Investments

12 Months Ended

Dec. 31, 2021

Investments:

Investments

NOTE 4 – INVESTMENTS

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

	December 31
	2021			2020
Investment income:
Fixed maturities	$	1,920,624		$	2,068,592
Equity securities		90,596			28,727
Short-term investments and cash equivalents		2,660			24,603
Gross investment income		2,013,880			2,121,922
Less investment expenses		(80,887	)		(133,679	)
Net investment income		1,932,993			1,988,243
Net realized investment gains		259,912			97,771
Net realized gain on sale of real estate		3,693,858			-
Net unrealized investment gains on equity securities		400,862			198,266
Net investment income, realized investment gains, realized gains on real estate sale and unrealized investment gains	$	6,287,625		$	2,284,280

The amortized cost, estimated fair value and weighted average yield of fixed maturity investments by contractual maturity are as follows:

Maturities by Year at December 31, 2021	Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	15,758,755	$	15,875,423		2.21	%
Due after one year through five years		19,349,200		19,681,599		1.80	%
Due after five years through ten years		19,335,034		19,832,093		2.39	%
Due after ten years and beyond		17,075,416		17,324,290		2.35	%
Total	$	71,518,405	$	72,713,405		2.18	%

Maturities by Year at December 31, 2020	Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	11,064,202	$	11,169,232		2.57	%
Due after one year through five years		30,090,910		31,260,694		2.59	%
Due after five years through ten years		18,476,051		19,806,444		2.51	%
Due after ten years and beyond		21,238,117		21,971,324		2.63	%
Total	$	80,869,280	$	84,207,694		2.58	%

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

The weighted average maturity of the Company’s investments was approximately 6.7 years as of December 31, 2021, and 8.0 years as of December 31, 2020.

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
December 31, 2021
Available-for-sale fixed maturities:
U.S. Treasury securities	$	6,278,764	$	67,516	$	(36,475	)	$	6,309,805
Corporate securities		44,370,193		1,076,288		(196,508	)		45,249,973
Agency mortgage-backed securities		20,569,448		352,466		(68,287	)		20,853,627
Held-to-maturity fixed maturities:
Certificates of deposit		300,000		-		-			300,000
Total fixed maturities	$	71,518,405	$	1,496,270	$	(301,270	)	$	72,713,405
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 maturities:
Certificates of deposit		798,000		-		-			798,000
Total fixed maturities	$	80,869,280	$	3,416,535	$	(78,121	)	$	84,207,694

As of December 31, 2021, six securities were held as collateral with Comerica, pursuant to the reinsurance trust agreement among Crusader, 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 those securities was $8,243,758 and $8,162,053 on December 31, 2021, respectively. As of December 31, 2020, one corporate security, included in available-for-sale fixed maturities, was held as collateral with Comerica, pursuant to the reinsurance trust agreement among Crusader, 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 $824,500 and $787,653 on December 31, 2020, respectively.

A summary of the unrealized gains (losses) on investments carried at fair value and the applicable deferred federal income taxes is as follows:

	Year ended December 31
	2021			2020
Gross unrealized gains of fixed maturities	$	1,496,270		$	3,416,535
Gross unrealized losses of fixed maturities		(301,270	)		(78,121	)
Net unrealized gains on investments		1,195,000			3,338,414
Deferred federal tax expense		(250,950	)		(701,067	)
Net unrealized gains, net of deferred income taxes	$	944,050		$	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
December 31, 2021
U.S. Treasury securities	$	481,875	$	(15,785	)		1	$	476,016	$	(20,690	)		1
Corporate securities		13,152,240		(128,502	)		15		1,179,235		(68,006	)		1
Agency mortgage-backed securities		5,086,187		(43,019	)		8		471,479		(25,268	)		1
Total debt securities		18,720,302		(187,306	)		24		2,126,730		(113,964	)		3
Equity securities		665,100		(55,156	)		18		76,454		(4,703	)		3
Total	$	19,385,402	$	(242,462	)		42	$	2,203,184	$	(118,667	)		6

	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
U.S. Treasury securities	$	-	$	-			-	$	-	$	-		-
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 monitors its investments closely.  If an unrealized loss is determined to be other-than-temporary, it is written off as a realized loss through the 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 as of December 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:

	December 31			December 31
	2021			2020
Fixed maturities securities sold
Number of securities sold		3			15
Amortized cost of sold securities	$	2,194,103		$	5,529,470
Realized gains on sales	$	710		$	52,053
Fixed maturities securities called
Number of securities called		10			4
Amortized cost of called securities	$	7,167,178		$	2,449,503
Realized (losses) gains on calls	$	(17,758	)	$	497

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’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:

	December 31		December 31
	2021		2020
Cost	$	3,532,026	$	2,548,440
Unrealized gain		599,127		198,266
Fair market value of equity securities	$	4,131,153	$	2,746,706

The Company’s investment in fixed maturity securities, held-to-maturity, certificates of deposit included $300,000 and $798,000 of brokered certificates of deposit as of December 31, 2021 and 2020, respectively.  All of the Company’s certificates of deposit are within the Federal Deposit Insurance Corporation (“FDIC”) insured permissible limits. Due to the nature of the Company’s business, certain bank accounts may exceed FDIC insured permissible limits. 

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 in the state of Nevada.

	Year ended December 31
	2021		2020
Certificates of deposit	$	300,000	$	200,000
Short-term investments		200,000		200,000
Total state held deposits	$	500,000	$	400,000

All the Company’s brokered and non-brokered certificates of deposit are within the FDIC insured permissible limits.  Due to the 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:

	Year ended December 31
	2021		2020
Short term bonds		954,750		-
Certificates of deposit		200,000		200,000
Total short-term investments	$	1,154,750	$	200,000