Loan Bank advance	1,000,000
Total Financial Liabilities	20,186,265	15,361,164
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	6,678,805	2,077,646
Investment income due and accrued
Policy loans
Total Financial Assets (excluding available for sale investments)	6,678,805	2,077,646
Policyholder deposits in deposit-type contracts
Federal Home Loan Bank advance
Total Financial Liabilities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Investment income due and accrued
Policy loans
Total Financial Assets (excluding available for sale investments)
Policyholder deposits in deposit-type contracts
Federal Home Loan Bank advance
Total Financial Liabilities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Investment income due and accrued	321,362	286,980
Policy loans	118,930	56,539
Total Financial Assets (excluding available for sale investments)	440,292	343,519
Policyholder deposits in deposit-type contracts	19,186,265	15,361,164
Federal Home Loan Bank advance	1,000,000
Total Financial Liabilities	$ 20,186,265	$ 15,361,164

XML

Note 3 - Investments - Amortized Cost and Fair Value of Debt Securities By Contractual Maturity (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Debt securities, amortized cost	$ 40,806,347	$ 40,054,185
Debt securities, fair value	43,294,395	37,869,778
Fixed Maturities [Member]
One year or less, amortized cost	99,987
One year or less, fair value	100,239
After one year through five years, amortized cost	1,424,337	1,472,228
After one year through five years, fair value	1,471,552	1,462,745
After five years through ten years, amortized cost	3,286,937	2,101,676
After five years through ten years, fair value	3,574,191	2,055,173
More than 10 years, amortized cost	20,743,310	20,430,838
More than 10 years, fair value	22,626,113	19,492,496
Debt securities, amortized cost	30,823,397	28,069,450
Debt securities, fair value	33,152,892	26,983,803
Fixed Maturities [Member] | Redeemable Preferred Stock [Member]
Debt securities, amortized cost	2,097,206	211,313
Debt securities, fair value	2,133,893	192,404
Debt securities, amortized cost	2,097,206	211,313
Debt securities, fair value	2,133,893	192,404
Fixed Maturities [Member] | Collateralized Mortgage Backed Securities [Member]
Debt securities, amortized cost	3,171,620	3,853,395
Debt securities, fair value	3,246,904	3,780,985
Debt securities, amortized cost	3,171,620	3,853,395
Debt securities, fair value	$ 3,246,904	$ 3,780,985

XML

Note 2 - Acquisitions (Details Textual)	Dec. 14, 2018 USD ($)
GWLIC [Member]
Payments to Acquire Businesses, Gross	$ 500,000

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of presentation

: The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America.

Consolidation, Policy [Policy Text Block]

Principles of consolidation

: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated from the consolidated financial statements.

Area of Operation, Policy [Policy Text Block]

Area of Operation:

US Alliance Life and Security Company is authorized to operate in the states of Kansas, North Dakota, Missouri, Nebraska and Oklahoma. DCLIC is authorized to operate in the states of North Dakota and South Dakota. USALSC-Montana is authorized to operate in the state of Montana.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and cash equivalents

: For purposes of the statement of cash flows, the Company considers demand deposits and highly liquid investments with original maturities of

three

months or less when purchased to be cash and cash equivalents. The Company maintains its operating cash balances in

one

financial institution located in Topeka, Kansas. The FDIC insures aggregate balances, including interest-bearing and noninterest-bearing accounts, of

$250,000

per depositor per insured institution. The Company’s financial institution is a member of a network that participates in the Insured Cash Sweep (ICS) program. By participating in ICS, the Company’s deposits in excess of the insured limit are apportioned and placed in demand deposit accounts at other financial institutions in amounts under the insured limit. As a result, the Company can access insurance coverage from multiple financial institutions while working directly with one. The Company had

no

amounts uninsured as of

December 

31,

2019.

The Company also has funds deposited in an overnight deposit account at the Federal Home Loan Bank of Topeka which are included as part of its cash and cash equivalents.  The Company has

not

experienced any losses in such accounts and believes it is

not

exposed to any significant credit risk on cash and cash equivalents.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, equipment and software

: Property, equipment and software are stated at cost less accumulated depreciation. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to income currently. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Computer equipment is depreciated over

no

longer than a

5

-year period. Furniture and equipment are depreciated over

no

longer than a

10

-year period. Major categories of depreciable assets and the respective book values as of

December 31, 2019

and

2018

are represented below.

