Note 2 – Investments

Available for Sale Securities – Fixed Maturity and Equity Securities

The following tables provide a summary of fixed maturities available for sale and equity securities by original or amortized cost and estimated fair value:

December 31, 2015	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	20,336,681	$	1,441,890	$	(32,083	)	$	21,746,488
U.S. special revenue and assessments		1,137,546		7,843		(2,550	)		1,142,839
All other corporate bonds		167,173,444		3,762,156		(8,705,830	)		162,229,770
		188,647,671		5,211,889		(8,740,463	)		185,119,097
Equity securities		43,954,737		2,119,205		(388,602	)		45,685,340
Total	$	232,602,408	$	7,331,094	$	(9,129,065	)	$	230,804,437

December 31, 2014	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	23,036,161	$	1,970,791	$	(50,184	)	$	24,956,768
States, municipalities and political subdivisions		95,000		2,385		0			97,385
U.S. special revenue and assessments		1,137,702		13,739		(202,930	)		948,511
Collateralized mortgage obligations		1,005,081		92,091		(6	)		1,097,166
Public utilities		399,927		55,913		0			455,840
All other corporate bonds		162,960,493		8,624,486		(1,659,193	)		169,925,786
		188,634,364		10,759,405		(1,912,313	)		197,481,456
Equity securities		39,275,638		2,260,855		(540,491	)		40,996,002
Total	$	227,910,002	$	13,020,260	$	(2,452,804	)	$	238,477,458

The following table provides a summary of fixed maturities by contractual maturity as of December 31, 2015. Actual maturities could differ from contractual maturities due to call or prepayment provisions:

Fixed Maturities Available for Sale December 31, 2015	Amortized Cost		Estimated Fair Value

Due in one year or less	$	3,961,534	$	4,000,512
Due after one year through five years		23,444,519		24,343,844
Due after five years through ten years		64,352,687		62,094,221
Due after ten years		96,888,931		94,680,520
Total	$	188,647,671	$	185,119,097

By insurance statute, the majority of the Company's investment portfolio is invested in investment grade securities to provide ample protection for policyholders.

Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor's rating of BB+ or below.

The Company held below investment grade investments with an estimated market value of $13,352,934 and $9,142,063 as of December 31, 2015 and 2014, respectively. The investments are all classified as "All other corporate bonds".

The fair value of investments with sustained gross unrealized losses at December 31, 2015 and 2014 are as follows:

December 31, 2015	Less than 12 months			12 months or longer			Total

	Fair value		Unrealized losses	Fair value		Unrealized losses	Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities	$	4,966,210	(32,083)	$	0	0	$	4,966,210	(32,083)
U.S. special revenue and assessments		984,770	(2,550)		0	0		984,770	(2,550)
All other corporate bonds		85,734,097	(5,255,276)		19,400,640	(3,450,554)		105,134,737	(8,705,830)
Total fixed maturities	$	91,685,077	(5,289,909)	$	19,400,640	(3,450,554)	$	111,085,717	(8,740,463)

Equity securities	$	4,741,132	(388,602)	$	0	0	$	4,741,132	(388,602)

December 31, 2014	Less than 12 months			12 months or longer			Total

	Fair value		Unrealized losses	Fair value		Unrealized losses	Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities		0	0		4,947,265	(50,184)		4,947,265	(50,184)
U.S. special revenue and assessments		0	0		784,390	(202,930)		784,390	(202,930)
Collateralized mortgage obligations		0	0		1,012	(6)		1,012	(6)
All other corporate bonds	$	28,954,477	(416,560)	$	3,535,206	(1,242,633)	$	32,489,683	(1,659,193)
Total fixed maturities	$	28,954,477	(416,560)	$	9,267,873	(1,495,753)	$	38,222,350	(1,912,313)

Equity securities	$	6,067,132	(540,491)	$	0	0	$	6,067,132	(540,491)

The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months:

