| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2018 |
| Notes to Financial Statements | |
| NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Nature of Business Unico American Corporation (the “Company”
or “Unico”) is an insurance holding company that underwrites property and casualty insurance through its insurance
company subsidiary; provides property, casualty, and health insurance through its agency subsidiaries; and provides insurance premium
financing and membership association services through its other subsidiaries. References to Unico or the Company include both the
corporation and its subsidiaries, all of which are wholly owned. Unico was incorporated under the laws of Nevada in 1969. Principles of Consolidation The accompanying consolidated financial statements
include the accounts of Unico American Corporation and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Basis of Presentation The consolidated financial statements have been
prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). As described in Note 14, the Company's
insurance subsidiary also files financial statements with regulatory agencies prepared on a statutory basis of accounting that
differs from GAAP. Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation. Use of Estimates in the Preparation of the
Financial Statements The preparation of financial statements in conformity
with GAAP requires the Company to make estimates and assumptions that affect its reported amounts of assets and liabilities and
its disclosure of any contingent assets and liabilities at the date of its financial statements, as well as its reported amounts
of revenues and expenses during the reporting period. The most significant assumptions in the preparation of these consolidated
financial statements relate to losses and loss adjustment expenses. While every effort is made to ensure the integrity of such
estimates, actual results may differ. Investments All of the Company’s fixed maturity investments
are classified either as held-to-maturity or available-for-sale. The held-to-maturity investments are recorded at amortized cost,
reflecting the ability and intent to hold these investments to maturity. The available-for-sale investments are stated at fair
value, with unrealized gains or losses, net of applicable deferred income taxes, excluded from earnings and credited or charged
to a separate component of equity. Although part of the Company's investments is classified as available-for-sale and the Company
may sell investment securities from time to time in response to economic and market conditions, its investment guidelines place
primary emphasis on buying and holding high-quality investments to maturity. Interest income on fixed maturity investments and
short-term investments is recognized on an accrual basis at each measurement date and is included in net investment income in the
Company’s Consolidated Statements of Operations. The Company has a comprehensive portfolio monitoring
process to identify and evaluate each fixed income security whose carrying value may be other-than-temporarily impaired. For each
fixed income security in an unrealized loss position, the Company assesses whether it is more likely than not that the Company
will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or
regulatory purposes, or the credit quality of the underlying security. If a security meets this criteria, the security's decline
in fair value is considered other than temporary and is recorded as a net realized investment loss in the Consolidated Statements
of Operations and in the Consolidated Statements of Comprehensive Income (Loss) based on the specific identification method. There
were no realized investments gains (losses) from other than temporary impairments for any of the periods presented in the accompanying
Consolidated Statements of Operations. For each fixed income security that the Company does not intend to sell or for which it
is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates
the credit loss component of the impairment, if any, from the amount related to all other factors and reports the credit loss component
in net realized investment gains (losses). There was no credit loss component for any of the periods presented in the accompanying
Consolidated Statements of Operations. The unrealized gains or losses from fixed maturities are reported as “Accumulated
other comprehensive income (loss),” which is a separate component of stockholders’ equity, net of any deferred tax
effect. The short-term investments include U.S. treasury
bills, certificates of deposit, and commercial paper that are all highly rated and have initial maturity between three and twelve
months. Fair Value of Financial Instruments The Company employs a fair value hierarchy that
prioritizes the inputs for valuation techniques used to measure fair value. The fair value of a financial instrument is the amount
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date (the exit price). Financial assets and financial liabilities recorded on the Consolidated Balance Sheets at
fair value are categorized based on the reliability of inputs to the valuation techniques. (See Note 5.) The Company has used the following methods and
assumptions in estimating its fair value disclosures for instruments carried at fair value:
Investment securities, excluding long-term
certificates of deposit, and short-term investments – Fair values are obtained from widely accepted third party vendors. The Company has used the following methods and
assumptions for estimating fair value for other financial instruments not carried at fair value:
Cash, cash equivalents, and restricted cash
– The carrying amounts reported in the Consolidated Balance Sheets approximate their fair values given the short-term nature
of these instruments.
Long-term certificates of deposit –
The carrying amounts reported in the Consolidated Balance Sheets for these instruments are at amortized cost which approximates
their fair value
Receivables, net – The carrying amounts
reported in the Consolidated Balance Sheets approximate their fair values given the short-term nature of these instruments.