	Year Ended			Year Ended
	December 31,			December 31,
	2019			2018
Computer	$	20,755		$	20,755
Furniture and equipment		97,410			97,410
Accumulated depreciation		(74,324	)		(64,087	)
Balance at end of period	$	43,841		$	54,078

Deferred Charges, Policy [Policy Text Block]

Pre-paid expenses:

The Company recognizes pre-paid expenses (reported in other assets) as the expenses are incurred. Pre-paid expenses consist of systems consulting hours and insurance. Systems consulting hours are charged as they are incurred on projects. Insurance expenses are charged straight line over the life of the contract.

Marketable Securities, Policy [Policy Text Block]

Investments

: Investments in available-for-sale securities are carried in the consolidated financial statements at fair value. Net unrealized holding gains (losses) on fixed maturity securities are included in accumulated other comprehensive income. Bond premiums and discounts are amortized using the scientific-yield method over the term of the bonds. Net unrealized holding gains (losses) on equity securities are included as a component of net investment gains (losses).

Realized gains and losses on securities sold during the year are determined using the specific identification method and included in investment income as a component of net investment gains (losses). Investment income is recognized as earned.

Management has a policy and process in place to identify securities that could potentially have an impairment that is other-than-temporary. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. Management considers severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings and whether the Company intends to sell a security or it is more likely than

not

that the Company would be required to sell a security prior to the recovery of the amortized cost.

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than

not

that the Company would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. As it relates to debt securities, if the Company does

not

expect to recover the amortized basis, do

not

plan to sell the security and if it is

not

more likely than

not

that the Company would be required to sell a security before the recovery of its amortized cost, the other-than-temporary impairment would be recognized. The Company would recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss. As of

December 31, 2019

and

2018,

the Company had

no

investment securities that were evaluated to be other than temporarily impaired.

Present Value of Future Insurance Profits, Policy [Policy Text Block]

Value of business acquired

: Value of business acquired (VOBA) represents the estimated value assigned to purchased companies or insurance in- force of the assumed policy obligations at the date of acquisition of a block of policies. At least annually, a review is performed of the models and the assumptions used to develop expected future profits, based upon management’s current view of future events. VOBA is reviewed on an ongoing basis to determine that the unamortized portion does

not

exceed the expected recoverable amounts. Management’s view primarily reflects our experience but can also reflect emerging trends within the industry. Short-term deviations in experience affect the amortization of VOBA in the period, but do

not

necessarily indicate that a change to the long-term assumptions of future experience is warranted. If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated. Certain assumptions, such as interest spreads and surrender rates,

may

be interrelated. As such, unlocking adjustments often reflect revisions to multiple assumptions. The VOBA balance is immediately impacted by any assumption changes, with the change reflected through the statements of comprehensive income as an unlocking adjustment in the amount of VOBA amortized. These adjustments can be positive or negative with adjustments reducing amortization limited to amounts previously deferred plus interest accrued through the date of the adjustment.  VOBA is amortized on a straight-line method over

30

years.

In addition, managment 

may

consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system upgrades. The Company considers such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality. To the extent they represent such improvements, these items are applied to the appropriate financial statement line items in a manner similar to unlocking adjustments.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

: Goodwill represents the excess of the amounts paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill is tested for impairment at least annually in the

fourth

quarter or more frequently if events or circumstances change that would indicate that a triggering event has occurred.  Management assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or circumstances suggest that the carrying value of an identifiable indefinite-lived intangible asset

may

exceed the sum of the future discounted cash flows expected to result from its use and eventual disposition. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

Reinsurance Accounting Policy [Policy Text Block]

Reinsurance

: In the normal course of business, the Company seeks to limit aggregate and single exposure to losses on risks 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. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does

not

extinguish the Company’s primary liability under the policies written. Therefore, the Company regularly evaluates the financial condition of its reinsurers including their activities with respect to claim settlement practices and commutations, and establishes allowances for uncollectible reinsurance recoverable as appropriate. There were

no

allowances as of

December 31, 2019

and

2018.

