10-Q

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

_______________________________ 

FORM 10-Q 

_______________________________ 

(Mark One) 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from                      to                     .

Commission File Number: 001-38046 

ICC Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________ 

Pennsylvania (State or other jurisdiction of incorporation or organization)	81-3359409 (I.R.S. Employer Identification No.)
225 20th Street,  Rock Island,  Illinois (Address of principal executive offices)	61201 (Zip Code)

(309)  793-1700

(Registrant’s telephone number, including area code)

_______________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ICCH	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☐	Accelerated filer   ☐
Non-accelerated filer     ☒	Smaller reporting company   ☒
	Emerging growth company   ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐     No ☒

The number of shares of the registrant’s common stock outstanding as of November 6, 2020 was 3,293,325.

Table of Contents

		Page
PART I
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	3
	Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three-Month Periods Ended September 30, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Nine-Month Periods Ended September 30, 2020 and 2019 (unaudited)	5
	Condensed Consolidated Statements of Stockholders Equity for the Nine-Month Periods Ended September 30, 2020 and 2019 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2020 and 2019 (unaudited)	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	35
PART II
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Default Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ICC Holdings, Inc. and Subsidiaries 

Condensed Consolidated Balance Sheets

	As of
	September 30,			December 31,
	2020			2019
	(Unaudited)
Assets
Investments and cash:
Fixed maturity securities (cost or amortized cost - $96,725,639 at 9/30/2020 and $88,348,415 at 12/31/2019)	$	103,318,485		$	92,087,572
Common stocks at fair value		12,596,635			14,448,773
Preferred stocks at fair value		1,638,453			—
Other invested assets		1,779,060			877,900
Property held for investment, at cost, net of accumulated depreciation of $438,720 at 9/30/2020 and $332,218 at 12/31/2019		5,515,676			4,353,713
Cash and cash equivalents		6,598,640			6,626,585
Total investments and cash		131,446,949			118,394,543
Accrued investment income		719,389			646,504
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $100,000 at 9/30/2020 and 12/31/2019		22,737,615			22,368,526
Ceded unearned premiums		839,718			822,818
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $0 at 9/30/2020 and 12/31/2019		13,844,420			11,036,170
Federal income taxes		717,862			192,559
Deferred policy acquisition costs, net		5,267,470			5,269,256
Property and equipment, at cost, net of accumulated depreciation of $5,949,933 at 9/30/2020 and $5,619,706 at 12/31/2019		2,851,235			3,033,348
Other assets		1,559,179			1,239,794
Total assets	$	179,983,837		$	163,003,518
Liabilities and Equity
Liabilities:
Unpaid losses and settlement expenses	$	61,943,244		$	56,838,307
Unearned premiums		29,921,669			30,392,817
Reinsurance balances payable		728,674			374,998
Corporate debt		15,097,960			3,475,088
Accrued expenses		3,093,882			4,216,988
Income taxes - deferred		214,674			39,213
Other liabilities		950,858			1,324,273
Total liabilities		111,950,961			96,661,684
Equity:
Common stock1		35,000			35,000
Treasury stock, at cost2		(3,112,656	)		(3,146,576	)
Additional paid-in capital		32,717,495			32,703,209
Accumulated other comprehensive earnings, net of tax		5,208,657			2,953,936
Retained earnings		35,821,408			36,608,750
Less: Unearned Employee Stock Ownership Plan shares at cost3		(2,637,028	)		(2,812,485	)
Total equity		68,032,876			66,341,834
Total liabilities and equity	$	179,983,837		$	163,003,518

¹Par value $0.01; authorized: 2020 - 10,000,000 shares and 2019 – 10,000,000 shares; issued: 2020 – 3,500,000 shares and 2019 – 3,500,000 shares; outstanding: 2020 –  3,030,522 and 2019 - 3,014,941 shares.

²2020 – 205,775 shares and 2019 – 203,811 shares

³2020 – 263,703 shares and 2019 – 281,248 shares

See accompanying notes to consolidated financial statements. 

3

ICC Holdings, Inc. and Subsidiaries 

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) 

	For the Three-Months Ended
	September 30,
	2020			2019
Net premiums earned	$	12,532,967		$	13,679,746
Net investment income		900,950			811,462
Net realized investment (losses) gains		(59,333	)		141,481
Net unrealized gains (losses) on equity securities		981,779			(7,603	)
Other (loss)		(36,333	)		(112,763	)
Consolidated revenues		14,320,030			14,512,323
Losses and settlement expenses		8,863,053			9,609,347
Policy acquisition costs and other operating expenses		4,722,485			4,733,206
Interest expense on debt		58,724			32,458
General corporate expenses		171,860			164,378
Total expenses		13,816,122			14,539,389
Earnings (loss) before income taxes		503,908			(27,066	)
Total income tax expense (benefit)		99,919			(13,150	)
Net earnings (loss)	$	403,989		$	(13,916	)
Other comprehensive earnings, net of tax		440,838			703,220
Comprehensive earnings	$	844,827		$	689,304
Earnings per share:
Basic:
Basic net earnings (loss) per share	$	0.13		$	(0.00	)
Diluted:
Diluted net earnings (loss) per share	$	0.13		$	(0.00	)
Weighted average number of common shares outstanding:
Basic		3,030,571			3,011,034
Diluted		3,039,658			3,015,038

