Exhibit 99.6

Total Care Auto,

Powered by Landcar

COMBINED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

TOTAL CARE AUTO, POWERED BY LANDCAR

C O N T E N T S

 

		Page
Combined Financial Statements:
Balance Sheets			1-2
Statements of Income			3
Statements of Comprehensive Income			4
Statements of Changes in Stockholders’ Equity			5
Statements of Cash Flows			6-7
Notes to Combined Financial Statements			8-29

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Balance Sheets

As of September 30, 2021 and December 31, 2020

 

		Combined 9/30/2021				Combined 12/31/2020
ASSETS
Current assets:
Cash and cash equivalents, at estimated fair value		$	57,434,881			$	74,708,047
Short-term investments, at estimated fair value			3,521,236				201,310
Premiums receivables			16,055,473				13,577,564
Reinsurance recoverable			15,406				1,339
Other receivable			69,827				13,012
Accrued investment income			636,829				473,707
Prepaid expenses			25,940				106,157
Mortgage loans, at amortized, current portion, net of the uncollectible allowance of $0			—				86,971
Deferred acquisition costs, current portion			120,462,177				102,916,570
Related party receivable			—				—
Total current assets			198,221,769				192,084,677
Investments
Bonds, available for sale, at estimated fair value (amortized cost: $25,028,265 and $12,363,757)			25,180,812				12,673,890
Bonds, held-to-maturity, amortized cost			36,200,790				33,363,406
Preferred stock, available-for-sale, at estimated fair value			2,121				3,445,191
Common stock, available-for-sale, at estimated fair value			61,080,409				35,642,082
Mortgage loans, amortized cost, long-term portion			789,326				2,363,317
Alternative investments			4,220,654				197,241
Related party notes receivable			58,755,354				91,680,000
Notes receivable, non-current portion			—				—
Deferred acquisition costs, long-term portion			346,022,896				293,521,236
Deferred income tax asset			58,628				310,824
Property and equipment, net of accumulated depreciation of $2,543,403 and $2,629,659			1,493,326				2,167,006
Total noncurrent assets			533,804,316				475,364,193
Total assets		$	732,026,085			$	667,448,870

 

The accompanying notes are an integral part of these combined financial statements

1

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Balance Sheets (Continued)

As of September 30, 2021 and December 31, 2020

 

		Combined 9/30/2021				Combined 12/31/2020
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	8,896,995			$	9,806,397
Securities payable			3,971				—
Taxes, licenses, and fees, excluding income taxes			63,042				103,536
Claims payable			1,113,433				1,100,319
Interest payable			—				20,652
Unearned premiums, current portion			199,857,637				179,481,064
Line of credit			—				14,000,000
Income taxes payable			101,795				21,239
Total current liabilities			210,036,873				204,533,207
Other liabilities:
Unpaid losses and loss adjustment expenses			2,105,804				2,424,159
Total other liabilities			2,105,804				2,424,159
Noncurrent liabilities:
Unearned premiums, long-term portion			471,755,115				421,345,772
Total noncurrent liabilities			471,755,115				421,345,772
Total liabilities			683,897,792				628,303,138
Stockholders’ equity:
Common stock			2,501,000				2,501,000
Additional paid-in capital			85,125,956				85,125,956
Retained earnings (deficit)			(39,648,257	)			(48,791,357	)
Accumulated other comprehensive income (loss), net			149,594				310,133
Total stockholders’ equity			48,128,293				39,145,732
Total liabilities and stockholders’ equity		$	732,026,085			$	667,448,870

 

The accompanying notes are an integral part of these combined financial statements

2

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Statements of Income

For the Nine Months Ended September 30, 2021 and 2020

 