Liability for Future Policy Benefit [Policy Text Block]

Benefit reserves

: The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables.

Unpaid Policy Claims and Claims Adjustment Expense, Policy [Policy Text Block]

Policy claims

: Policy claims are based on reported claims plus estimated incurred but

not

reported claims developed from trends of historical data applied to current exposure. The Company’s current estimate of incurred but

not

reported claims as of

December 31, 2019

and

2018

is

$127,711

and

$139,753

 and is included as a part of policyholder benefit reserves.

Deposit Contracts, Policy [Policy Text Block]

Deposit-type contracts

: Deposit-type contracts consist of amounts on deposit associated with deferred annuity contracts and premium deposit funds. The deferred annuity contracts credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate annually subject to minimums established by law or administrative regulation.

Liabilities for deferred annuity deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less policyholder withdrawals. The following table provides information about deferred annuity deposit-type contracts for the years ended

December 31, 2019

and

2018.

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	16,201,166		$	12,931,900
Acquisition of Great Western Life		-			35,659
Deposits received		3,517,203			4,004,619
Interest credited		583,038			566,999
Withdrawals		(1,238,266	)		(1,338,011	)
Balance at end of period	$	19,063,141		$	16,201,166

The premium deposit funds credit interest based upon a fixed interest rate set by the Company. The Company has the ability to change this rate subject to minimums established by law or administrative regulation.

Liabilities for premium deposit fund deposit-type contracts are included without reduction for potential surrender charges. This liability is equal to the accumulated account deposits, plus interest credited, and less withdrawals. The table on the following page provides information about premium deposit fund deposit-type contracts for the years ended

December 31, 2019

and

2018.

	Year Ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	425,052		$	516,991
Assumed from American Life & Security Corp		-			(35,934	)
Deposits received		17,891			44,007
Interest credited		10,756			12,039
Withdrawals		(120,226	)		(112,051	)
Balance at end of period	$	333,473		$	425,052

Insurance Premiums Revenue Recognition, Policy [Policy Text Block]

Revenue recognition and related expenses

: Revenues on traditional life insurance products consist of direct premiums reported as earned when due. Premium income includes reinsurance assumed and is reduced by premiums ceded.

Amounts received as payment for annuity contracts without life contingencies are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of fees earned for contract-holder services, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows.

Liabilities for future policy benefits are provided and acquisition costs are amortized by associating benefits and expenses with earned premiums to recognize related profits over the life of the contracts.

Deferred Policy Acquisition Costs, Policy [Policy Text Block]

Deferred acquisition costs

: The Company capitalizes and amortizes over the life of the premiums produced incremental direct costs that result directly from and are essential to the contract acquisition transaction and would

not

have been incurred by the Company had the contract acquisition

not

occurred. An entity

may

defer incremental direct costs of contract acquisition that are incurred in transactions with independent

third

parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts. Additionally, an entity

may

capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. Acquisition costs are amortized over the premium paying period using the net level premium method. Traditional life insurance products are treated as long duration contracts, which generally remain in force for the lifetime of the insured.

The following table provides information about deferred acquisition costs for the years ended

December 31, 2019

and

2018,

respectively.

	Year ended			Year ended
	December 31,			December 31,
	2019			2018
Balance at beginning of period	$	2,757,404		$	2,963,057
Deferred cost of reinsurance, American Life block acquisition		-			(35,934	)
Capitalization of commissions, sales and issue expenses		328,488			285,187
Amortization net of interest		(433,218	)		(454,906	)
Balance at end of period	$	2,652,674		$	2,757,404

Comprehensive Income, Policy [Policy Text Block]

Comprehensive loss

: Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses from marketable fixed maturity securities classified as available for sale, net of applicable taxes.

Earnings Per Share, Policy [Policy Text Block]

Common stock and earnings (loss) per share:

The par value for common stock is

$0.10

per share with

20,000,000

shares authorized. As of

December 31, 2019

and

2018

the company had

7,734,004

and

7,650,551

common shares issued and outstanding, respectively.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the net income (loss) and the weighted average number of shares outstanding during each year. The weighted average number of shares outstanding during the years ended

December 31, 2019

and

2018

were

7,688,560

and

7,393,795

shares, respectively. Potential common shares are excluded from the computation when their effect is anti-dilutive. Basic and diluted net loss per common share is the same for the years ended

December 31, 2019

and

2018.