Accrued expenses and other liabilities –
The carrying amounts reported in the Consolidated Balance Sheets approximate the fair values given the short-term nature of these
instruments. Property and Equipment All property and equipment is
stated at cost less accumulated depreciation and amortization on the Consolidated Balance Sheets. Depreciation
on a building,
is computed using the straight
line method over 39 years. Improvements to the building structure are amortized over the useful life of the improvements. Depreciation
on computed
using the straight line method over 3 to 15 years. Amortization of tenant improvements in the Calabasas building is being computed
using the shorter of the useful life of the tenant improvements or the remaining years of the lease. Income Taxes The Company and its subsidiaries file consolidated
federal and state income tax returns. Pursuant to the tax allocation agreement, Crusader and American Acceptance Corporation (“AAC”),
a subsidiary of Unico, are allocated taxes or tax credits in the case of losses, at current corporate rates based on their own
taxable income or loss. The Company files income tax returns under U.S. federal and various state jurisdictions. The Company is
subject to examination by U.S. federal income tax authorities for tax returns filed starting at taxable year 2015 and California
state income tax authorities for tax returns filed starting at taxable year 2014. There are no ongoing examinations of income tax
returns by federal or state tax authorities. As a California insurance company, Crusader
is obligated to pay a premium tax on direct written premium in all states that Crusader is admitted. Premium taxes are deferred
and amortized as the related premium is earned. The premium tax is in lieu of state franchise taxes and is not included in the
provision for state taxes. The provision for federal income taxes is computed
on the basis of income as reported for financial reporting purposes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes, and are measured using the enacted tax rates and laws expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Income tax expense provisions increase or decrease in the same period
in which a change in tax rates is enacted. At each balance sheet date, management assesses
the need to establish a valuation allowance that reduces deferred tax assets when it is more-likely-than-not that any portion of
the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon generating sufficient
taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. Management
considers the reversal of deferred tax liabilities, projected future taxable income of an appropriate nature and tax-planning strategies
when making this assessment. Although realization is not assured, management believes that it is more likely-than-not that the
Company’s deferred tax assets net of the valuation allowance will be realized. Earnings Per Share Basic earnings per share exclude the impact
of common share equivalents and are based upon the weighted average common shares outstanding. Diluted earnings per share utilize
the average market price per share when applying the treasury stock method in determining common share dilution. When outstanding
stock options are dilutive, they are treated as common share equivalents for purposes of computing diluted earnings per share and
represent the difference between basic and diluted weighted average shares outstanding. In loss periods, the options are excluded
from the calculation of diluted earnings per share, as the inclusion of such options would have an anti-dilutive effect. Revenue Recognition a. General Agency Operations Commissions from sales of health
insurance are earned in income based on the satisfaction of a single performance obligation. Marketing, selling, billing,
collecting, and administering health insurance policies are a series of distinct services combined as a one performance obligation,
which is recognized in income monthly over the policy period. Premiums are collected upon the initial sale of health
insurance policies and then monthly upon each subsequent periodic payment. As a result there are limited accounts receivable.
Policy fee income is recognized on a pro-rata basis over the terms of the policies. b. Insurance Company Operation Premium is earned on a pro-rata basis
over the terms of the policies. Premium applicable to the unexpired terms of policies in force are recorded as unearned premium. c. Insurance Premium Financing
Operations Premium finance interest may be charged
to policyholders who choose to finance insurance premium. Interest may be charged at rates that vary with the amount of premium
financed. Premium finance interest, if any, is recognized using a method that approximates the interest (actuarial) method. Other
charges and fees earned include late fees, returned check fees and payment processing fees that are earned when recorded. Losses and Loss Adjustment Expenses The liability
for unpaid losses and loss adjustment expenses is based upon the accumulation of individual case estimates for losses reported
prior to the close of the accounting period plus estimates based on experience and industry data for development of case estimates
and for incurred but unreported losses and loss adjustment expenses. There is
a high level of uncertainty inherent in the evaluation of the required loss and loss adjustment expense reserves for Crusader.
The long-tailed nature of liability claims and the volatility of jury awards exacerbate that uncertainty. Crusader records The ultimate cost of claims is dependent upon future events, the outcomes
of which are affected by many factors. Crusader’s claim reserving procedures and settlement philosophy, current and perceived
social and economic inflation, current and future court rulings and jury attitudes, improvements in medical technology, and many
other economic, scientific, legal, political, and social factors all can have significant effects on the ultimate costs of claims.
Changes in Company operations and management philosophy also may cause actual developments to vary from the past. Since the emergence
and disposition of claims are subject to uncertainties, the net amounts that will ultimately be paid to settle claims may vary
significantly from the estimated amounts provided for in the accompanying consolidated financial statements. Any adjustments to
reserves are reflected in the operating results of the periods in which they are made. Management believes that the Restricted
Funds Restricted funds are as follows:
Year ended December 31
2018 2017
Premium trust funds (1) $ 1,383,451 $ —
Assigned to state agencies (2) 710,000 700,000
Total restricted funds $ 2,093,451 $ 700,000
(1) As required by law, the Company segregates
from its operating accounts the premium collected from insureds that are payable to insurance companies into separate trust accounts.