		Combined 9/30/2021				Combined 9/30/2020
Premium and administrative fee income		$	160,446,723			$	143,472,588
Service and licensing fee income			31,050,000				27,700,000
Total income			191,496,723				171,172,588
Cost of sales:
Claims expense incurred			32,257,253				31,971,636
Other cost of sales			668,844				387,258
Amortization of deferred acquisition costs			90,394,542				73,666,165
Total cost of sales			123,320,639				106,025,059
Gross profit			68,176,084				65,147,529
Operating expenses:
Salaries and benefits			2,889,507				2,751,098
Rent			194,707				174,969
Depreciation			692,499				665,069
Professional fees			782,438				799,489
Advertising			20,349				—
Other general and administrative			1,012,121				1,254,418
Total expenses			5,591,621				5,645,043
Gain from operations			62,584,463				59,502,486
Net investment income			6,285,285				3,664,311
Net realized gains			874,321				710,405
Other income			2,126,783				1,908,964
Net income before provision for income taxes			71,870,852				65,786,166
Provision for income taxes			1,717,752				866,933
Net income		$	70,153,100			$	64,919,233

 

The accompanying notes are an integral part of these combined financial statements

3

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Statements of Comprehensive Income

For the Nine Months Ended September 30, 2021 and 2020

 

		Combined 9/30/2021				Combined 9/30/2020
Net income		$	70,153,100			$	64,919,233
Other comprehensive income (loss):
Unrealized investment gain (loss) arising during the period			(176,373	)			230,706
Reclassification adjustment for (gains) losses included in net income			15,834				(84,467	)
Other comprehensive income (loss):			(160,539	)			146,239
Income tax expense related to items of other comprehensive income (loss)			—				—
Other comprehensive income (loss), net of income tax			(160,539	)			146,239
Total comprehensive income		$	69,992,561			$	65,065,472

 

The accompanying notes are an integral part of these combined financial statements

4

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Statements of Changes in Stockholders’ Equity

For the Nine Months Ended September 30, 2021 and

the Year Ended December 31, 2020

 

		Common Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income				Total
Combined
Balance at January 1, 2020		$	2,501,000			$	85,125,956			$	(60,289,983	)		$	163,894			$	27,500,867
Net income			—				—				89,106,126				—				89,106,126
Dividends paid			—				—				(77,607,500	)			—				(77,607,500	)
Comprehensive income, net			—				—				—				146,239				146,239
Balance at December 31, 2020			2,501,000				85,125,956				(48,791,357	)			310,133				39,145,732
Net income			—				—				70,153,100				—				70,153,100
Dividends paid			—				—				(61,010,000	)			—				(61,010,000	)
Comprehensive income, net			—				—				—				(160,539	)			(160,539	)
Balance at September 30, 2021		$	2,501,000			$	85,125,956			$	(39,648,257	)		$	149,594			$	48,128,293

 

The accompanying notes are an integral part of these combined financial statements

5

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Statements of Cash Flows

For the Nine Months Ended September 30, 2021 and 2020

 

		Combined 9/30/2021				Combined 9/30/2020
Reconciliation of net income to net cash provided by operating activities:
Net income		$	70,153,100			$	64,919,233
Adjustments to reconcile net income to net cash provided by operating activities:
Realized gain on investments			(874,321	)			(710,405	)
Unrealized (gain) loss on investments			(4,129,424	)			(580,500	)
Amortization (accretion) of bonds			733,121				481,148
Depreciation			692,499				692,499
Change in:
Premiums receivables			(2,477,909	)			(3,557,253	)
Reinsurance recoverable			(14,067	)			(19,471	)
Accrued investment income			(163,122	)			266,283
Prepaid expenses			80,217				27,734
Deferred acquisition costs			(70,047,267	)			(43,176,499	)
Deferred income tax asset/liability			252,196				(14,072	)
Related party receivable			—				5,877
Income tax recoverable/payable			80,556				31,310
Unpaid losses and loss adjustment expenses			(318,355	)			69,714
Claims payable			13,114				7,291
Interest payable			(20,652	)			20,771
Accounts payable and accrued expenses			(966,217	)			3,627,826
Securities payable			3,971				544,990
Taxes, licenses, and fees			(40,494	)			(9,228	)
Unearned premiums			70,785,916				32,567,255
Net cash provided by operating activities			63,742,863				55,194,503

 

The accompanying notes are an integral part of these combined financial statements

6

TOTAL CARE AUTO, POWERED BY LANDCAR

Combined Statements of Cash Flows (Continued)

For the Nine Months Ended September 30, 2021 and 2020

 