Income Tax, Policy [Policy Text Block]

Income taxes

: The Company is subject to U.S. federal and state taxes. The provision for income taxes is based on income as reported in the consolidated financial statements. The income tax provision is calculated using the asset and liability method. Deferred income taxes are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted rates expected to apply to taxable income in the years in which the differences are expected to reverse. A valuation allowance is established for the amount of any deferred tax asset that exceeds the amount of the estimated future taxable income needed to utilize the future tax benefits.

All of the Company’s tax returns are subject to U.S. federal, state and local income tax examinations by tax authorities. The Company had

no

known uncertain tax benefits included in its provision for income taxes as of

December 31, 2019

and

2018.

The Company’s policy is to recognize interest and penalties (if applicable) as an element of the provision for income taxes in the consolidated statements of income.

The tax years which remain subject to examination by taxing authorities are the years ended

December 31, 2016

through

2019.

Risk and Uncertainties, Policy [Policy Text Block]

Risk and uncertainties:

Certain risks and uncertainties are inherent in the Company’s day-to-day operations and in the process of preparing its consolidated financial statements. The more significant of those risks and uncertainties, as well as the Company’s method for mitigating the risks, are presented below and throughout the notes to the consolidated financial statements.

- Use of Estimates:

The preparation of consolidated financial statements in conformity with US GAAP, generally accepted accounting principles in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- Regulatory Factors:

The insurance laws of Kansas, North Dakota, and Montana give insurance regulators broad regulatory authority, including powers to (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct, (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus; and ( x ) regulate the type and amount of permitted investments.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act") reshapes financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act continue to be subject to regulatory interpretation and implementation rules requiring rulemaking that

may

take several years to complete. The ultimate outcome of the regulatory rulemaking proceedings cannot be predicted with certainty. The regulations promulgated could have a material impact on consolidated financial results or financial condition.

- Reinsurance:	In order to manage the risk of financial exposure to adverse underwriting results, the Company reinsures a portion of its individual and group life risks with other insurance companies. The Company retains $35,000 on its Whole Life products and $25,000 on its term life products. The Company also reinsures 100% of the risk on its individual accidental death benefit rider. The Company retains 25% of the risk for each covered life on its group life product to a maximum of $100,000 on any individual person. The Company retains 25% of the risk for each covered life on its group accidental death and dismemberment product to a maximum of $25,000 on any individual person. The Company also has catastrophic reinsurance coverage to protect against three or more group life deaths resulting from a single event. The Company also reinsures 90% of the risk on its group disability products. The Company reinsurers 66% of the risk on its critical illness product. Optimum Re Insurance Company (a subsidiary of Optimum Group), General Reinsurance Corporation (a subsidiary of Berkshire Hathaway), Reliance Standard Life Insurance Company (a subsidiary of Tokio Marine Holdings), Hartford Life and Accident Company, and Unified Life Insurance Company provide reinsurance for USALSC and DCLIC. The Company evaluates the financial condition of its reinsurers to minimize its exposure to losses from reinsurer insolvencies. Management believes that any liabilities arising from this contingency would not be material to the Company’s financial position.
- Interest Rate Risk:	Interest rate fluctuations could impair an insurance company's ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Annuity products expose the risk that changes in interest rates will reduce any spread, or the difference between the amounts that the insurance company is required to pay under the contracts and the amounts the insurance subsidiary is able to earn on its investments intended to support its obligations under the contracts. Spread is a key component of revenues.
	To the extent that interest rates credited are less than those generally available in the marketplace, policyholder lapses, policy loans and surrenders, and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to purchase products with perceived higher returns. This process may result in cash outflows requiring that an insurance subsidiary sell investments at a time when the prices of those investments are adversely affected by the increase in market interest rates, which may result in realized investment losses.
	Increases in market interest rates may also negatively affect profitability in periods of increasing interest rates. The ability to replace invested assets with higher yielding assets needed to fund the higher crediting rates that may be necessary to keep interest sensitive products competitive.

