INVESTMENTS

9 Months Ended

Sep. 30, 2021

Investments

NOTE 10 - INVESTMENTS

NOTE 10 – 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 on equity securities is as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
Investment income:
Fixed maturities	$	440,961		$	499,649		$	1,513,099		$	1,551,380
Equity securities		24,009			5,888			66,783			12,220
Short-term investments and cash equivalents		1,129			4,582			1,851			24,496
Gross investment income		466,099			510,119			1,581,733			1,588,096
Less investment expenses		(38,855	)		(32,974	)		(110,887	)		(100,761	)
Net investment income		427,244			477,145			1,470,846			1,487,335
Net realized investment gains		57,173			38,214			218,982			39,789
Net realized gain on sale of real estate		-			-			3,693,858			-
Net unrealized investment gains (losses) on equity securities		(147,722	)		19,670			18,559			42,629
Net investment income, realized investment gains, realized gains on real estate sale and unrealized investment gains	$	336,695		$	535,029		$	5,402,245		$	1,569,753

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
September 30, 2021
Available-for-sale fixed maturities:
U.S. Treasury securities	$	7,271,118	$	109,947	$	(33,948	)	$	7,347,117
Corporate securities		46,124,041		1,472,998		(127,520	)		47,469,519
Agency mortgage-backed securities		23,452,719		479,517		(39,682	)		23,892,554
Total Available-for sale fixed maturities		76,847,878		2,062,462		(201,150	)		78,709,190
Held-to-maturity fixed securities:
Certificates of deposits		548,000		-		-			548,000
Total fixed maturities	$	77,395,878	$	2,062,462	$	(201,150	)	$	79,257,190

	Amortized		Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gains		Losses			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 September 30, 2021, three U.S. Treasury securities and three agency mortgage-back securities, included in available-for-sale fixed maturities, were held as collateral with Comerica Bank & Trust, N. A. (“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 aggregate fair value and amortized cost of these securities was $8,584,173 and $8,446,981, on September 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:

	September 30			December 31
	2021			2020
Gross unrealized gains on fixed maturities	$	2,062,462		$	3,416,535
Gross unrealized losses on fixed maturities		(201,150	)		(78,121	)
Net unrealized gains on fixed maturities		1,861,312			3,338,414
Deferred federal tax expense		(390,876	)		(701,067	)
Net unrealized gains, net of deferred income taxes	$	1,470,436		$	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 September 30, 2021	Par  Value		Amortized Cost		Fair Value		Weighted Average Yield
Due in one year	$	14,995,000	$	15,011,137	$	15,178,570		2.19	%
Due after one year through five years		22,696,119		22,804,524		23,363,295		1.82	%
Due after five years through ten years		18,717,649		18,793,070		19,502,697		2.41	%
Due after ten years and beyond		20,319,818		20,787,147		21,212,628		2.34	%
Total	$	76,728,586	$	77,395,878	$	79,257,190		2.17	%

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 6.9 years as of September 30, 2021, and 8.0 years as of December 31, 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
September 30, 2021
U.S. Treasury securities	$	960,235	$	(33,947	)		2	$	-	$	-			-
Corporate securities		12,229,369		(67,056	)		14		1,186,701		(60,464	)		1
Agency mortgage-backed securities		1,521,290		(15,100	)		2		472,074		(24,583	)		1
Total debt securities		14,710,894		(116,103	)		18		1,658,775		(85,047	)		2
Equity securities		1,315,491		(109,566	)		32		84,903		(10,138	)		4
Total	$	16,026,385	$	(225,669	)		50	$	1,743,678	$	(95,185	)		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
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 September 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					Nine Months Ended
	September 30					September 30
	2021			2020		2021			2020
Fixed maturities securities sold
Number of securities sold		-			6		3			7
Amortized cost of sold securities	$	-		$	2,923,386	$	2,193,393		$	3,524,702
Realized gains on sales	$	-		$	30,057	$	710		$	31,171
Fixed maturities securities called
Number of securities called		4			1		7			(3)
Amortized cost of called securities	$	2,929,834		$	249,998	$	5,323,613		$	1,949,536
Realized (losses) gains on calls	$	(166	)	$	2	$	(18,613	)	$	464

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:

	September 30		December 31
	2021		2020
Cost	$	3,466,331	$	2,548,440
Unrealized gains		216,823		198,266
Fair market value of equity securities	$	3,683,154	$	2,746,706

The Company’s investment in certificates of deposit included $548,000 and $798,000 of brokered certificates of deposit as of September 30, 2021, and December 31, 2020, 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.

	September 30		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:

	September 30		December 31
	2021		2020
U.S. Treasury bills	$	1,499,822	$	-
Short-term bonds		961,868		-
Certificates of deposit		200,000		200,000
Total short-term investments	$	2,661,690	$	200,000