These amounts are included in cash and short-term investments.
(2) $510,000 and $500,000 included in fixed maturity investments as of December 31, 2018 and 2017,
respectively, and $200,000 and $200,000 included in short-term investments as of December 31, 2018 and 2017, respectively, are
statutory deposits 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 states other than California. Deferred
Policy Acquisition Costs Policy acquisition costs consist of commissions,
premium taxes, inspection fees, and certain other underwriting costs, which are related to the successful production of Crusader
insurance policies. Policy acquisition costs that are eligible for deferral are deferred and
amortized as the related premium is earned and are limited to their estimated realizable value Ceding
commission applicable to the unexpired terms Reinsurance Crusader employs reinsurance to provide
greater diversification of business allowing management to control exposure to potential losses arising from large risks by reinsuring
certain levels of risk in various areas of exposure, to reduce the loss that may arise from catastrophes, and to provide additional
capacity for growth. Prepaid reinsurance premium and reinsurance receivables are reported as assets and represent ceded unearned
premium and reinsurance recoverable on both paid and unpaid losses and loss adjustment expenses, respectively. Amounts recoverable
from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. Crusader
evaluates each of its ceded reinsurance contracts at its inception to determine if there is sufficient risk transfer to allow the
contract to be accounted for as reinsurance under current accounting literature. As of December 31, 2018, all such ceded contracts
are accounted for as risk transfer reinsurance. Crusader evaluates and monitors the financial
condition of its reinsurers and factors such as collection periods, disputes, applicable coverage defenses and other factors to
assess the need for any allowance against anticipated reinsurance recoveries. No such allowance was considered necessary at December
31, 2018 or 2017. Segment Reporting The Company has identified its insurance
company operation as its primary reporting segment. Revenues from this segment comprised 92% of consolidated revenues for the years
ended December 31, 2018 and 2017. The Company’s remaining operations constitute a variety of specialty insurance services,
each with unique characteristics and individually insignificant to consolidated revenues. The insurance company operation is conducted
through Crusader, which as of December 31, 2018, was licensed as an admitted insurance carrier in the states of Arizona, California,
Nevada, Oregon, and Washington. Crusader is a multiple line property and casualty insurance company, which began transacting business
on January 1, 1985. For the years ended December 31, 2018 and 2017, 98% and 99% of Crusader’s business was commercial multiple
peril (“CMP”) insurance policies, respectively. CMP policies provide a combination of property and liability coverage
for businesses. Commercial property coverage insures against loss or damage to buildings, inventory and equipment from natural
disasters, including hurricanes, windstorms, hail, water, explosions, severe winter weather, and other events such as theft and
vandalism, fires and storms and financial loss due to business interruption resulting from covered property damage. However, Crusader
does not write earthquake coverage. Commercial liability coverage insures against third party liability from accidents occurring
on the insured’s premises or arising out of its operations, such as injuries sustained from products sold or the operation
of the insured’s premises. In addition to CMP policies, Crusader also writes separate policies to insure commercial property
and commercial liability risks on a mono-line basis which provides either commercial property or commercial liability coverage,
but not both. Revenues, loss before income taxes and
assets by segment are as follows:
Year ended December 31
2018 2017
Revenues
Insurance company operation $ 31,028,500 $ 33,972,236
Other insurance operations 11,622,824 13,497,345
Intersegment eliminations (1) (9,038,528 ) (10,678,099 )
Total other insurance operations 2,584,296 2,819,246
Total revenues $ 33,612,796 $ 36,791,482
Loss before income taxes
Insurance company operation $ (1,369,358 ) $ (7,419,040 )
Other insurance operations (2,557,434 ) (2,461,181 )
Total loss before income taxes $ (3,926,792 ) $ (9,880,221 )
Assets
Insurance company operation $ 115,271,728 $ 117,274,626
Intersegment eliminations (2) (3,141,740 ) (2,486,500 )
Total insurance company operation 112,129,988 114,788,126
Other insurance operations 13,486,978 15,510,632
Total assets $ 125,616,966 $ 130,298,758 (1) Intersegment
revenue eliminations reflect rents paid by Unico to Crusader for space leased in the Calabasas building and commissions paid by
Crusader to Unifax Insurance Systems, Inc. (“Unifax”), a subsidiary of Unico. (2) Intersegment
asset eliminations reflect the elimination of Crusader receivables from Unifax and Unifax payables to Crusader. Concentration of Risks 99.8%, and 99.7% of Crusader’s direct
written premium was derived from California during the years ended December 31, 2018 and 2017, respectively. In 2018, approximately
37% and 46% of the $958,495 commission income from the Company’s health insurance program was from Guardian Life Insurance
Company of America dental and group life plan programs and the Blue Shield Care Trust health and life insurance programs, respectively.