If interest rates were to increase by

1%,

the market value of our fixed income securities would decrease by

9.4%

as of

December 31, 2019.

The Company therefore

may

have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts.

Conversely, in a period of prolonged low interest rates it is difficult to invest assets and earn the rate of return necessary to support insurance products. Some central banks currently have negative interest rates which contributes to the current low interest rate environment.

Policy lapses in excess of those actuarially anticipated would have a negative impact on our financial performance.

Profitability could be reduced if lapse and surrender rates exceed the assumptions upon which the insurance policies were priced. Policy sales costs are deferred and recognized over the life of a policy. Excess policy lapses, however, cause the immediate expensing or amortizing of deferred policy sales costs.

- Investment Risk:

Our invested assets are subject to customary risks of defaults and changes in market values. Factors that may affect the overall default rate on, and market value of, the invested assets include interest rate levels, financial market performance, and general economic conditions.

- Assumptions Risk:

In the life insurance business, assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of life insurance products are made. These assumptions are based on industry experience and are reviewed and revised regularly by an outside actuary to reflect actual experience on a current basis. However, variation of actual experience from that assumed in developing such terms may affect a product's profitability or sales volume and in turn adversely impact our revenues.

Reclassification, Policy [Policy Text Block]

Reclassifications

: Certain reclassifications of a minor nature have been made to prior-year balances to conform to current-year presentation with

no

net impact to net loss/income or equity.

New Accounting Pronouncements, Policy [Policy Text Block]

New accounting standards

:

Revenue from Contracts with Customers

In

May 2014,

the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts and revenues from financial institutions are

not

within the scope of this updated guidance, the Company's fee income related to providing services will be subject to this updated guidance. The Company did

not

earn any fee income in

2019

or

2018.

  The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. 

The following steps are applied in the updated guidance: (

1

) identify the contract(s) with a customer; (

2

) identify the performance obligations in the contract; (

3

) determine the transaction price; (

4

) allocate the transaction price to the performance obligations in the contract and (

5

) recognize revenue when, or as, the entity satisfies a performance obligation.

In

July 

2015,

the FASB deferred the effective date of the updated guidance on revenue recognitionby

one

year to the quarter ending

March 

31,

2018.

  As an emerging growth company, the Company has chosen to defer implementation of this accounting standard until the year ending

December 31, 2019.

The adoption of this guidance did

not

have any effect on the Company’s result of operations, financial position or liquidity.

Recognition and Measurement of Financial Assets and Financial Liabilities

In

January 2016,

the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.

This guidance was effective for the Company for the year ended

December 31, 2019

and required a cumulative effect adjustment to opening retained earnings to be recorded for equity investments with readily determinable fair values.  As of the adoption date, the Company held publicly traded equity investments with a fair value of $

10,987,539

million in a net unrealized gain position of $

1,098,760

million. The Company has recorded a cumulative-effect adjustment of $

1,098,760

to decrease Accumulated Other Comprehensive Income (AOCI) with a corresponding increase to accumulated deficit for unrealized gains as of the beginning of fiscal year

2019.

As a result of the implementation of ASU

2016

-

01,

unrealized gains and losses in equity investments with readily determinable fair values are recorded on the Consolidated Statements of Comprehensive Income (Loss) within net investment gains (losses). The Company recorded a gain in net investment gains (losses) of

$1.1

million for year ended

December 31, 2019

as a result of adopting this standard. The implementation of this guidance is expected to increase volatility in our net income as the volatility previously recorded in Comprehensive Income (OCI) related to changes in the fair market value of available-for-sale equity investments will now be reflected in net income effective with the adoption date.

Leases

In

February 

2016,

the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than

12

months.  The updated guidance retains the

two

classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).  Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows.  Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset.  Operating leases will recognize lease expense (with

no

separate recognition of interest expense) on a straight-line basis over the term of the lease.   The accounting by lessors is

not

significantly changed by the updated guidance.  The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after

December 

15,

2018,

and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied.  Early adoption is permitted.  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after

December 15, 2020.