	Less than 12 months	12 months or longer	Total
As of December 31, 2015
Fixed maturities	40	9	49
Equity securities	9	0	9
As of December 31, 2014
Fixed maturities	18	7	25
Equity securities	25	0	25

Substantially all of the unrealized losses on fixed maturities available for sale at December 31, 2015 and 2014 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized losses on equity investments were primarily attributable to normal market fluctuations. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of December 31, 2015 and 2014

Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Consolidated Statements of Operations. Trading securities include exchange-traded equities and exchange-traded options. Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2015 was $0 and $(28,609), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2014 was $6,250 and $(23,853), respectively. Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

As of June 30, 2015, the Company reclassified its remaining exchange-traded equity trading security to the available for sale category. The fair value of the security at the time of the reclassification was $3,224,000. Trading securities are purchased and held primarily for purposes of selling them in the near term and reflect active and frequent buying and selling. Management analyzed the recent buying and selling activity related to the exchange-traded equity and deems the available for sale category to better reflect Management's intent for this security going forward. Through June 30, 2015, unrealized gains and losses from this exchange-traded equity were recorded as a component of earnings. Subsequent unrealized gains/losses are reported as a component of comprehensive income.

The following table reflects trading securities revenue charged to net investment income for the periods ended December 31:

	2015				2014

Net unrealized gains (losses)		$	945,128			$	(722,573	)
Net realized gains (losses)			(515,967	)			245,995
Net unrealized and realized gains (losses)		$	429,161			$	(476,578	)

Mortgage Loans on Real Estate

The Company, from time to time, acquires mortgage loans through participation agreements with FSNB. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. The Company is able to receive participations from FSNB for three primary reasons: 1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB's loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away. For originated loans, the Company's Management is responsible for the final approval of such loans after evaluation. Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity. Once the loan is approved, the Company directly funds the loan to the borrower. The Company bears all risk of loss associated with the terms of the mortgage with the borrower.

Approximately 30% and 39% of the mortgage loan portfolio consists of discounted commercial mortgage loans as of December 31, 2015 and 2014, respectively. The Company began purchasing discounted commercial mortgage loans in 2009. Management has extensive background and experience in the analysis and valuation of commercial real estate. The discounted loans are available through the FDIC's sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower's willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During 2015 and 2014, the Company acquired $13,774,698 and $2,348,890 in mortgage loans, respectively, including both regular participation mortgage loans as well as discounted mortgage loans. FSNB services the majority of the Company's mortgage loan portfolio. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During 2015 and 2014, the maximum and minimum lending rates for mortgage loans were:

	2015		2014
	Maximum rate	Minimum rate	Maximum rate	Minimum rate

Commercial Loans	8.00 %	4.00 %	10.00 %	3.91 %
Residential Loans	8.00 %	3.00 %	8.00 %	7.00 %

Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property.

The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due along with a brief description of what steps are being taken to resolve the delinquency. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact.

Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers' ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Given the uncertainty of the current market, Management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held. The Company records repayments on loans as discount accrual when the loan basis has been paid in full.

On the remainder of the mortgage loan portfolio, interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

A mortgage loan reserve is established and adjusted based on Management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The Company acquired the discounted mortgage loans at below contract value, and believes that it will fully recover its carrying value upon disposal, therefore no reserve for delinquent loans is deemed necessary. Those not currently paying are being vigorously worked by Management. The current discounted commercial mortgage loan portfolio has an average price of 39.0 % of face value and Management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased. The mortgage loan reserve was $0 at December 31, 2015 and 2014.