In 2017, approximately 42% and 45% of the $1,047,593 commission income from the Company’s health insurance program was from
Guardian Life Insurance Company of America dental and group life plan programs and the Blue Shield Care Trust health and life insurance
programs, respectively. Crusader’s reinsurance recoverable on
paid and unpaid losses and loss adjustment expenses is as follows:
Year ended December 31
Name of Reinsurer A.M.
Best Rating (1) 2018 2017
Renaissance Reinsurance U.S. Inc. A+ $ 4,911,922 $ 4,464,980
Hannover Ruck SE A+ 4,142,308 3,384,341
TOA Reinsurance Company of America A 476,101 670,337
Other A (48 ) 574
Total $ 9,530,283 $ 8,520,232 (1) A.M. Best ratings are as of December 31, 2018. Stock-Based Compensation Share-based compensation expense for all share-based
payment awards is based on the grant-date fair value estimated in accordance with the provisions of ASC Topic 718, “Compensation
- Stock Compensation” using the modified prospective transition method. Recently Issued Accounting Standards Recently adopted standards In February 2018, the Financial Accounting Standards
Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, “Income Statement - Reporting
Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”
ASU 2018-02 was issued as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) on December 22, 2017.
Accounting guidance required deferred tax items to be revalued based on the new tax laws (the most significant of which reduced
the corporate tax rate to 21% percent from 34% percent) and to include the change in income from continuing operations. ASU 2018-02
is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. The Company
adopted ASU 2018-02 for the year ended December 31, 2017 (see Note 16 for impact of ASU 2018-02 adoption to the Company’s
consolidated financial statements). In May 2017, FASB issued ASU 2017-09, "Compensation
- Stock Compensation (Topic 718), Scope of Modification Accounting." ASU 2017-09 provides guidance about which changes to
the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09
became effective for the Company beginning January 1, 2018. ASU 2017-09 does not have a material impact on the Company’s
consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606).” The core principle of ASU 2014-09 is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve that core principle, the transaction price for a contract
is allocated among separately identifiable performance obligations and a portion of the transaction price is recognized as revenue
when the associated performance obligation has been completed or transferred to the customer. The Company adopted ASU 2014-09 effective
January 1, 2018. The adoption of ASU 2014-09 did not have a material
impact on the Consolidated Statement of Operations and the
Consolidated Balance Sheet mostly because the accounting for insurance contracts, lease contracts, and investments is outside of
the scope of Topic 606. The revenue outside of the scope of Topic 606 was represented by net earned premium, insurance company
operations net investment income and net realized investment gains, policy fee income, and rental income on the Calabasas building,
and the total of all revenues outside the scope of Topic 606 was 96.5% of the total revenues for the year ended December 31, 2018.
The impact of Topic 606 to the in-scope revenue was immaterial for the year ended December 31, 2018. Standards not yet adopted In June 2016, the FASB issued ASU 2016-13 “Measurement
of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the current incurred loss methodology for recognizing credit
losses with a current expected credit loss model, which requires the measurement of all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13
also requires enhanced disclosures for better understanding of significant estimates and judgments used in estimating credit losses.
