Cost of Insurance Acquired

12 Months Ended

Dec. 31, 2019

Cost of Insurance Acquired [Abstract]

Cost of Insurance Acquired

Note 5 – Cost of Insurance Acquired

When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition.  The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies.  Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits.  The interest rates utilized may vary due to differences in the blocks of business.  The interest rate utilized in the amortization calculation of the remaining cost of insurance acquired is 12%. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.

	2019		2018
Cost of insurance acquired, beginning of year	$	5,622,227	$	6,428,292
Interest accretion		769,612		866,339
Amortization		(1,545,518)		(1,672,404)
Net amortization		(775,906)		(806,065)
Cost of insurance acquired, end of year	$	4,846,321	$	5,622,227

Estimated net amortization expense of cost of insurance acquired for the next five years is as follows:

	Interest Accretion	Amortization	Net Amortization
2020	676,503	1,421,353	744,850
2021	587,120	1,302,090	714,970
2022	501,324	1,189,672	688,348
2023	418,722	1,079,979	661,257
2024	339,372	975,187	635,815