		Combined 9/30/2021				Combined 9/30/2020
Cash flows from investing activities:
Proceeds from short-term investments		$	(3,319,926	)		$	1,247,118
Proceeds from sale of investments			148,976,986				44,857,900
Proceeds from mortgage loan principal collections			1,660,962				1,503,447
Purchase of property and equipment			—				(181,340	)
Purchase of investments			(186,248,697	)			(50,394,796	)
Net cash used by investing activities			(38,930,675	)			(2,967,671	)
Cash flows from financing activities:
Proceeds from (repayment of) line of credit			(14,000,000	)			14,000,000
Related party notes receivable funded			—				(67,213,939	)
Proceeds from related party notes receivable			32,924,646				73,000,000
Dividends paid			(61,010,000	)			(57,720,000	)
Other cash used			—				—
Net cash used by financing activities			(42,085,354	)			(37,933,939	)
Net increase (decrease) in cash and cash equivalents			(17,273,167	)			14,292,893
Cash and cash equivalents at beginning of year			74,708,047				51,031,396
Cash and cash equivalents at end of year		$	57,434,881			$	65,324,289
Supplemental Disclosures of Cash Flow Information:
Interest paid		$	—			$	—
Taxes paid		$	1,385,000			$	1,162,691

 

The accompanying notes are an integral part of these combined financial statements

7

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Company

Total Care Auto, Powered by Landcar (“TCA”) is made up of two different entities: Landcar Agency, Inc. (“LCA”), and Landcar Casualty Company (“LCC”).

The combined financial statements presented herein contain the accounts of both of these entities. All significant intercompany balances and transactions have been eliminated in combination.

TCA offers extended vehicle service contracts, prepaid maintenance contracts, vehicle theft assistance contracts, key replacement contracts, guaranteed asset protection (“GAP”) contracts, paintless dent repair contracts, appearance protection contracts, tire and wheel, Anti-bacterial, and lease wear and tear contracts. In addition, TCA provides the required contractual liability insurance if needed. The majority of these warranty contracts are sold through affiliated automobile dealerships.

Basis of Presentation

The accompanying combined financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) using the accrual method of accounting. All income is recorded when earned and all expenses are recorded when incurred regardless of when such amounts are received or paid.

Use of Estimates

The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset s and liabilities at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the reserve for unpaid losses and loss adjustment expenses, unearned premiums, collectability of the notes receivables and mortgage loans, and fair value of investments.

Cash and Cash Equivalents

Cash equivalents are highly liquid investments with a maturity date of three months or less at the time of purchase and are stated at cost, which approximates fair market value. TCA maintains cash balances in demand deposits and money market funds in which the carrying amount approximates fair value.

Short-term investments

Short-term investments are made up of bonds with a maturity date of more than three months, but less than 12 months. These holdings are stated at cost, which approximates fair market value.

 

8

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Restricted Cash and Securities

TCA places securities on statutory deposit with certain state agencies to retain the right to do business in those states.

Premiums Receivable/Bad Debts

Receivables are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. Receivables are written off when they are determined to be uncollectible. TCA believes no allowance for doubtful accounts is necessary as of September 30, 2021 and December 31, 2020.

Investment Securities

Bonds and treasury instruments at September 30, 2021 and December 31, 2020 consist of held-to-maturity securities and available-for-sale securities.

Held-to-maturity securities are reported at cost, adjusted for amortization of premiums and accretion of discounts that are recognized in interest income using the interest method over the period to maturity. A portion of the bonds are classified as available-for-sale securities. Available-for-sale securities are reported at market value.

Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other than temporary would result in write-downs of the individual securities to their fair value. The related write-downs would be included in earnings as realized losses. During the 2021 and 2020 fiscal years, no such write-downs were noted.

Equity securities are made up of preferred and common stock. These are reported at market value with the change in value being recognized in net income.

Cost Method Investments

During 2012, LCA invested in Mercato Partners Growth II GP, LLC and has accounted for it using the cost method in accordance with FASB Accounting Standards Codification (ASC- 323), Investments – Equity Method and Joint Ventures. During the nine months ended September 30, 2021, the Company received distributions from the fund related to the investment performance of the assets held. The carrying value of this investment as of September 30, 2021 and December 31, 2020 was $0 and $197,421, respectively. Management performs an annual assessment of these investments for impairment.