The Company is currently evaluating the effect ASU 2016-13 will have on the Company's consolidated financial statements, but expects
the primary changes to be (i) the use of the expected credit loss model for its premium receivables and reinsurance recoverables
and (ii) the presentation of credit losses within the available-for-sale fixed maturities portfolio through an allowance method
rather than as a direct write-down. ASU 2016-13 will become effective for fiscal years beginning after December 31, 2019, but provides
for an early adoption for fiscal years beginning after December 31, 2018. The Company has not determined when it will adopt ASU
2016-13. In February 2016, the FASB issued ASU 2016-02
“Leases.” ASU 2016-02 requires lessees to recognize on the balance sheet the assets and liabilities for the rights
and obligations created by all leases, including those historically accounted for as operating leases. The Company is currently
evaluating the effect ASU 2016-02 will have on the Company's consolidated financial statements. The guidance is effective for interim
and annual periods beginning after December 31, 2018, and will be applied under a modified retrospective approach for leases that
exist or are entered into after the beginning of the earliest comparative period in the consolidated financial statements. |
| Nature of Business | Nature of Business Unico American Corporation (the “Company”
or “Unico”) is an insurance holding company that underwrites property and casualty insurance through its insurance
company subsidiary; provides property, casualty, and health insurance through its agency subsidiaries; and provides insurance premium
financing and membership association services through its other subsidiaries. References to Unico or the Company include both the
corporation and its subsidiaries, all of which are wholly owned. Unico was incorporated under the laws of Nevada in 1969. |
| Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements
include the accounts of Unico American Corporation and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. |
| Basis of Presentation | Basis of Presentation The consolidated financial statements have been
prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). As described in Note 14, the Company's
insurance subsidiary also files financial statements with regulatory agencies prepared on a statutory basis of accounting that
differs from GAAP. Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation. |
| Use of Estimates in the Preparation of the Financial Statements | Use of Estimates in the Preparation of the
Financial Statements The preparation of financial statements in conformity
with GAAP requires the Company to make estimates and assumptions that affect its reported amounts of assets and liabilities and
its disclosure of any contingent assets and liabilities at the date of its financial statements, as well as its reported amounts
of revenues and expenses during the reporting period. The most significant assumptions in the preparation of these consolidated
financial statements relate to losses and loss adjustment expenses. While every effort is made to ensure the integrity of such
estimates, actual results may differ. |
| Investments | Investments All of the Company’s fixed maturity investments
are classified either as held-to-maturity or available-for-sale. The held-to-maturity investments are recorded at amortized cost,
reflecting the ability and intent to hold these investments to maturity. The available-for-sale investments are stated at fair
value, with unrealized gains or losses, net of applicable deferred income taxes, excluded from earnings and credited or charged
to a separate component of equity. Although part of the Company's investments is classified as available-for-sale and the Company
may sell investment securities from time to time in response to economic and market conditions, its investment guidelines place
primary emphasis on buying and holding high-quality investments to maturity. Interest income on fixed maturity investments and
short-term investments is recognized on an accrual basis at each measurement date and is included in net investment income in the
Company’s Consolidated Statements of Operations. The Company has a comprehensive portfolio monitoring
process to identify and evaluate each fixed income security whose carrying value may be other-than-temporarily impaired. For each
fixed income security in an unrealized loss position, the Company assesses whether it is more likely than not that the Company
will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or
regulatory purposes, or the credit quality of the underlying security. If a security meets this criteria, the security's decline
in fair value is considered other than temporary and is recorded as a net realized investment loss in the Consolidated Statements
of Operations and in the Consolidated Statements of Comprehensive Income (Loss) based on the specific identification method. There
were no realized investments gains (losses) from other than temporary impairments for any of the periods presented in the accompanying
Consolidated Statements of Operations. For each fixed income security that the Company does not intend to sell or for which it
is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates
the credit loss component of the impairment, if any, from the amount related to all other factors and reports the credit loss component
in net realized investment gains (losses). There was no credit loss component for any of the periods presented in the accompanying
Consolidated Statements of Operations. The unrealized gains or losses from fixed maturities are reported as “Accumulated
other comprehensive income (loss),” which is a separate component of stockholders’ equity, net of any deferred tax
effect. The short-term investments include U.S. treasury
bills, certificates of deposit, and commercial paper that are all highly rated and have initial maturity between three and twelve
months. |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company employs a fair value hierarchy that
prioritizes the inputs for valuation techniques used to measure fair value. The fair value of a financial instrument is the amount
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date (the exit price). Financial assets and financial liabilities recorded on the Consolidated Balance Sheets at
fair value are categorized based on the reliability of inputs to the valuation techniques. (See Note 5.) The Company has used the following methods and
assumptions in estimating its fair value disclosures for instruments carried at fair value:
Investment securities, excluding long-term
certificates of deposit, and short-term investments – Fair values are obtained from widely accepted third party vendors. The Company has used the following methods and
assumptions for estimating fair value for other financial instruments not carried at fair value:
Cash, cash equivalents, and restricted cash
– The carrying amounts reported in the Consolidated Balance Sheets approximate their fair values given the short-term nature
of these instruments.
Long-term certificates of deposit –
The carrying amounts reported in the Consolidated Balance Sheets for these instruments are at amortized cost which approximates
their fair value
Receivables, net – The carrying amounts
reported in the Consolidated Balance Sheets approximate their fair values given the short-term nature of these instruments.
