Investments

3 Months Ended

Mar. 31, 2021

Investments:

Investments

A summary of investment income, net of investment expenses, net realized investment gains, realized gains on real estate sale, and net unrealized investment gains on equity securities is as follows:

	Three Months ended March 31
	2021			2020
Fixed maturities	$	528,167		$	542,407
Equity securities		20,753			1,442
Short-term investments and cash equivalents		384			11,722
Gross investment income		549,304			555,571
Less investment expenses		(34,581	)		(34,879	)
Net investment income		514,723			520,692
Net realized investment gains		55,399			1,114
Net realized gains on real estate sale		3,693,858			-
Net unrealized investment gains (losses) on equity securities		151,667			(44,800	)
Net investment income, realized investment gains, realized gains on real
estate sale and unrealized investment gains (losses)	$	4,415,647		$	477,006

The amortized cost and estimated fair values of investments in fixed maturities by category are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2021
Available-for-sale fixed maturities:
U.S. Treasury securities	$	10,754,166	$	180,757	$	(51,882	)	$	10,883,041
Corporate securities		46,200,918		1,601,092		(339,765	)		47,462,245
Agency mortgage-backed securities		29,564,648		705,489		(65,069	)		30,205,068
Held-to-maturity fixed securities:
Certificates of deposits		798,000		-		-			798,000
Total fixed maturities	$	87,317,732	$	2,487,338	$	(456,716	)	$	89,348,354

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2020
Available-for-sale fixed maturities:
U.S. Treasury securities	$	10,596,808	$	235,373	$	-		$	10,832,181
Corporate securities		44,159,926		2,347,826		(55,847	)		46,451,905
Agency mortgage-backed securities		25,314,546		833,336		(22,274	)		26,125,608
Held-to-maturity fixed securities:
Certificates of deposits		798,000		-		-			798,000
Total fixed maturities	$	80,869,280	$	3,416,535	$	(78,121	)	$	84,207,694

As of March 31, 2021, one corporate security, included in available-for-sale fixed maturities, was held as collateral with Comerica Bank & Trust, N. A. (“Comerica”), pursuant to the reinsurance trust agreement among Crusader, United Specialty Insurance Company (“USIC”) and Comerica to secure payment of Crusader’s liabilities and performance of its obligations under the reinsurance arrangement with USIC. The estimated fair value and amortized cost of that security was $821,000 and $788,858 on March 31, 2021, respectively.

A summary of the unrealized gains (losses) on investments in fixed maturities carried at fair value and the applicable deferred federal income taxes are shown below:

	March 31			December 31
	2021			2020
Gross unrealized gains on fixed maturities	$	2,487,338		$	3,416,535
Gross unrealized losses on fixed maturities		(456,716	)		(78,121	)
Net unrealized gains on fixed maturities		2,030,622			3,338,414
Deferred federal tax expense		(426,430	)		(701,067	)
Net unrealized gains, net of deferred income taxes	$	1,604,192		$	2,637,347

A summary of estimated fair value, gross unrealized losses, and number of securities in a gross unrealized loss position by the length of time in which the securities have continually been in that position is shown below:

	Less than 12 Months							12 Months or Longer
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses			Number of Securities
March 31, 2021
U.S. Treasury securities	$	3,691,882	$	(51,882	)		3	$	-	$	-			-
Corporate securities		9,841,887		(320,480	)		14		891,000		(19,285	)		1
Agency mortgage-backed securities		7,990,649		(65,069	)		11		-		-			-
Total debt securities		21,524,418		(437,431	)		28		891,000		(19,285	)		1
Equity securities		608,807		(24,884	)		34		10,972		(749	)		2
Total	$	22,133,225	$	(462,315	)		62	$	901,972	$	(20,034	)		3

	Less than 12 Months							12 Months or Longer
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses		Number of Securities
December 31, 2020
Corporate securities		2,101,986		(55,847	)		2		-		-		-
Agency mortgage-backed securities		3,223,329		(22,274	)		12		-		-		-
Total debt securities		5,325,315		(78,121	)		14		-		-		-
Equity securities		723,346		(37,357	)		25		-		-		-
Total	$	6,048,661	$	(115,478	)		39	$	-	$	-		-

The Company closely monitors its investments. If an unrealized loss is determined to be other-than-temporary, it is written off as a realized loss through the Condensed Consolidated Statements of Operations. The Company’s methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors including the length of time to maturity and the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. The unrealized losses on all securities as of March 31, 2021, and December 31, 2020, were determined to be temporary.

Although the Company does not intend to sell its fixed maturity investments prior to maturity, the Company may sell investment securities from time to time in response to cash flow requirements, economic, regulatory, and/or market conditions or investment securities may be called by their issuers prior to the securities’ maturity. The fixed maturity securities previously held by the Company were sold and called prior to maturity as follows:

	Three Months Ended March 31
	2021		2020
Fixed maturities securities sold
Number of securities sold		1		1
Amortized cost of sold securities	$	249,995	$	601,316
Realized gains on sales	$	2	$	1,114
Fixed maturities securities called
Number of securities called		2		-
Amortized cost of called securities	$	1,374,901	$	-
Realized gains on calls	$	99	$	-

The unrealized gains or losses from fixed maturities are reported as “Accumulated other comprehensive income or loss,” which is a separate component of stockholders’ equity, net of any deferred tax effect.

The Company started investing in common stock equity securities during the year ended December 31, 2020. The Company’s equity securities allocation is intended to enhance the return of and provide diversification for the total investment portfolio. A summary of equity securities is shown below:

	March 31		December 31
	2021		2020
Cost	$	2,834,034	$	2,548,440
Unrealized gains		349,933		198,266
Fair market value of equity securities	$	3,183,967	$	2,746,706

The Company’s investment in certificates of deposit included $598,000 of brokered certificates of deposit as of March 31, 2021 and December 31, 2020.

The following securities from three different banks represent statutory deposits that are assigned to and held by the California State Treasurer and the Insurance Commissioner of the State of Nevada. These deposits are required for writing certain lines of business in California and for admission to transact insurance business in the state of Nevada.

	March 31		December 31
	2021		2020
Certificates of deposit	$	200,000	$	200,000
Short-term investments		200,000		200,000
Total state held deposits	$	400,000	$	400,000

All the Company’s brokered and non-brokered certificates of deposit are within the FDIC insured permissible limits. Due to nature of the Company’s business, certain bank accounts may exceed FDIC insured permissible limits.

Short-term investments have an initial maturity of one year or less and consist of the following:

	March 31		December 31
	2021		2020
U.S. Treasury bills	$	2,749,946	$	-
Certificates of deposit		200,000		200,000
Total short-term investments	$	2,949,946	$	200,000