See accompanying notes to consolidated financial statements 

4

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) 

	For the Nine-Months Ended
	September 30,
	2020			2019
Net premiums earned	$	36,921,702		$	39,219,882
Net investment income		2,644,900			2,406,965
Net realized investment (losses) gains		(402,320	)		741,123
Net unrealized gains on equity securities		2,195			1,716,124
Other income (loss)		82,934			(43,838	)
Consolidated revenues		39,249,411			44,040,256
Losses and settlement expenses		25,913,619			28,117,369
Policy acquisition costs and other operating expenses		13,741,725			14,541,986
Interest expense on debt		150,773			96,353
General corporate expenses		471,616			444,829
Total expenses		40,277,733			43,200,537
(Loss) earnings before income taxes		(1,028,322	)		839,719
Total income tax (benefit) expense		(240,980	)		122,796
Net (loss) earnings	$	(787,342	)	$	716,923
Other comprehensive earnings, net of tax		2,254,721			3,423,233
Comprehensive earnings	$	1,467,379		$	4,140,156
Earnings per share:
Basic:
Basic net (loss) earnings per share	$	(0.26	)	$	0.24
Diluted:
Diluted net (loss) earnings per share	$	(0.26	)	$	0.24
Weighted average number of common shares outstanding:
Basic		3,023,794			3,004,887
Diluted		3,032,881			3,008,891

See accompanying notes to consolidated financial statements. 

5

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

	Common stock		Treasury stock			Unearned ESOP			Additional paid-in capital			Retained earnings			Accumulated other comprehensive earnings (loss)		Total equity
Balance, January 1, 2020	$	35,000	$	(3,146,576	)	$	(2,812,485	)	$	32,703,209		$	36,608,750		$	2,953,936	$	66,341,834
Purchase of treasury stock		—		(109,460	)		—			—			—			—		(109,460	)
Net (loss)		—		—			—			—			(787,342	)		—		(787,342	)
Other comprehensive earnings, net of tax		—		—			—			—			—			2,254,721		2,254,721
Restricted stock unit expense		—		143,380	1		—			(16,792	)		—			—		126,588
ESOP compensation expense		—		—			175,457			31,078			—			—		206,535
Balance, September 30, 2020	$	35,000	$	(3,112,656	)	$	(2,637,028	)	$	32,717,495		$	35,821,408		$	5,208,657	$	68,032,876

¹Amount represents restricted stock units that have fully vested in the period

	Common stock		Treasury stock			Unearned ESOP			Additional paid-in capital		Retained earnings			Accumulated other comprehensive earnings (loss)			Total equity
Balance, January 1, 2019	$	35,000	$	(2,999,995	)	$	(3,046,855	)	$	32,505,423	$	33,680,702		$	(1,580,976	)	$	58,593,299
Cumulative-effect adjustment from ASU 2016-011		—		—			—			—		(1,366,297	)		1,366,297			—
Purchase of treasury stock		—		(102,855	)		—			—		—			—			(102,855	)
Net earnings		—		—			—			—		716,923			—			716,923
Other comprehensive earnings, net of tax		—		—			—			—		—			3,423,233			3,423,233
Restricted stock unit expense		—		—			—			78,226		—			—			78,226
ESOP compensation expense		—		—			175,296			57,839		—			—			233,135
Balance, September 30, 2019	$	35,000	$	(3,102,850	)	$	(2,871,559	)	$	32,641,488	$	33,031,328		$	3,208,554		$	62,941,961

¹See discussion of Accounting Standards Update 2016-01 adoption in 2019 10-K, Note 1 - Summary of Significant Accounting Policies

See accompanying notes to consolidated financial statements. 