The following table summarizes the number of loans held in the discounted mortgage loan portfolio and the carrying value of the loans as of December 31, 2015:

Payment Frequency	Number of Loans		Carrying Value

No payments received		8	$	0
One-time payment received		1		0
Irregular payments received		2		20,834
Periodic payments received		7		5,347,215
Total		18	$	5,368,049

The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31:

	2015		2014

In good standing	$	14,701,228	$	14,443,455
Overdue interest over 90 days		20,834		3,130,290
Restructured		126,118		1,104,972
In process of foreclosure		2,921,750		4,483,265
Total mortgage loans	$	17,769,930	$	23,161,982
Total foreclosed loans during the year	$	0	$	56,576

Investment Real Estate

Real estate acquired through foreclosure, consisting of properties obtained through foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is reported on an individual asset basis at the lower of cost or fair value, less disposal costs. Fair value is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources. When properties are acquired through foreclosure, any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recognized and charged to the Consolidated Statements of Operations. Based upon Management's evaluation of the real estate acquired through foreclosure, additional expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations.

Notes Receivable

Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The valuation allowance as of December 31, 2015 and 2014 was $0. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party.

Similar to the mortgage loans, FSNB services several of the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans.

Analysis of Investment Operations

The following table reflects the Company's net investment income for the periods ended December 31:

	2015			2014

Fixed maturities	$	8,559,938		$	8,225,640
Equity securities		1,708,786			3,255,611
Trading securities		(429,161	)		(476,578	)
Mortgage loans		5,700,492			4,592,853
Real estate		1,474,726			8,355,153
Notes receivable		787,658			340,000
Policy loans		720,544			760,715
Cash and cash equivalents		681			505
Short-term		699,357			70,578
Total consolidated investment income		19,223,021			25,124,477
Investment expenses		(3,663,086	)		(8,774,758	)
Consolidated net investment income	$	15,559,935		$	16,349,719

The following table reflects the Company's net realized investments gains and losses for the periods ended December 31:

2015	Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed maturities	$	1,289,455	$	(41,215)	$	1,248,240
Real estate		5,968,558		0		5,968,558
Common stock		48,165		(238,794)		(190,629)
Preferred stock		971,662		(637)		971,025
Real estate – OTTI		0		(54,901)		(54,901)
Common stock – OTTI		0		(3,515,700)		(3,515,700)
Total realized gains (losses)	$	8,277,840	$	(3,851,247)	$	4,426,593

2014	Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed maturities	$	2,414,160	$	(1,135,417)	$	1,278,743
Real estate		14,757,451		(1,460,332)		13,297,119
Common stock		673,821		(14,908)		658,913
Preferred stock		1,986,303		0		1,986,303
Real estate – OTTI		0		(35,946)		(35,946)
Common stock – OTTI		0		(126,959)		(126,959)
Total realized gains (losses)	$	19,831,735	$	(2,773,562)	$	17,058,173

Other-Than-Temporary Impairments

The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary. The factors considered by Management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support, whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates. If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Consolidated Statements of Operations.

Equity securities may experience other-than-temporary impairments in the future based on the prospects for full recovery in value in a reasonable period of time and the Company's ability and intent to hold the security to recovery. If a decline in fair value is judged by Management to be other-than-temporary or Management does not have the intent or ability to hold a security, a loss is recognized by a charge to other-than-temporary impairment losses in the Consolidated Statements of Operations.

Management regularly reviews its real estate portfolio in comparison to appraisal valuations and current market conditions for indications of other-than-temporary impairments. If a decline in value is judged by Management to be other-than-temporary, a loss is recognized by a charge to other-than-temporary impairment losses in the Consolidated Statements of Operations.

Based on Management's review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Consolidated Statements of Operations for the periods ended December 31:

	2015		2014

Other than temporary impairments:
Common stock	$	3,515,700	$	126,959
Real estate		54,901		35,946
Total other than temporary impairments	$	3,570,601	$	162,905

The other-than-temporary impairments recognized during 2015 and 2014 were taken as a result of Management's assessment and consideration of the length of time the securities have remained in an unrealized loss position and as a result of management's analysis and determination of value. The investments were written down to better reflect their current expected market value.

Investments on Deposit

The Company had investments with a fair value of $8,932,241 and $10,635,716 on deposit with various state insurance departments as of December 31, 2015 and 2014, respectively.