Mortgages and Notes Receivable

Mortgage loans and notes receivable are carried at the outstanding principal balances with an allowance for estimated uncollectible amounts, if any.

 

9

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Deferred Acquisition Costs

Direct expenses paid for the acquisition of contracts on which revenue has been received but not yet earned have been deferred and are amortized over the related contract period.

Property and Equipment

Property and equipment is recorded at cost at the time of purchase and depreciated over the useful life of the assets using the straight-line depreciation method. Acquisitions of under $5,000 are expensed in the year purchased. The estimated useful lives for the various asset classes are as follows:

 

Asset Categories		Useful life
Furniture and equipment		10 years
Computer hardware		3 years
Computer software		5 years
Leasehold improvements		3-5 years

Property and equipment was made up of the following as of September 30, 2021 and December 31, 2020:

 

		2021				2020
Property and Equipment
Furniture and fixtures		$	413,894			$	413,894
Computer hardware and office equipment			181,852				310,559
Software			3,437,212				4,069,479
Work in progress			3,771				2,733
Total			4,036,729				4,796,665
Accumulated depreciation			(2,543,403	)			(2,629,659	)
Net property and equipment		$	1,493,326			$	2,167,006

Depreciation expense for the nine months ended September 30, 2021 and 2020 amounted to $692,499 and $665,069 respectively.

Costs of software developed for internal use are capitalized in a work in progress account until the project has been placed in service. Depreciation begins once the project has been placed in service.

 

10

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Unearned Premiums

Revenue is earned over the period of the related warranty contract. Accordingly, TCA records a deferred revenue reserve to ratably recognize revenue over the contract period.

Unpaid Losses and Loss Adjustment Expense Reserve

Losses and loss adjustment expense reserves represent management’s best estimate of the ultimate net cost of all reported and unreported losses incurred through September 30, 2021 and December 31, 2020. TCA does not discount liabilities for unpaid losses or unpaid loss adjustment expense reserves. The reserves for unpaid losses and loss adjustment expenses are estimated using individual case-basis valuations and statistical analysis. Those estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in such estimates, management believes the reserves for losses and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known; such adjustments are included in current operations.

Claims are counted when incidents that may result in a liability are reported and are based on policy coverage.

Revenue Recognition

Effective January 1, 2019, the Company adopted new FASB guidance contained in ASU 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers, using the modified retrospective method applied to all active contracts. This standard revises the criteria for revenue recognition. Under the new guidance, the transaction price is attributed to the underlying performance obligations in the contract and revenue is deferred and recognized as income as the Company satisfies the performance obligations in the contract as the obligations under the contracts are performed. Under the new guidance, revenue is recognized more slowly as compared to the historic revenue recognition pattern. Incremental costs of obtaining a contract are capitalized and amo rtized to the extent the Company expects to recover those costs. The Company considers all revenue other than investment and interest income to be the result of contracts with customers. Each contract is considered to have one performance obligation which extends over the life of the contract. The method for recognizing revenue for the various types of contracts is described in the following paragraphs. Expenses are matched with earned premiums resulting in recognition of profits over the life of the contracts. Unearned premium reserves are established to cover the unexpired portion of premiums written.

 

11

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenue Recognition (Continued)

Earnings methods are assigned based on contract type and expected claim patterns and consist of the pro-rata, rule of 78’s, and reverse rule of 78’s methods. GAP insurance unearned premium reserve is calculated by the rule of 78’s. The other contracts are earned ratably over the contract period.

Extended vehicle service contracts are earned ratably over the contract based on historical claims payment patterns for TCA.

The Company receives monthly retrospective commissions from third party vendors. These commissions are earned when received and are reported as other income on the statement of income and comprehensive income.

Revenue from service and licensing fees is earned monthly as it is received.