6

ICC Holdings, Inc. and Subsidiaries 

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine-Month Periods Ended September 30,
	2020			2019
Cash flows from operating activities:
Net (loss) earnings	$	(787,342	)	$	716,923
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities
Net realized investment losses (gains)		402,320			(741,123	)
Net unrealized (gains) on equity securities		(2,195	)		(1,716,124	)
Depreciation		508,152			613,916
Deferred income tax		(423,896	)		360,009
Amortization of bond premium and discount		175,114			172,691
Stock-based compensation expense		333,123			311,361
Change in:
Accrued investment income		(72,885	)		(2,371	)
Premiums and reinsurance balances receivable		(369,089	)		(1,847,981	)
Ceded unearned premiums		(16,900	)		(65,406	)
Reinsurance balances payable		353,676			(897,013	)
Reinsurance balances recoverable		(2,808,250	)		(5,530,517	)
Deferred policy acquisition costs		1,786			(278,207	)
Unpaid losses and settlement expenses		5,104,937			6,875,171
Unearned premiums		(471,148	)		1,642,978
Accrued expenses		(1,123,106	)		(1,376,476	)
Current federal income tax		(525,303	)		(18,097	)
Other		(692,009	)		(570,277	)
Net cash (used in) operating activities		(413,015	)		(2,350,543	)
Cash flows from investing activities:
Purchases of:
Fixed maturity securities, available-for-sale		(20,946,699	)		(19,060,848	)
Common stocks		(3,356,465	)		(5,252,095	)
Preferred stocks		(1,718,782	)		—
Other invested assets		(901,500	)		(738,300	)
Property held for investment		(1,268,464	)		(332,393	)
Property and equipment		(231,291	)		(321,704	)
Proceeds from sales, maturities and calls of:
Fixed maturity securities, available-for-sale		12,813,180			19,522,461
Common stocks		4,247,936			5,998,276
Preferred stocks		221,990			—
Property and equipment		11,753			31,137
Net cash (used in) investing activities		(11,128,342	)		(153,466	)
Cash flows from financing activities:
Proceeds from loans		11,629,800			—
Repayments of borrowed funds		(6,928	)		(7,020	)
Purchase of treasury stock		(109,460	)		(102,855	)
Net cash provided by (used in) financing activities		11,513,412			(109,875	)
Net (decrease) in cash and cash equivalents		(27,945	)		(2,613,884	)
Cash and cash equivalents at beginning of year		6,626,585			4,644,784
Cash and cash equivalents at end of period	$	6,598,640		$	2,030,900
Supplemental information:
Federal income tax paid (recovered)	$	—		$	(164,543	)
Interest paid		135,800			96,700

See accompanying notes to consolidated financial statements. 

7

Notes to Unaudited Condensed Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. DESCRIPTION OF BUSINESS

ICC Holdings, Inc. is a Pennsylvania corporation that was organized in 2016. As used in this Form 10-Q, references to the “Company,” “we,” “us,” and “our” refer to the consolidated group. On a stand-alone basis ICC Holdings, Inc. is referred to as the “Parent Company.” The consolidated group consists of the holding company, ICC Holdings, Inc.; ICC Realty, LLC, a real estate services and holding company; Beverage Insurance Agency, Inc., a non-insurance subsidiary; Estrella Innovative Solutions, Inc., an outsourcing company; and Illinois Casualty Company (ICC), an operating insurance company that is the parent company of ICC Properties, LLC, a real estate series limited liability company. Both ICC and ICC Properties, LLC are Illinois domiciled companies.

We are a specialty insurance carrier primarily underwriting commercial multi-peril, liquor liability, workers’ compensation, and umbrella liability coverages for the food and beverage industry through our subsidiary insurance company, ICC. ICC writes business in Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Wisconsin and markets through independent agents. Approximately 22.7% and 22.3% of the premium is written in Illinois for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, approximately 25.0% and 25.8% of the premium is written in Illinois, respectively. The Company operates as a single segment.

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form 10-Q.  Accordingly, they do not include all the disclosures required by GAAP for complete financial statements.  As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, for the year ended December 31, 2019 (the “2019 10-K”). Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at September 30, 2020, and the results of operations of the Company and its subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year.

The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These amounts are inherently subject to change and actual results could differ significantly from these estimates.

C. SIGNIFICANT ACCOUNTING POLICIES

The Company reported its significant accounting policies in the 2019 10-K.

D. PROSPECTIVE ACCOUNTING STANDARDS

For information regarding accounting standards that the Company has not yet adopted, see the “Prospective Accounting Standards” in Note 1 – Summary of Significant Accounting Policies in the 2019 10-K. The Company maintains its status as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We have taken advantage of the extended transition period provided by Section 107 of the JOBS Act. We decided to comply with the effective dates for financial accounting standards applicable to emerging growth companies later in compliance with the requirements in Sections 107(b)(2) and (3) of the JOBS Act. Such decision is irrevocable. 

E. PROPERTY AND EQUIPMENT

Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended September 30, 2020 and December 31, 2019, the Company recognized no impairments.  Property and equipment are summarized as follows:

	As of
	September 30,			December 31,
	2020			2019
Automobiles	$	530,722		$	505,788
Furniture and fixtures		474,401			457,218
Computer equipment and software		3,917,136			3,823,416
Home office		3,878,909			3,866,632
Total cost		8,801,168			8,653,054
Accumulated depreciation		(5,949,933	)		(5,619,706	)
Net property and equipment	$	2,851,235		$	3,033,348

8

F. COMPREHENSIVE EARNINGS

Comprehensive earnings (loss) include net (loss) earnings plus unrealized (gains) losses on available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, the Company used a 21% tax rate. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense of $343,316 and $771,697 for the nine months ended September 30, 2020 and 2019, respectively.