Accrued expenses and other liabilities –
The carrying amounts reported in the Consolidated Balance Sheets approximate the fair values given the short-term nature of these
instruments. |
| Property and Equipment | Property and Equipment All property and equipment is
stated at cost less accumulated depreciation and amortization on the Consolidated Balance Sheets. Depreciation
on a building,
is computed using the straight
line method over 39 years. Improvements to the building structure are amortized over the useful life of the improvements. Depreciation
on computed
using the straight line method over 3 to 15 years. Amortization of tenant improvements in the Calabasas building is being computed
using the shorter of the useful life of the tenant improvements or the remaining years of the lease. |
| Income Taxes | Income Taxes The Company and its subsidiaries file consolidated
federal and state income tax returns. Pursuant to the tax allocation agreement, Crusader and American Acceptance Corporation (“AAC”),
a subsidiary of Unico, are allocated taxes or tax credits in the case of losses, at current corporate rates based on their own
taxable income or loss. The Company files income tax returns under U.S. federal and various state jurisdictions. The Company is
subject to examination by U.S. federal income tax authorities for tax returns filed starting at taxable year 2015 and California
state income tax authorities for tax returns filed starting at taxable year 2014. There are no ongoing examinations of income tax
returns by federal or state tax authorities. As a California insurance company, Crusader
is obligated to pay a premium tax on direct written premium in all states that Crusader is admitted. Premium taxes are deferred
and amortized as the related premium is earned. The premium tax is in lieu of state franchise taxes and is not included in the
provision for state taxes. The provision for federal income taxes is computed
on the basis of income as reported for financial reporting purposes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes, and are measured using the enacted tax rates and laws expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Income tax expense provisions increase or decrease in the same period
in which a change in tax rates is enacted. At each balance sheet date, management assesses
the need to establish a valuation allowance that reduces deferred tax assets when it is more-likely-than-not that any portion of
the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon generating sufficient
taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. Management
considers the reversal of deferred tax liabilities, projected future taxable income of an appropriate nature and tax-planning strategies
when making this assessment. Although realization is not assured, management believes that it is more likely-than-not that the
Company’s deferred tax assets net of the valuation allowance will be realized. |
| Earnings Per Share | Earnings Per Share Basic earnings per share exclude the impact
of common share equivalents and are based upon the weighted average common shares outstanding. Diluted earnings per share utilize
the average market price per share when applying the treasury stock method in determining common share dilution. When outstanding
stock options are dilutive, they are treated as common share equivalents for purposes of computing diluted earnings per share and
represent the difference between basic and diluted weighted average shares outstanding. In loss periods, the options are excluded
from the calculation of diluted earnings per share, as the inclusion of such options would have an anti-dilutive effect. |
| Revenue Recognition | Revenue Recognition a. General Agency Operations Commissions from sales of health
insurance are earned in income based on the satisfaction of a single performance obligation. Marketing, selling, billing,
collecting, and administering health insurance policies are a series of distinct services combined as a one performance obligation,
which is recognized in income monthly over the policy period. Premiums are collected upon the initial sale of health
insurance policies and then monthly upon each subsequent periodic payment. As a result there are limited accounts receivable.
Policy fee income is recognized on a pro-rata basis over the terms of the policies. b. Insurance Company Operation Premium is earned on a pro-rata basis
over the terms of the policies. Premium applicable to the unexpired terms of policies in force are recorded as unearned premium. c. Insurance Premium Financing
Operations Premium finance interest may be charged
to policyholders who choose to finance insurance premium. Interest may be charged at rates that vary with the amount of premium
financed. Premium finance interest, if any, is recognized using a method that approximates the interest (actuarial) method. Other
charges and fees earned include late fees, returned check fees and payment processing fees that are earned when recorded. |
| Loss and Loss Adjustment Expenses | Losses and Loss Adjustment Expenses The liability
for unpaid losses and loss adjustment expenses is based upon the accumulation of individual case estimates for losses reported
prior to the close of the accounting period plus estimates based on experience and industry data for development of case estimates
and for incurred but unreported losses and loss adjustment expenses. There is
a high level of uncertainty inherent in the evaluation of the required loss and loss adjustment expense reserves for Crusader.
The long-tailed nature of liability claims and the volatility of jury awards exacerbate that uncertainty. Crusader records The ultimate cost of claims is dependent upon future events, the outcomes
of which are affected by many factors. Crusader’s claim reserving procedures and settlement philosophy, current and perceived
social and economic inflation, current and future court rulings and jury attitudes, improvements in medical technology, and many
other economic, scientific, legal, political, and social factors all can have significant effects on the ultimate costs of claims.
Changes in Company operations and management philosophy also may cause actual developments to vary from the past. Since the emergence
and disposition of claims are subject to uncertainties, the net amounts that will ultimately be paid to settle claims may vary
significantly from the estimated amounts provided for in the accompanying consolidated financial statements. Any adjustments to
reserves are reflected in the operating results of the periods in which they are made. Management believes that the |
| Restricted Funds | Restricted
Funds Restricted funds are as follows:
Year ended December 31
2018 2017
Premium trust funds (1) $ 1,383,451 $ —
Assigned to state agencies (2) 710,000 700,000
Total restricted funds $ 2,093,451 $ 700,000
(1) As required by law, the Company segregates
from its operating accounts the premium collected from insureds that are payable to insurance companies into separate trust accounts.