The timing of revenue recognition, billings and cash collections results in billed account s receivables, contract assets (reported as deferred acquisition costs) and contract liabilities (reported as unearned premium) on the Company’s balance sheets. Balances as of September 30, 2021 and December 31, 2020 were as follows:

 

		2021				2020
Billed receivables		$	16,055,473			$	13,577,564
Contract assets		$	466,485,073			$	396,437,806
Contract liabilities		$	671,612,752			$	600,826,836

 

12

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenue Recognition (Continued)

Premium and administrative fee income for the nine months ended September 30, 2021 and 2020 by product is as follows:

 

		2021				2020
Company:
LCC:
Guaranteed asset protection contracts		$	6,112,854			$	5,796,760
Lease, wear and tear			80,687				3,687
LCA:
Service contracts			81,217,937				69,099,352
Maintenance			22,628,390				22,367,035
Vehicle theft assistance			18,779,883				17,708,341
Paintless dent repair and appearance protection			17,447,451				16,576,094
Guaranteed asset protection administrative fees			5,020,522				5,091,493
Key replacement			5,383,130				3,952,089
Tire and wheel			1,304,309				1,074,226
Anti-bacterial			2,192,872				1,604,211
Lease, wear and tear			283,038				222,362
Other			(4,350	)			(23,062	)
Total		$	160,446,723			$	143,472,588

Dividends

LCA pays monthly dividends to the shareholders that are based on the prior month’s earnings. Dividends are only accrued when they are formally declared by the board. If the board does not make a declaration, then dividends will be accounted for when paid.

 

13

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

LCC accounts for income taxes in accordance with FASB ASC 740, Income Taxes. FASB ASC 740 is an asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting basis of certain assets and liabilities. LCC has deferred tax assets and liabilities principally from differences in the methods of accounting for reserves, unamortized acquisition costs and unrealized gain and losses on common and preferred stock.

LCA has elected under IRC Section 1362 to be an S-Corporation. In lieu of corporation income taxes, the stockholders of an S-Corporation are taxed on their proportionate share of LCA’s taxable income.

TCA accounts for uncertain tax positions in accordance with provisions of FASB ASC 740. Management has determined that TCA does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Since tax matters are subject to some degree of uncertainty, there can be no assurance that TCA’s tax returns will not be challenged by the taxing authorities and that TCA or their shareholders will not be subject to additional tax, penalties, and interest as a result of such challenge. Generally, LCA’s and LCC’s tax returns remain open for three years for federal and state income tax examination.

Concentration of Credit Risk

Financial instruments, which potentially subject TCA to concentrations of credit risk, consist of temporary cash investments, fixed maturity securities, mortgage loans, notes receivables and other investments.

TCA maintains interest bearing accounts at a financial institution. The accounts at this institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. TCA’s total cash exceeded the insurance limit as of September 30, 2021 and December 31, 2020. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risks relating to its cash accounts.

TCA invests in money market funds that are not insured or guaranteed by the FDIC or any other government agency. Although a money market fund seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in the fund. As of September 30, 2021 and December 31, 2020, TCA held $6,211,848 and $3,498,838 in money market funds, respectively.

 

14

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

TCA categorizes assets and liabilities measured at fair value into a three -level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities valued at fair value are categorized based on the inputs to the valuation techniques as follows:

Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Level 3 – Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

Subsequent to initial recognition, TCA may remeasure the carrying value of assets and liabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their fair value.

Comprehensive Income

TCA presents comprehensive income in accordance with the standards establish ed by the Comprehensive Income topic of FASB ASC 220. Comprehensive income consists of net income and net unrealized gains or losses on debt securities and is presented in the statement of changes in stockholders’ equity and statement of comprehensive income.

COVID-19 Uncertainties

The COVID-19 pandemic has not had a significant impact on the Company’s underwriting results and the Company does not expect it to going forward.

 

15

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

2.     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March of 2016, the FASB issued ASU 2016-02, Leases, which requires all leases that have a term of more than 12 months to be recognized as assets and liabilities on the balance sheet at inception. A lessee would recognize a lease liability to make lease payments owed to a lessor (liability) and a benefit for the right to use the leased asset (asset) for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee would depend on whether the les see is expected to consume more than an insignificant portion of the economic benefits embedded in the underlying asset. This new guidance is effective for fiscal years beginning after December 15, 2021. TCA does not anticipate a significant impact on TCA’s results of operations, financial position, or cash flows as a result of this new standard.

