INVESTMENTS

3 Months Ended

Mar. 31, 2022

Investments

INVESTMENTS

NOTE 8 – INVESTMENTS

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

	Three Months Ended March 31
	2022			2021
Investment income:
Fixed maturities	$	373,350		$	528,167
Equity securities		27,051			20,753
Short-term investments and cash equivalents		3,007			384
Gross investment income		403,408			549,304
Less investment expenses		(74,626	)		(34,581	)
Net investment income		328,782			514,723
Net realized investment gains		61,733			55,399
Net realized gain on sale of real estate	-				3,693,858
Net unrealized investment gains (losses) on equity securities		(180,069	)		151,667
Net investment income, realized investment
gains, realized gains on real
estate sale and unrealized investment gains	$	210,446		$	4,415,647

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

	Amortized		Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gains		Losses			Value
March 31, 2022
Available-for-sale fixed maturities:
U.S. Treasury securities	$	5,785,095	$	5,944	$	(98,208	)	$	5,692,831
Corporate securities		42,463,486		164,910		(1,008,254	)		41,620,142
Agency mortgage-backed securities		19,007,275		10,888		(486,472	)		18,531,691
Total Available-for-sale fixed maturities		67,255,856		181,742		(1,592,934	)		65,844,664
Held-to-maturity fixed securities:
Certificates of deposits		300,000		-		-			300,000
Total fixed maturities	$	67,555,856	$	181,742	$	(1,592,934	)	$	66,144,664

	Amortized		Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gains		Losses			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
Total Available-for-sale fixed maturities		71,218,405		1,496,270		(301,270	)		72,413,405
Held-to-maturity fixed securities:
Certificates of deposits		300,000		-		-			300,000
Total fixed maturities	$	71,518,405	$	1,496,270	$	(301,270	)	$	72,713,405

As of March 31, 2022, six securities were held as collateral with Comerica Bank & Trust, N. A. (“Comerica”), pursuant to the reinsurance trust agreement among Crusader, Crusader and United Insurance Company ("USIC"), and Comerica to secure payment of Crusader’s liabilities and performance of its obligations under the reinsurance arrangement with USIC (the “Reinsurance Trust Agreement”). The estimated aggregate fair value and amortized cost of these securities was $7,944,916 and $7,836,756, on March 31, 2022 respectively. As of December 31, 2021, the estimated fair value and amortized cost of those securities was $8,243,758 and $8,162,053 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
	2022			2021
Gross unrealized gains on fixed maturities	$	181,742		$	1,496,270
Gross unrealized losses on fixed maturities		(1,592,934	)		(301,270	)
Net unrealized gains (losses) on fixed maturities		(1,411,192	)		1,195,000
Deferred federal tax expense (benefit)		296,350			(250,950	)
Net unrealized gains (losses), net of deferred income taxes	$	(1,114,842	)	$	944,050

The amortized cost, estimated fair value (net of unrealized gains and losses) and weighted average yield of fixed maturity investments by contractual maturity are as follows:

Maturities by Year at March 31, 2022	Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	17,978,044	$	17,974,935		1.83	%
Due after one year through five years		15,417,501		15,283,963		2.11	%
Due after five years through ten years		19,091,698		18,372,496		2.43	%
Due after ten years and beyond		15,068,613		14,513,270		2.36	%
Total	$	67,555,856	$	66,144,664		2.18	%

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	%

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 fixed maturity investments was approximately 7.0 years as of March 31, 2022, and approximately 6.7 years as of December 31, 2021.

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, 2022
U.S. Treasury securities	$	-	$	-			-	$	896,328	$	(98,208	)		2
Corporate securities		21,182,647		(755,757	)		29		1,806,455		(252,497	)		4
Agency mortgage-backed securities		15,248,602		(394,717	)		37		860,650		(91,755	)		2
Total debt securities		36,431,249		(1,150,474	)		66		3,563,433		(442,460	)		8
Equity securities		1,162,916		(103,530	)		100		84,921		(11,312	)		11
Total	$	37,594,165	$	(1,254,004	)		166	$	3,648,354	$	(453,772	)		19

	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

The increase in gross unrealized losses is attributable to the increase in yields resulting from the tightening of monetary policy by the Federal Reserve in order to mitigate inflation in the U.S. economy and the economic impact of Russia’s invasion of Ukraine. 

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, 2022 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
	2022		2021
Fixed maturities securities sold
Number of securities sold		-		1
Amortized cost of sold securities	$	-	$	249,995
Realized gains on sales	$	-	$	2
Fixed maturities securities called
Number of securities called		1		2
Amortized cost of called securities	$	524,987	$	1,374,901
Realized gains on calls	$	13	$	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’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
	2022		2021
Cost	$	3,613,060	$	3,532,026
Unrealized gains		417,828		599,127
Estimated fair value of equity securities	$	4,030,888	$	4,131,153

The Company’s investment in certificates of deposit was $300,000 as of March 31, 2022 and December 31, 2021, respectively.

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
	2022		2021
Certificates of deposit	$	300,000	$	300,000
Short-term investments		100,000		200,000
Total state held deposits	$	400,000	$	500,000

All the Company’s brokered and non-brokered 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.

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

	March 31		December 31
	2022		2021
Short-term bonds	$	951,230	$	954,750
Certificates of deposit		100,000		200,000
Total short-term investments	$	1,051,230	$	1,154,750