The following table presents changes in accumulated other comprehensive earnings for unrealized gains and losses on available-for-sale securities:

	Nine-Month Periods Ended
	September 30,
	2020			2019
Beginning balance	$	2,953,936		$	(1,580,976	)
Cumulative effect of adoption of ASU 2016-01		-			1,366,297
Adjusted beginning balance		2,953,936			(214,679	)
Other comprehensive earnings before reclassification		2,579,925			3,611,573
Amount reclassified from accumulated other comprehensive earnings		(325,204	)		(188,340	)
Net current period other comprehensive earnings		2,254,721			3,423,233
Ending balance	$	5,208,657		$	3,208,554

The following table illustrates the components of other comprehensive earnings for each period presented in the condensed consolidated interim financial statements.

	Three-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	551,140		$	(57,292	)	$	493,848		$	890,152		$	(116,415	)	$	773,737
Reclassification adjustment for (gains) included in net earnings		(67,102	)		14,092			(53,010	)		(89,262	)		18,745			(70,517	)
Total other comprehensive earnings	$	484,038		$	(43,200	)	$	440,838		$	800,890		$	(97,670	)	$	703,220

	Nine-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	2,836,794		$	(256,869	)	$	2,579,925		$	4,333,205		$	(721,632	)	$	3,611,573
Reclassification adjustment for (gains) included in net earnings		(411,651	)		86,447			(325,204	)		(238,405	)		50,065			(188,340	)
Total other comprehensive earnings	$	2,425,143		$	(170,422	)	$	2,254,721		$	4,094,800		$	(671,567	)	$	3,423,233

The following table provides the reclassifications from accumulated other comprehensive earnings for the periods presented:

Amounts Reclassified from
Accumulated Other Comprehensive Earnings
	Three-Month Periods Ended						Nine-Month Periods Ended
Details about Accumulated Other	September 30,						September 30,						Affected Line Item in the Statement
Comprehensive Earnings Component	2020			2019			2020			2019			where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(67,102	)	$	(89,262	)	$	(411,651	)	$	(238,405	)	Net realized investment (gains) losses
		14,092			18,745			86,447			50,065		Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(53,010	)	$	(70,517	)	$	(325,204	)	$	(188,340	)

G. RISKS AND UNCERTAINTIES

Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-19 pandemic has resulted in, and is expected to continue to result in, significant disruptions in economic activity and financial markets. The cumulative effects of COVID-19 on the Company, and the effect of any civil unrest or other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, or reduce the market value of invested assets held by the Company.

9

2. INVESTMENTS

The Company’s investments are primarily composed of fixed income debt securities and common and preferred stock equity securities. We carry our equity securities at fair value and categorize all our fixed maturity debt securities as available-for-sale (AFS), which are carried at fair value. When available, quoted market prices are obtained to determine fair value for the Company’s investments. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. The Company has no investment securities for which fair value is determined using Level 3 inputs as defined in Note 3 – Fair Value Disclosures. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date, which does not differ significantly from trade date accounting.

Available-for-Sale Fixed Maturity and Equity Securities 

The following tables are a summary of the proceeds from sales, maturities, and calls of AFS fixed maturity and equity securities and the related gross realized gains and losses.

	For the Three-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	3,428,951	$	67,102	$	—		$	67,102
Common stocks		986,939		93,984		(226,398	)		(132,414	)
Preferred stocks		76,500		5,979		—			5,979
2019
Fixed maturity securities	$	5,771,988	$	99,445	$	(10,183	)	$	89,262
Common stocks		1,320,803		185,319		(133,100	)		52,219

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	12,813,180	$	412,577	$	(926	)	$	411,651
Common stocks		4,247,936		470,406		(1,282,423	)		(812,017	)
Preferred stocks		221,990		8,808		(10,762	)		(1,954	)
2019
Fixed maturity securities	$	19,522,461	$	264,737	$	(26,332	)	$	238,405
Common stocks		5,998,276		960,420		(457,702	)		502,718

The amortized cost and estimated fair value of fixed income securities at September 30, 2020, by contractual maturity, are shown as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	1,275,943	$	1,305,900
Due after one year through five years		18,436,788		19,612,776
Due after five years through 10 years		16,366,929		18,431,137
Due after 10 years		21,586,567		23,678,509
Asset and mortgage backed securities without a specific due date		38,843,607		40,057,464
Redeemable preferred stocks		215,805		232,699
Total fixed maturity securities	$	96,725,639	$	103,318,485

Expected maturities may differ from contractual maturities due to call provisions on some existing securities.

10

The following table is a schedule of cost or amortized cost and estimated fair values of investments in securities classified as available for sale at September 30, 2020 and December 31, 2019:

	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2020
Fixed maturity securities:
U.S. Treasury	$	1,352,935	$	1,390,344	$	37,491	$	(82	)
MBS/ABS/CMBS		38,843,607		40,057,464		1,354,537		(140,680	)
Corporate		38,295,706		42,339,992		4,141,760		(97,474	)
Municipal		18,017,586		19,297,986		1,288,389		(7,989	)
Redeemable preferred stock		215,805		232,699		16,894		—
Total fixed maturity securities	$	96,725,639	$	103,318,485	$	6,839,071	$	(246,225	)

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2019
Fixed maturity securities:
U.S. Treasury	$	800,462	$	800,219	$	684	$	(927	)
MBS/ABS/CMBS		33,802,911		34,290,995		540,743		(52,659	)
Corporate		39,442,202		41,915,103		2,482,378		(9,477	)
Municipal		14,302,840		15,081,255		808,081		(29,666	)
Total fixed maturity securities	$	88,348,415	$	92,087,572	$	3,831,886	$	(92,729	)

All the Company’s collateralized securities carry an average credit rating of AA+ by one or more major rating agencies and continue to pay according to contractual terms. Included within MBS/ABS/CMBS, as defined in Note 3 – Fair Value Disclosures, are residential mortgage backed securities with fair values of $13,590,690 and $9,909,462 and commercial mortgage backed securities of $13,811,945 and $13,408,898 at September 30, 2020 and December 31, 2019, respectively.