In June of 2016, the FASB issued Accounting Standards Update 2016 -13, Financial Instruments – Credit Losses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This requirement eliminates the probable initial recognition threshold in Current GAAP which has delayed recognition of credit losses until the loss was probable. Instead, the new treatment will better reflect an entity’s current estimate of all expected credit losses. In addition, the new guidance requires that any credit losses on available -for-sale debt securities to be presented as an allowance rather than as a write-down. Initial allowance for credit losses is added to the purchase price rather than reported as a credit loss expense. Subsequent changes in the allowance for credit losses are recorded in credit loss expense. This will allow entities to also record reversals of credit losses in current period net income, whereas the current GAAP prohibits reflecting these improvements in current period earnings. This guidance will become effective for the Company’s year ending on December 31, 2023. The Company does not expect a significant impact to the Company’s financials as a result of this guidance.

 

16

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

3.	INVESTMENTS

The carrying amounts of investment securities and their fair values as of September 30, 2021 and December 31, 2020 are as follows:

 

		2021
		Cost/ Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Investments:
Common stock		$	47,334,605			$	14,248,594			$	502,790			$	61,080,409
Preferred stock			—				2,121				—				2,121
Bonds, available-for-sale			25,028,265				219,607				67,060				25,180,812
Bonds, held-to-maturity			36,200,790				526,921				97,747				36,629,964
Total investments		$	108,563,660			$	14,997,243			$	667,597			$	122,893,306
		2020
		Cost/ Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Investments:
Common stock		$	26,034,522			$	10,031,833			$	424,273			$	35,642,082
Preferred stock			3,223,872				221,319				—				3,445,191
Bonds, available-for-sale			12,363,757				311,534				1,401				12,673,890
Bonds, held-to-maturity			33,363,406				804,061				11,879				34,155,588
Total investments		$	74,985,557			$	11,368,747			$	437,553			$	85,916,751

A summary of amortized cost and fair value of TCA’s investment in bonds at September 30, 2021, is as follows:

 

		Amortized Cost				Fair Value
2021		$	200,993			$	201,528
2022 through 2025			42,556,411				43,039,474
2026 through 2030			10,783,076				10,846,415
2031 through 2040			5,758,771				5,765,546
After 2041			1,929,804				1,957,813
Total by maturity		$	61,229,055			$	61,810,776

 

17

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

3.	INVESTMENTS (Continued)

On a regular basis, TCA reviews its investment portfolios for securities in an unrealized loss position for other-than-temporary impairment. This review for potential impairment is performed on a specific identification basis and requires significant management judgment related to a number of qualitative and quantitative factors including the severity o f the impairment, the duration of the impairment, recent trends and expected market performance. Management considers all unrealized losses as of September 30, 2021 to be temporary. The securities summarized below were in an unrealized loss position for which other-than-temporary declines in value have not been recognized as of September 30, 2021.

 

		Less than 12 Months
Asset class:		Cost/ Amortized Cost				Unrealized Loss				Market Value
Bonds		$	21,337,022			$	(128,396	)		$	21,208,626
Common stocks			3,759,059				(346,712	)			3,412,347
Total		$	25,096,081			$	(475,108	)		$	24,620,973
		12 Months or More
Asset class:		Cost/ Amortized Cost				Unrealized Loss				Market Value
Bonds		$	2,421,911			$	(36,411	)		$	2,385,500
Common stocks		$	12,098,228			$	(156,078	)		$	11,942,150
Total		$	14,520,139			$	(192,489	)		$	14,327,650
		Total
		Cost/ Amortized Cost				Unrealized Loss				Market Value
Asset class:
Bonds		$	23,758,933			$	(164,807	)		$	23,594,126
Common stocks			15,857,287				(502,790	)			15,354,497
Total		$	39,616,220			$	(667,597	)		$	38,948,623

 

18

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

3.	INVESTMENTS (Continued)

The securities summarized below were in an unrealized loss position for which other -than- temporary declines in value have not been recognized as of December 31, 2020.