These amounts are included in cash and short-term investments.
(2) $510,000 and $500,000 included in fixed maturity investments as of December 31, 2018 and 2017,
respectively, and $200,000 and $200,000 included in short-term investments as of December 31, 2018 and 2017, respectively, are
statutory deposits 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 states other than California. |
| Deferred Policy Acquisition Costs | Deferred
Policy Acquisition Costs Policy acquisition costs consist of commissions,
premium taxes, inspection fees, and certain other underwriting costs, which are related to the successful production of Crusader
insurance policies. Policy acquisition costs that are eligible for deferral are deferred and
amortized as the related premium is earned and are limited to their estimated realizable value Ceding
commission applicable to the unexpired terms |
| Reinsurance | Reinsurance Crusader employs reinsurance to provide
greater diversification of business allowing management to control exposure to potential losses arising from large risks by reinsuring
certain levels of risk in various areas of exposure, to reduce the loss that may arise from catastrophes, and to provide additional
capacity for growth. Prepaid reinsurance premium and reinsurance receivables are reported as assets and represent ceded unearned
premium and reinsurance recoverable on both paid and unpaid losses and loss adjustment expenses, respectively. Amounts recoverable
from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. Crusader
evaluates each of its ceded reinsurance contracts at its inception to determine if there is sufficient risk transfer to allow the
contract to be accounted for as reinsurance under current accounting literature. As of December 31, 2018, all such ceded contracts
are accounted for as risk transfer reinsurance. Crusader evaluates and monitors the financial
condition of its reinsurers and factors such as collection periods, disputes, applicable coverage defenses and other factors to
assess the need for any allowance against anticipated reinsurance recoveries. No such allowance was considered necessary at December
31, 2018 or 2017. |
| Segment Reporting | Segment Reporting The Company has identified its insurance
company operation as its primary reporting segment. Revenues from this segment comprised 92% of consolidated revenues for the years
ended December 31, 2018 and 2017. The Company’s remaining operations constitute a variety of specialty insurance services,
each with unique characteristics and individually insignificant to consolidated revenues. The insurance company operation is conducted
through Crusader, which as of December 31, 2018, was licensed as an admitted insurance carrier in the states of Arizona, California,
Nevada, Oregon, and Washington. Crusader is a multiple line property and casualty insurance company, which began transacting business
on January 1, 1985. For the years ended December 31, 2018 and 2017, 98% and 99% of Crusader’s business was commercial multiple
peril (“CMP”) insurance policies, respectively. CMP policies provide a combination of property and liability coverage
for businesses. Commercial property coverage insures against loss or damage to buildings, inventory and equipment from natural
disasters, including hurricanes, windstorms, hail, water, explosions, severe winter weather, and other events such as theft and
vandalism, fires and storms and financial loss due to business interruption resulting from covered property damage. However, Crusader
does not write earthquake coverage. Commercial liability coverage insures against third party liability from accidents occurring
on the insured’s premises or arising out of its operations, such as injuries sustained from products sold or the operation
of the insured’s premises. In addition to CMP policies, Crusader also writes separate policies to insure commercial property
and commercial liability risks on a mono-line basis which provides either commercial property or commercial liability coverage,
but not both. Revenues, loss before income taxes and
assets by segment are as follows:
Year ended December 31
2018 2017
Revenues
Insurance company operation $ 31,028,500 $ 33,972,236
Other insurance operations 11,622,824 13,497,345
Intersegment eliminations (1) (9,038,528 ) (10,678,099 )
Total other insurance operations 2,584,296 2,819,246
Total revenues $ 33,612,796 $ 36,791,482
Loss before income taxes
Insurance company operation $ (1,369,358 ) $ (7,419,040 )
Other insurance operations (2,557,434 ) (2,461,181 )
Total loss before income taxes $ (3,926,792 ) $ (9,880,221 )
Assets
Insurance company operation $ 115,271,728 $ 117,274,626
Intersegment eliminations (2) (3,141,740 ) (2,486,500 )
Total insurance company operation 112,129,988 114,788,126
Other insurance operations 13,486,978 15,510,632
Total assets $ 125,616,966 $ 130,298,758 (1) Intersegment
revenue eliminations reflect rents paid by Unico to Crusader for space leased in the Calabasas building and commissions paid by
Crusader to Unifax Insurance Systems, Inc. (“Unifax”), a subsidiary of Unico. (2) Intersegment
asset eliminations reflect the elimination of Crusader receivables from Unifax and Unifax payables to Crusader. |
| Concentration of Risk | Concentration of Risks 99.8%, and 99.7% of Crusader’s direct
written premium was derived from California during the years ended December 31, 2018 and 2017, respectively. In 2018, approximately
37% and 46% of the $958,495 commission income from the Company’s health insurance program was from Guardian Life Insurance
Company of America dental and group life plan programs and the Blue Shield Care Trust health and life insurance programs, respectively.
