INVESTMENTS

6 Months Ended

Jun. 30, 2021

Investments

NOTE 8 - INVESTMENTS

NOTE 8 – 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 June 30						Six Months Ended June 30
	2021			2020			2021			2020
Fixed maturities	$	543,971		$	509,324		$	1,072,138		$	1,051,731
Equity securities		22,020			4,890			42,774			6,332
Short-term investments and cash equivalents		341			8,193			722			19,914
Gross investment income		566,332			522,407			1,115,634			1,077,977
Less investment expenses		(37,453	)		(32,909	)		(72,032	)		(67,787	)
Net investment income		528,879			489,498			1,043,602			1,010,190
Net realized investment gains		106,410			461			161,809			1,575
Net realized gains on real estate sale		-			-			3,693,858			-
Net unrealized investment gains on equity securities		14,615			67,759			166,281			22,959
Net investment income, realized investment gains, realized gains on real estate sale and unrealized investment gains	$	649,904		$	557,718		$	5,065,550		$	1,034,724

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
June 30, 2021
Available-for-sale fixed maturities:
U.S. Treasury securities	$	7,262,854	$	140,241	$	(31,661	)	$	7,371,434
Corporate securities		50,551,597		1,646,629		(124,412	)		52,073,814
Agency mortgage-backed securities		26,787,187		566,299		(52,073	)		27,301,413
Total Available-for sale fixed maturities		84,601,638		2,353,169		(208,146	)		86,746,661
Held-to-maturity fixed securities:
Certificates of deposits		548,000		-		-			548,000
Total fixed maturities	$	85,149,638	$	2,353,169	$	(208,146	)	$	87,294,661

	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
Total Available-for sale fixed maturities		80,071,280		3,416,535		(78,121	)		(83,409,694	)
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 June 30, 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 $2,045,000 and $1,974,534, on June 30, 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:

	June 30			December 31
	2021			2020
Gross unrealized gains on fixed maturities	$	2,353,169		$	3,416,535
Gross unrealized losses on fixed maturities		(208,146	)		(78,121	)
Net unrealized gains on fixed maturities		2,145,023			3,338,414
Deferred federal tax expense		(450,455	)		(701,067	)
Net unrealized gains, net of deferred income taxes	$	1,694,568		$	2,637,347

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

Maturities by Year at June 30, 2021	Par Value		Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	16,170,000	$	16,185,243	$	16,386,079		2.31	%
Due after one year through five years		26,521,012		26,682,135		27,372,028		1.87	%
Due after five years through ten years		19,424,414		19,506,193		20,317,069		2.41	%
Due after ten years and beyond		22,237,762		22,776,067		23,219,485		2.37	%
Total	$	84,353,188	$	85,149,638	$	87,294,661		2.21	%

Maturities by Year at December 31, 2020	Par Value		Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	11,070,641	$	11,064,202	$	11,169,232		2.57	%
Due after one year through five years		30,065,671		30,090,910		31,260,694		2.59	%
Due after five years through ten years		18,363,570		18,476,051		19,806,444		2.51	%
Due after ten years and beyond		20,927,571		21,238,117		21,971,324		2.63	%
Total	$	80,427,453	$	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 fixed maturity investments was 7.8 years as of June 30, 2021, and 8.3 years as of June 30, 2020.

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
June 30, 2021
U.S. Treasury securities	$	4,762,045	$	(31,661	)		3	$	-	$	-			-
Corporate securities		14,419,743		(124,412	)		18		-		-			-
Agency mortgage-backed securities		6,465,163		(52,073	)		8		-		-			-
Total debt securities		25,646,951		(208,146	)		29		-		-			-
Equity securities		787,071		(40,703	)		38		54		(3	)		1
Total	$	26,434,022	$	(248,849	)		67	$	54	$	(3	)		1

	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 June 30, 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 June 30					Six Months Ended June 30
	2021			2020		2021			2020
Fixed maturities securities sold
Number of securities sold		2			-		3			1
Amortized cost of sold securities	$	1,943,398		$	-	$	2,193,393		$	601,316
Realized gains on sales	$	707		$	-	$	710		$	1,114
Fixed maturities securities called
Number of securities called		1			2		3			2
Amortized cost of called securities	$	1,018,877		$	1,699,539	$	2,393,778		$	1,699,539
Realized (losses) gains on calls	$	(18,877	)	$	461	$	(18,778	)	$	461

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:

	June 30		December 31
	2021		2020
Cost	$	3,205,869	$	2,548,440
Unrealized gains		364,547		198,266
Fair market value of equity securities	$	3,570,416	$	2,746,706

The Company’s investment in certificates of deposit included $598,000 of brokered certificates of deposit as of June 30, 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.

	June 30		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:

	June 30		December 31
	2021		2020
U.S. Treasury bills	$	5,299,331	$	-
Short-term bonds		968,983		-
Certificates of deposit		200,000		200,000
Total short-term investments	$	6,468,314	$	200,000