ANALYSIS 

The following tables are also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of September 30, 2020 and December 31, 2019. The tables segregate the securities based on type, noting the fair value, cost or amortized cost, and unrealized loss on each category of investment as well as in total. The table further classifies the securities based on the length of time they have been in an unrealized loss position.

	September 30, 2020									December 31, 2019
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	300,000		$	—		$	300,000		$	—		$	699,391		$	699,391
Amortized cost		300,082			—			300,082			—			700,318			700,318
Unrealized loss		(82	)		—			(82	)		—			(927	)		(927	)
MBS/ABS/CMBS
Fair value		11,438,192			2,014,666			13,452,858			6,398,581			5,056,732			11,455,313
Amortized cost		11,556,312			2,037,226			13,593,538			6,420,488			5,087,484			11,507,972
Unrealized loss		(118,120	)		(22,560	)		(140,680	)		(21,907	)		(30,752	)		(52,659	)
Corporate
Fair value		1,075,259			—			1,075,259			1,396,706			—			1,396,706
Amortized cost		1,172,733			—			1,172,733			1,406,183			—			1,406,183
Unrealized loss		(97,474	)		—			(97,474	)		(9,477	)		—			(9,477	)
Municipal
Fair value		491,160			—			491,160			1,969,468			—			1,969,468
Amortized cost		499,149			—			499,149			1,999,134			—			1,999,134
Unrealized loss		(7,989	)		—			(7,989	)		(29,666	)		—			(29,666	)
Total
Fair value		13,304,611			2,014,666			15,319,277			9,764,755			5,756,123			15,520,878
Amortized cost		13,528,276			2,037,226			15,565,502			9,825,805			5,787,802			15,613,607
Unrealized loss	$	(223,665	)	$	(22,560	)	$	(246,225	)	$	(61,050	)	$	(31,679	)	$	(92,729	)

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The fixed income portfolio contained 22 securities in an unrealized loss position as of September 30, 2020. Of these 22 securities, 4 have been in an unrealized loss position for 12 consecutive months or longer and represent $22,560 in unrealized losses. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Credit-related impairments on fixed income securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net earnings. Any non-credit related impairment is recognized in comprehensive earnings. Based on management’s analysis, the fixed income portfolio is of a high credit quality and it is believed it will recover the amortized cost basis of the fixed income securities. Management monitors the credit quality of the fixed income investments to assess if it is probable that the Company will receive its contractual or estimated cash flows in the form of principal and interest.

There were no other-than-temporary impairment losses recognized in net earnings during the nine months ended September 30, 2020. For all fixed income securities at a loss at September 30, 2020, management believes it is probable that the Company will receive all contractual payments in the form of principal and interest. In addition, the Company is not required to, nor does it intend to sell these investments prior to recovering the entire amortized cost basis for each security, which may be at maturity. The fixed income securities in an unrealized loss position were not other-than-temporarily impaired at September 30, 2020 and December 31, 2019.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES 

Net unrealized gains for the three and nine months ended September 30, 2020 for equity securities held as of September 30, 2020 were $981,779 and $2,195 respectively. Net unrealized (losses) gains for the three and nine months ended September 30, 2019 for equity securities held as of September 30, 2019 were $(7,603) and $1,716,124, respectively.

Other Invested Assets 

Other invested assets include membership in the Federal Home Loan Bank of Chicago (FHLBC), which occurred in February 2018. Our $200,000 investment in FHLBC stock is carried at cost. Due to the nature of our membership in the FHLBC, the carrying amount approximates fair value.

In addition, other invested assets include privately held investments of $305,000, and notes issued for $625,000 and $650,000 on July 30, 2019 and January 28, 2020, respectively. Both notes bear interest at 6.5% and are amortized over 20 years with a balloon payment due July 30, 2029.

3. FAIR VALUE DISCLOSURES

Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. The fair value of certain financial instruments is determined based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value.

The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level:

●  Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets.

●  Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.

●  Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value.

As a part of the process to determine fair value, management utilizes widely recognized, third-party pricing sources to determine fair values. Management has obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy.

Corporate, Agencies, and Municipal Bonds—The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All Corporate, Agencies, and Municipal securities are deemed Level 2.