 

		Less than 12 Months
		Cost/ Amortized Cost				Unrealized Loss				Market Value
Asset class:
Bonds		$	4,287,599			$	(13,280	)		$	4,274,319
Common stocks			7,021,225				(311,984	)			6,709,241
Total		$	11,308,824			$	(325,264	)		$	10,983,560
		12 Months or More
		Cost/ Amortized Cost				Unrealized Loss				Market Value
Asset class:
Common stocks			2,436,874				(112,289	)			2,324,585
Total		$	2,436,874			$	(112,289	)		$	2,324,585
		Total
		Cost/ Amortized Cost				Unrealized Loss				Market Value
Asset class:
Bonds		$	4,287,599			$	(13,280	)		$	4,274,319
Common stocks			9,458,099				(424,273	)			9,033,826
Total		$	13,745,698			$	(437,553	)		$	13,308,145

 

19

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

3.	INVESTMENTS (Continued)

Assets measured at fair market value are as follows:

 

Investments held in trust or on deposit with various state insurance departments and reinsurers on September 30, 2021 and December 31, 2020 are reported at statement values as follows:

 

		2021				2020
Utah		$	2,103,155			$	2,098,757
Nevada			225,186				214,711
New Mexico			227,865				225,012
Total		$	2,556,206			$	2,538,480

 

20

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

3.	INVESTMENTS (Continued)

Realized gains and losses by investment class for the nine months ended September 30, 2021 and 2020 are as follows:

 

		2021				2020
Bonds:
Gross gains from sales		$	70,569			$	319,239
Gross losses from sales			(81,178	)			(28,724	)
Preferred stock:
Gross gains from sales			250,444				48,872
Gross losses from sales			(9,932	)			(34,065	)
Common stock:
Gross gains from sales			898,880				1,257,196
Gross losses from sales			(255,226	)			(855,927	)
Short-term investments			91				3,814
Other invested assets			673				—
Net capital gains		$	874,321			$	710,405

Mortgage Loans

Mortgage loans at September 30, 2021 and December 31, 2020 totaled $789,326 and $2,450,288 respectively. The maximum and minimum lending rates for mortgage loans during the year were 7.50% and 4.40%.

 

4.	UNAMORTIZED ACQUISITION COSTS

Commissions paid for premiums received but not yet earned have been deferred. These deferred acquisition costs are being amortized over the contracts term. For the nine months ended September 30, 2021 and 2020, commissions and insurance capitalized were as follows:

 

		2021				2020
Company:
LCC:
Guaranteed asset protection contracts		$	7,467,554			$	7,073,870
Lease, wear and tear			712,094				522,977
LCA:
Vehicle theft assistance contracts			20,596,288				16,620,880
Extended vehicle service contracts			103,174,905				87,998,553
Paintless dent repair			7,212,830				5,479,037
Appearance protection			13,144,338				9,568,451
Key replacement contracts			6,686,933				4,976,774
Maintenance contracts			1,881,158				1,711,812
Tire and wheel			393,139				283,994
Anti-bacterial			1,419,278				999,251
Lease, wear and tear			326,962				196,909
Guaranteed asset protection contracts admin			5,062,057				5,656,106
Other			543,919				491,197
Total		$	168,621,455			$	141,579,811

Total amortization expense for the periods ended September 30, 2021 and 2020 amounted to $90,394,542 and $73,666,165 respectively.

 

21

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

5.	UNEARNED PREMIUMS

Extended vehicle service, prepaid maintenance, vehicle theft assistance, key replacement, GAP, paintless dent repair, and appearance protection contract income received but not yet earned has been deferred. These unearned premiums are being amortized over the contract term of the related policies. For the nine months ended September 30, 2021 and 2020, premiums capitalized were as follows:

 

		2021				2020
Company:
LCC:
Guaranteed asset protection contracts		$	8,209,553			$	7,313,134
Lease, wear and tear			632,468				383,859
LCA:
Vehicle theft assistance contracts			23,492,304				19,190,450
Extended vehicle service contracts			130,531,710				109,184,088
Paintless dent repair			8,749,250				6,814,630
Appearance protection			15,365,832				11,557,675
Key replacement contracts			8,780,986				6,577,634
Maintenance contracts			24,407,677				22,127,510
Guaranteed asset protection contracts admin fee			4,684,637				4,943,873
Tire and wheel			1,315,623				1,086,622
Anti-bacterial			2,823,023				1,988,090
Lease, wear and tear			513,945				446,956
Total		$	229,507,008			$	191,614,521

Total earned premiums for the nine months ended September 30, 2021 and 2020 amounted to $160,446,723 and $143,472,588, respectively.