The adoption of this guidance is

not

expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Measurement of Credit Losses on Financial Instruments

In

June 

2016,

the FASB issued updated guidance for the accounting for credit losses for financial instruments.  The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.  In addition, the length of time a security has been in an unrealized loss position will

no

longer impact the determination of whether a credit loss exists.

The updated guidance is effective for reporting periods beginning after

December 

15,

2019.

  Early adoption is permitted for reporting periods beginning after

December 

15,

2018.

  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after

December 15, 2022.

The Company will

not

be able to determine the impact that the updated guidance will have on its results of operations, financial position or liquidity until the updated guidance is adopted.

Classification of Certain Cash Receipts and Cash Payment

In

August 2016,

the FASB issued new guidance that clarifies the classification of certain cash receipts and cash payments in the statement of cash flows under

eight

different scenarios including, but

not

limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted. As an emerging growth company, the Company elected to defer implementation of this standard to fiscal years beginning after

December 15, 2018.

The implementation of this standard did

not

have a material impact on the Company’s statement of cash flows.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

On

December 22, 2017,

the U.S. federal government enacted a tax bill,

H.R.1,

An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year

2018

(Tax Cuts and Jobs Act). In

February 2018,

FASB issued guidance to address certain issues related to the Tax Cuts and Jobs Act. This new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. This guidance is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance did

not

have a material effect on the Company’s results of operations, financial position or liquidity.

Targeted Improvements to the Accounting for Long-Duration Contracts

In

August 2018,

the FASB issued ASU

2018

-

12

“Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU

2018

-

12

requires periodic reassessment of actuarial and discount rate assumptions used in the valuation of policyholder liabilities and deferred acquisition costs arising from the issuance of long-duration insurance and reinsurance contracts, with the effects of the changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Under current accounting guidance, the actuarial and discount rate assumptions are set at the contract inception date and

not

subsequently changed, except in limited circumstances. ASU

2018

-

12

also requires new disclosures and is effective for fiscal years beginning after

December 15, 2023,

with early adoption permitted. The Company is evaluating the effect this standard will have on our Consolidated Financial Statements.

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did

not

relate to accounting policies and procedures pertinent or material to the Company at this time.

XML

Note 4 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	632,639	$	632,639	$	-	$	-
Corporate bonds		20,084,397		-		19,892,797		191,600
Municipal bonds		7,055,059		-		7,055,059		-
Redeemable preferred stock		2,133,893		-		2,133,893		-
Mortgage backed and asset backed securities		3,246,904		-		3,246,904		-
Total fixed maturities		33,152,892		632,639		32,328,653		191,600
Equities:
Common stock		9,214,694		9,169,694		45,000		-
Preferred stock		926,809		-		926,809		-
Total equities		10,141,503		9,169,694		971,809		-
Total	$	43,294,395	$	9,802,333	$	33,300,462	$	191,600

	December 31, 2018
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	569,940	$	569,940	$	-	$	-
Corporate bonds		15,842,361		-		15,642,361		200,000
Municipal bonds		6,598,113		-		6,598,113		-
Redeemable preferred stock		192,404		-		192,404		-
Mortgage backed and asset backed securities		3,780,985		-		3,780,985		-
Total fixed maturities		26,983,803		569,940		26,213,863		200,000
Equities:
Common stock		10,735,935		10,735,935		-
Preferred stock		150,040		-		150,040
Total equities		10,885,975		10,735,935		150,040		-
Total	$	37,869,778	$	11,305,875	$	26,363,903	$	200,000

Fair Value, by Balance Sheet Grouping [Table Text Block]

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	6,678,805	$	6,678,805	$	6,678,805	$	-	$	-
Investment income due and accrued		321,362		321,362		-		-		321,362
Policy loans		118,930		118,930		-		-		118,930
Total Financial Assets (excluding available for sale investments)	$	7,119,097	$	7,119,097	$	6,678,805	$	-	$	440,292
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	19,396,614	$	19,186,265	$	-		-	$	19,186,265
Federal Home Loan Bank advance		1,000,000		1,000,000		-		-		1,000,000
Total Financial Liabilities	$	20,396,614	$	20,186,265	$	-		-	$	20,186,265