Mortgage-backed Securities (MBS), Collateralized Mortgage Obligations (CMO), Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS)—The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile, or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, pre-payment assumptions and to incorporate collateral performance. To evaluate CMO volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates, and recent trade activity. MBS, CMBS, CMO and ABS with corroborated and observable inputs are classified as Level 2. All MBS, CMBS, CMO and ABS holdings are deemed Level 2.

U.S. Treasury Bonds, Common Stocks and Exchange Traded Funds—U.S. treasury bonds and exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). All common stock holdings are deemed Level 1.

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Preferred Stock—Preferred stocks do not have readily observable prices, but do have quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices and are classified as Level 2. All preferred stock holdings are deemed Level 2.

Due to the relatively short-term nature of cash and cash equivalents, their carrying amounts are reasonable estimates of fair value. Other invested assets as well as debt obligations are carried at face value and given that there is no readily available market for these to trade in, management believes that face value accurately reflects fair value.

Assets measured at fair value on a recurring basis as of September 30, 2020, are summarized below:

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	1,390,344	$	—	$	—	$	1,390,344
MBS/ABS/CMBS		—		40,057,464		—		40,057,464
Corporate		—		42,339,992		—		42,339,992
Municipal		—		19,297,986		—		19,297,986
Redeemable preferred stocks		—		232,699		—		232,699
Total fixed maturity securities		1,390,344		101,928,141		—		103,318,485
Equity securities
Common stocks		12,596,635		—		—		12,596,635
Perpetual preferred stocks		—		1,638,453		—		1,638,453
Total equity securities		12,596,635		1,638,453		—		14,235,088
Total marketable investments measured at fair value	$	13,986,979	$	103,566,594	$	—	$	117,553,573

Assets measured at fair value on a recurring basis as of December 31, 2019, are summarized below:

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	800,219	$	—	$	—	$	800,219
MBS/ABS/CMBS		—		34,290,995		—		34,290,995
Corporate		—		41,915,103		—		41,915,103
Municipal		—		15,081,255		—		15,081,255
Total fixed maturity securities		800,219		91,287,353		—		92,087,572
Equity securities
Common stocks		14,448,773		—		—		14,448,773
Total marketable investments measured at fair value	$	15,248,992	$	91,287,353	$	—	$	106,536,345

As noted in the previous tables, the Company did not have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2020 and December 31, 2019. Additionally, there were no securities transferred in or out of Levels 1 or 2 during the nine-month periods ended September 30, 2020 and 2019.

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4. DEBT

Debt Obligation 

ICC Holdings, Inc. secured a loan with a commercial bank in March 2017 in the amount of $3.5 million and used the proceeds to repay ICC for the money borrowed by the ESOP. The term of the loan is five years bearing interest at 3.65%. The Company pledged stock and $1.0 million of marketable assets as collateral for the loan.

The Company also has borrowing capacity up to approximately $33 million in the aggregate from its membership with the Federal Home Loan Bank of Chicago (FHLBC).

In March 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency. As part of the Company’s response to COVID-19, the Company obtained, in March 2020, a $6.0 million loan from the FHLBC as a precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections. The term of the loan is five years bearing interest at 1.4%. The Company pledged $6.8 million of fixed income securities as collateral for this loan. The Company also obtained, in May 2020, a $4.0 million 0% interest, one-year loan from the FHLBC as an additional precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections as a result of the Company’s announcement in March 2020 to temporarily suspend all insurance premium billing for 30 days. The Company pledged an additional $7.4 million of fixed income securities as collateral for both FHLBC loans.

In April 2020, the Company obtained a $1.6 million loan (the PPP loan) from a commercial bank pursuant to the federally authorized Paycheck Protection Program (Program) administered by the Small Business Administration (the SBA). The PPP loan matures in the second quarter of 2022 and bears interest at a rate of 1.0% per annum. Commencing the fourth quarter of 2020, we will begin making loan payments. All or a portion of the PPP loan may be forgiven by the SBA upon application by us beginning 60 days, but not later than 120 days, after loan approval and upon documentation of expenditures in accordance with the SBA's requirements. Under the Paycheck Protection Program Flexibility Act of 2020 (the PPP Flexibility Act), (i) the first payment date for the PPP loan will be the earlier of (a) 10 months after the end of the “covered period” (as determined under the Program) or (b) the date the bank receives a remittance of the forgiven amount from the SBA, and (ii) the PPP loan’s maturity is extended to five years (from 2 years). Pursuant to the PPP Flexibility Act, we can obtain the lender's consent for the PPP loan maturity to be extended to the second quarter of 2025 (from 2022) and for the first payment date under the PPP loan to be extended as described in clause (i) of the previous sentence. 

The total balance of the debt agreements at September 30, 2020 and December 31, 2019 was $15,097,960 and $3,475,088, respectively. The average interest rate on remaining debt was 1.5% as of September 30, 2020 and 3.7% as of December 31, 2019.

On July 30, 2020, the Company secured through FHLBC a fixed 0.74% borrowing rate for a future $4.0 million loan that becomes effective May 3, 2021, upon the maturity of the existing $4.0 million FHLBC loan.  No collateral was pledged for this forward advance.