In 2017, approximately 42% and 45% of the $1,047,593 commission income from the Company’s health insurance program was from
Guardian Life Insurance Company of America dental and group life plan programs and the Blue Shield Care Trust health and life insurance
programs, respectively. Crusader’s reinsurance recoverable
on paid and unpaid losses and loss adjustment expenses is as follows:
Year ended December 31
Name of Reinsurer A.M.
Best Rating (1) 2018 2017
Renaissance Reinsurance U.S. Inc. A+ $ 4,911,922 $ 4,464,980
Hannover Ruck SE A+ 4,142,308 3,384,341
TOA Reinsurance Company of America A 476,101 670,337
Other A (48 ) 574
Total $ 9,530,283 $ 8,520,232 (1) A.M. Best ratings are as of December 31, 2018. |
| Stock Based Compensation | Stock-Based Compensation Share-based compensation expense for all share-based
payment awards is based on the grant-date fair value estimated in accordance with the provisions of ASC Topic 718, “Compensation
- Stock Compensation” using the modified prospective transition method. |
| Recently Issued Accounting Standards | Recently Issued Accounting Standards Recently adopted standards In February 2018, the Financial Accounting Standards
Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, “Income Statement - Reporting
Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”
ASU 2018-02 was issued as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) on December 22, 2017.
Accounting guidance required deferred tax items to be revalued based on the new tax laws (the most significant of which reduced
the corporate tax rate to 21% percent from 34% percent) and to include the change in income from continuing operations. ASU 2018-02
is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. The Company
adopted ASU 2018-02 for the year ended December 31, 2017 (see Note 16 for impact of ASU 2018-02 adoption to the Company’s
consolidated financial statements). In May 2017, FASB issued ASU 2017-09, "Compensation
- Stock Compensation (Topic 718), Scope of Modification Accounting." ASU 2017-09 provides guidance about which changes to
the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09
became effective for the Company beginning January 1, 2018. ASU 2017-09 does not have a material impact on the Company’s
consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606).” The core principle of ASU 2014-09 is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve that core principle, the transaction price for a contract
is allocated among separately identifiable performance obligations and a portion of the transaction price is recognized as revenue
when the associated performance obligation has been completed or transferred to the customer. The Company adopted ASU 2014-09 effective
January 1, 2018. The adoption of ASU 2014-09 did not have a material impact on the Consolidated Statement of Operations and the
Consolidated Balance Sheet mostly because the accounting for insurance contracts, lease contracts, and investments is outside of
the scope of Topic 606. The revenue outside of the scope of Topic 606 was represented by net earned premium, insurance company
operations net investment income and net realized investment gains, policy fee income, and rental income on the Calabasas building,
and the total of all revenues outside the scope of Topic 606 was 96.5% of the total revenues for the year ended December 31, 2018.
The impact of Topic 606 to the in-scope revenue was immaterial for the year ended December 31, 2018. Standards not yet adopted In June 2016, the FASB issued ASU 2016-13 “Measurement
of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the current incurred loss methodology for recognizing credit
losses with a current expected credit loss model, which requires the measurement of all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13
also requires enhanced disclosures for better understanding of significant estimates and judgments used in estimating credit losses.
The Company is currently evaluating the effect ASU 2016-13 will have on the Company's consolidated financial statements, but expects
the primary changes to be (i) the use of the expected credit loss model for its premium receivables and reinsurance recoverables
and (ii) the presentation of credit losses within the available-for-sale fixed maturities portfolio through an allowance method
rather than as a direct write-down. ASU 2016-13 will become effective for fiscal years beginning after December 31, 2019, but provides
for an early adoption for fiscal years beginning after December 31, 2018. The Company has not determined when it will adopt ASU
2016-13. In February 2016, the FASB issued ASU 2016-02
“Leases.” ASU 2016-02 requires lessees to recognize on the balance sheet the assets and liabilities for the rights
and obligations created by all leases, including those historically accounted for as operating leases. The Company is currently
evaluating the effect ASU 2016-02 will have on the Company's consolidated financial statements. The guidance is effective for interim
and annual periods beginning after December 31, 2018, and will be applied under a modified retrospective approach for leases that
exist or are entered into after the beginning of the earliest comparative period in the consolidated financial statements. |