 

6.	UNPAID CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

Reserves for incurred losses and loss adjustment expenses attributable to insured events of prior years has increased (decreased) by approximately ($680,000) and ($126,000) as of September 30, 2021 and December 31, 2020, respectively, as a result of re-estimation of unpaid losses and loss adjustment expenses. This change is generally a result of on -going analysis of recent loss development trends. Original estimates change as additional information becomes known regarding individual claims.

 

		2021				2020
(In thousands)
Balance at January 1		$	2,201			$	2,115
Incurred, related to:
Current year			4,388				7,414
Prior year			(680	)			(126	)
Total incurred			3,708				7,288
Paid, related to:
Current year			2,619				5,260
Prior year			1,439				1,942
Total paid			4,058				7,202
Balance at September 30, 2021 and December 31, 2020		$	1,851			$	2,201

 

22

TOTAL CARE AUTO, POWERED BY LANDCAR

Notes to Combined Financial Statements

For the Nine Months Ended September 30, 2021 and 2020

 

6.	UNPAID CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES (Continued)

The following is information about incurred claims development as of September 30, 2021 as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts.

 

		Incurred Claims and Allocated Claims Adjustment Expenses (000s)																																								As of September 30, 2021
																																										Total of Incurred-
																																										but-Not-Reported
																																										Liabilities Plus
																																										Expected				Cumulative
																																										Development of				Number of
		For the Years Ended December 31,																																								Reported Claims				Reported Claims
Accident Year		2012				2013				2014				2015				2016				2017				2018				2019				2020				2021
2012			848				936				936				936				936				936				936				936				936				936				—				373
2013							1,326				1,330				1,333				1,333				1,333				1,333				1,333				1,333				1,333				—				551
2014											2,413				2,671				2,680				2,681				2,681				2,681				2,681				2,681				—				916
2015															4,389				4,489				4,502				4,501				4,501				4,501				4,501				—				1,510
2016																			6,978				7,202				7,224				7,226				7,226				7,226				—				2,057
2017																							10,045				9,186				9,165				9,163				9,163				—				2,412
2018																											8,502				8,471				8,478				8,481				—				2,526
2019																															8,502				8,304				8,295				7				2,488
2020																																			7,288				6,614				35				1,870
2021																																							4,388				1,422				946
																			Ultimate incurred																			$	53,618
		Cumulative Paid Claims and Allocated Claims Adjustment Expenses (000s)
		For the Years Ended December 31,
Accident Year		2012				2013				2014				2015				2016				2017				2018				2019				2020				2021
2012			649				936				936				936				936				936				936				935				935				936
2013							980				1,330				1,333				1,333				1,333				1,333				1,333				1,333				1,333
2014											1,879				2,670				2,680				2,681				2,681				2,681				2,681				2,681
2015															3,211				4,474				4,501				4,501				4,501				4,501				4,501
2016																			5,105				7,172				7,222				7,226				7,226				7,226
2017																							7,388				9,145				9,163				9,163				9,163
2018																											6,528				8,437				8,473				8,481
2019																															6,528				8,261				8,288
2020																																			5,166				6,569
2021																																							2,619
																			Total cumulative paid																				51,797
																			All o/s liabilities before 2010																				—
																			Liabilities for losses and LAE, net of reinsurance																			$	1,821

Below is a reconciliation of the disclosure of incurred and paid claims development to the liability for unpaid loss and loss adjustment expenses.

 

		September 30,				December 31,
		2021				2020
Net liability for losses & LAE (000s)		$	1,821			$	2,171
Reinsurance recoverable on unpaid claims:			4				—
Unallocated claims adjustment expense			27				30
Adjusting and other expense liability (000s)			27				30
Total gross liability for unpaid claims and claims adjustment expense		$	1,852			$	2,201

 

23