Revolving Line of Credit 

We maintained a revolving line of credit with a commercial bank, which permitted borrowing up to an aggregate principal amount of $1.75 million. This facility was initially entered into during 2013 and expired August 5, 2020. The line of credit was priced at 30-day LIBOR plus 2% with a floor of 3.5%. In order to secure the lowest rate possible, the Company pledged marketable securities not to exceed $5.0 million in the event the Company would draw down on the line of credit. There was no interest paid on the line of credit during the nine months ended September 30, 2020 and 2019. There were no financial covenants governing this agreement.

Effective August 3, 2020, the Company replaced its expiring line of credit with a $2.0 million revolving line of credit with another commercial bank, which renews annually and has a current expiration date of August 3, 2021.  This new line of credit is priced at Prime plus 0.5%. The Company pledged $2.0 million of business assets in the event the Company draws down on the line of credit.  There are no financial covenants governing this line of credit.

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5. REINSURANCE

In the ordinary course of business, the Company assumes and cedes premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk (known as facultative reinsurance). In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, management monitors the concentration of risks exposed to catastrophic events.

Through the purchase of reinsurance, the Company also generally limits its net loss on any individual risk to a maximum of $1,000,000 for casualty business, $500,000 for property, and $500,000 for workers’ compensation, although certain treaties contain an annual aggregate deductible before reinsurance applies.

Premiums, written and earned, along with losses and settlement expenses incurred for the periods presented is summarized as follows:

 

	Three-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	14,534,058		$	16,305,222
Reinsurance assumed		51,551			70,200
Reinsurance ceded		(2,328,734	)		(2,410,170	)
Net	$	12,256,875		$	13,965,252
EARNED
Direct	$	14,825,942		$	16,007,232
Reinsurance assumed		51,108			64,863
Reinsurance ceded		(2,344,083	)		(2,392,349	)
Net	$	12,532,967		$	13,679,746
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	10,536,397		$	13,034,216
Reinsurance assumed		6,073			36,297
Reinsurance ceded		(1,679,417	)		(3,461,166	)
Net	$	8,863,053		$	9,609,347

	Nine-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	44,240,437		$	48,349,466
Reinsurance assumed		114,924			178,446
Reinsurance ceded		(7,921,708	)		(7,730,458	)
Net	$	36,433,653		$	40,797,454
EARNED
Direct	$	44,710,106		$	46,710,351
Reinsurance assumed		116,404			174,583
Reinsurance ceded		(7,904,808	)		(7,665,052	)
Net	$	36,921,702		$	39,219,882
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	37,370,896		$	37,778,378
Reinsurance assumed		44,409			119,498
Reinsurance ceded		(11,501,686	)		(9,780,507	)
Net	$	25,913,619		$	28,117,369

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6. UNPAID LOSSES AND SETTLEMENT EXPENSES

The following table is a reconciliation of the Company’s unpaid losses and settlement expenses:

	For the Three-Months Ended
	September 30,
(In thousands)	2020			2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	66,415		$	61,264
Less: Ceded		19,463			13,974
Net		46,952			47,290
Increase in incurred losses and settlement expense:
Current year		9,298			9,092
Prior years		(435	)		517
Total incurred		8,863			9,609
Deduct: Loss and settlement expense payments for claims incurred:
Current year		4,885			6,064
Prior years		2,831			4,778
Total paid		7,716			10,842
Net unpaid losses and settlement expense - end of the period		48,099			46,057
Plus: Reinsurance recoverable on unpaid losses		13,844			12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943		$	58,323

	For the Nine-Months Ended
	September 30,
(In thousands)	2020		2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	56,838	$	51,447
Less: Ceded		11,036		6,736
Net		45,802		44,711
Increase in incurred losses and settlement expense:
Current year		23,838		25,779
Prior years		2,076		2,338
Total incurred		25,914		28,117
Deduct: Loss and settlement expense payments for claims incurred:
Current year		10,534		10,455
Prior years		13,083		16,316
Total paid		23,617		26,771
Net unpaid losses and settlement expense - end of the period		48,099		46,057
Plus: Reinsurance recoverable on unpaid losses		13,844		12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943	$	58,323

Net unpaid losses and settlement expense increased $2,042,000, or 4.4%, in the nine months ended September 30, 2020 as compared to the same period in 2019. For the nine months ended September 30, 2020 and 2019, we experienced unfavorable development of $2,076,000 and $2,338,000, respectively. The  unfavorable development for the three and nine months ended September 30, 2020 was primarily driven by the Business Owners Liability and Business Owners Property lines of business. Business Owners Liability and Liquor Liability lines of business were the primary drivers of adverse development for the three and nine-month periods ended September 30, 2019.

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7. INCOME TAXES

The Company’s effective tax rate for the three and nine-month periods ended September 30, 2020, were 19.8% and 23.4%, respectively, compared to 48.6% and 14.6% for the same periods in 2019, respectively. Effective rates are dependent upon components of pretax earnings and the related tax effects.