	December 31, 2018
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	2,077,646	$	2,077,646	$	2,077,646	$	-	$	-
Investment income due and accrued		286,890		286,890		-				286,980
Policy loans		56,539		56,539		-		-		56,539
Total Financial Assets (excluding available for sale investments)	$	2,241,075	$	2,241,075	$	2,077,646	$	-	$	343,519
Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164
Total Financial Liabilities	$	16,626,218	$	15,361,164	$	-	$	-	$	15,361,164

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Note 1 - Description of Business and Significant Accounting Policies (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Number of Wholly-Owned Operating Subsidiaries	5
Cash, FDIC Insured Amount	$ 250,000
Cash, Uninsured Amount	0
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0	$ 0
Present Value of Future Insurance Profits, Weighted Average Amortization Period	30 years
SEC Schedule, 12-09, Valuation Allowances and Reserves, Amount, Ending Balance	$ 0	$ 0
Common Stock, Par or Stated Value Per Share	$ 0.10	$ 0.10
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued, Total	7,734,004	7,650,551
Weighted Average Number of Shares Outstanding, Basic and Diluted	7,688,560	7,393,795
Unrecognized Tax Benefits, Ending Balance	$ 0	$ 0
Interest Rate Risk, Fixed Income Securities, Impact of 1 Percent Increase in Interest Rate	9.40%
Equity Securities, FV-NI	$ 10,987,539
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	1,098,760
Cumulative Effect on Retained Earnings, Net of Tax, Total
Equity Securities, FV-NI, Gain (Loss), Total	1,100,000
AOCI Attributable to Parent [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	(1,098,760)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	(1,098,760)
Retained Earnings [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	1,098,760
Retained Earnings [Member] | Accounting Standards Update 2016-01 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	1,098,760
Pioneer Whole Life [Member]
Reinsurance Retention Policy, Amount Retained	35,000
Solid Solutions Term Life Series and Sound Solutions Term Life Series [Member]
Reinsurance Retention Policy, Amount Retained	$ 25,000
Accidental Death Benefit Rider [Member]
Reinsurance Retention Policy, Reinsured Risk, Percentage	100.00%
Group Life Products [Member]
Reinsurance Retention Policy, Amount Retained	$ 100,000
Reinsurance Retention Policy, Excess Retention, Percentage	25.00%
Group Accidental Death and Dismemberment [Member]
Reinsurance Retention Policy, Amount Retained	$ 25,000
Reinsurance Retention Policy, Excess Retention, Percentage	25.00%
Group Disability [Member]
Reinsurance Retention Policy, Reinsured Risk, Percentage	90.00%
Critical Illness [Member]
Reinsurance Retention Policy, Reinsured Risk, Percentage	66.00%
Policyholder Benefit Reserves [Member]
SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information, Other Policy Claim and Benefit Payable	$ 127,711	139,753
Computer Equipment [Member]
Property, Plant and Equipment, Useful Life	5 years
Furniture and Equipment [Member]
Property, Plant and Equipment, Useful Life	10 years
Service [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 0	$ 0
Product Concentration Risk [Member] | Direct Premium Revenue [Member] | Single Pay Life Products [Member]
Concentration Risk, Percentage	56.00%
Product Concentration Risk [Member] | Direct Premium Revenue [Member] | Individual Life Products [Member]
Concentration Risk, Percentage	25.00%
Product Concentration Risk [Member] | Direct Premium Revenue [Member] | Group Life Products [Member]
Concentration Risk, Percentage	19.00%

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Note 8 - Related Party Transaction (Details Textual) - Brier Development Company, Inc. [Member] - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Number of Entity Shares Owned Related Party	20,000
Reimbursements for Long-term Care and Allowance for Vehicle Expenses [Member]
Related Party Transaction, Amounts of Transaction	$ 19,421	$ 19,421

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Note 5 - Federal Income Taxes - Reconciliation of Income Tax (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income (loss) before total federal income tax	$ 168,050	$ (456,136)
Tax Rate	21.00%	21.00%
Expected income tax expense (benefit)	$ 35,291	$ (95,789)
Effect of tax-exempt income	(11,925)	(9,808)
Disallowed deductions	693
Other GAAP to tax differencees	(24,059)	105,597
Change in valuation allowance	(431,158)
Total income tax benefit	$ (431,158)