Income tax expense for the three and nine months ended September 30, 2020 and 2019, differed from the amounts computed by applying the U.S. federal tax rate of 21% to pretax income from continuing operations as demonstrated in the following tables:

	For the Three-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	105,820		$	(5,684	)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(7,871	)		(8,955	)
Tax-exempt interest income		(15,531	)		(16,433	)
Proration of tax-exempt interest and dividends received deduction		5,715			5,939
Nondeductible expenses		11,523			8,404
Officer life insurance, net		263			3,579
Total	$	99,919		$	(13,150	)

	For the Nine-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	(215,948	)	$	176,341
Increase (reduction) in taxes resulting from:
Dividends received deduction		(21,567	)		(28,482	)
Tax-exempt interest income		(46,795	)		(60,249	)
Proration of tax-exempt interest and dividends received deduction		16,683			21,775
Nondeductible expenses		25,751			24,450
Officer life insurance, net		896			(11,039	)
Total	$	(240,980	)	$	122,796

Management believes it is more likely than not that all deferred tax assets will be recovered as the result of future operations, which will generate sufficient taxable income to realize the deferred tax asset.

As of September 30, 2020 and December 31, 2019, the Company does not have any capital or operating loss carryforwards. Periods still subject to IRS audit include 2016 through current year. There are currently no open tax exams.

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8. EMPLOYEE BENEFITS

ESOP 

In connection with our conversion and public offering, we established an ESOP. The ESOP borrowed from the Company to purchase 350,000 shares in the offering. The issuance of the shares to the ESOP resulted in a contra account established in the equity section of the balance sheet for the unallocated shares at an amount equal to their $10.00 per share purchase price.

The Company may make discretionary contributions to the ESOP and pay dividends on unallocated shares to the ESOP. ICC makes annual contributions to the ESOP sufficient to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation.  No contributions to the ESOP were made during the nine months ended September 30, 2020 and 2019, respectively.

A compensation expense charge is booked monthly during each year for the shares committed to be allocated to participants that year, determined with reference to the fair market value of our stock at the time the commitment to allocate the shares is accrued and recognized. For the nine months ended September 30, 2020, we recognized compensation expense of $206,535 related to 17,546 shares of our common stock that are committed to be released to participants’ accounts at December 31, 2020. Of the 17,546 shares committed to be released, 1,921 shares were committed on September 30, 2020 and had no impact on the weighted average common shares outstanding for the three and nine months ended September 30, 2020. For the nine months ended September 30, 2019, we recognized compensation expense of $233,135 related to 17,530 shares of our common stock that were committed to be released to participants’ accounts at December 31, 2019. Of the 17,530 shares committed to be released at December 31, 2019, 1,926 shares were committed on September 30, 2019 and had no impact on the weighted average common shares outstanding for the three and nine months ended September 30, 2019.  

RESTRICTED STOCK UNITS 

Restricted stock units (RSUs) were granted for the first time in February 2018 with additional RSUs granted in March 2019 and April 2020. RSUs have a grant date value equal to the closing price of the Company’s stock on the dates the shares are granted. The RSUs vest 1/3 over three years from the date of grant.

As of September 30, 2020, 18,040,  13,071, and 11,700 RSUs have been granted at a fair market value of $11.03,  $13.70, and $15.10, respectively. We recognized $126,588 and $78,226 of expense on these units in the nine months ended September 30, 2020 and September 30, 2019, respectively. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $269,359 as of September 30, 2020, which will be recognized over the remainder of the three-year vesting periods.

9. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the financial statements were issued.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of ICC Holdings, Inc. ICC Holdings, Inc. and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in ICC Holdings, Inc.'s filings with the Securities and Exchange Commission (SEC) and its reports to shareholders. Generally, the inclusion of the words “anticipates,” “believe,” “estimate,” “expect,” “future,” “intend,” “estimate,” “may,” “plans,” “seek”, “will,” or the negative of such terms and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. All statements addressing operating performance, events, or developments that ICC Holdings, Inc. expects or anticipates will occur in the future, including statements relating to sales growth, earnings or earnings per share growth, and market share, as well as statements expressing optimism or pessimism about future operating results, are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on management’s then-current beliefs and assumptions regarding future events and operating performance and on information currently available to management, and are applicable only as of the dates of such statements. 

Forward-looking statements involve risks, uncertainties and assumptions, including, among other things, the factors discussed under the heading “Item 1A. Risk Factors” of ICC Holdings, Inc.’s Annual Report on Form 10-K and those listed below. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Actual results may differ materially from those expressed in these forward-looking statements due to several uncertainties and risks, including the risks described in this Quarterly Report on Form 10-Q and other unforeseen risks. Readers should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q. 

All of these factors are difficult to predict and many are beyond our control. These important factors include those discussed under “Item 1A. Risk Factors” of ICC Holdings, Inc.’s 2019 Annual Report on Form 10-K and those listed below:

• the potential impact of fraud, operational errors, systems malfunctions, or cybersecurity incidents;

•  future economic conditions in the markets in which we compete that are less favorable than expected;

•  our ability to expand geographically;

•  the effects of weather-related and other catastrophic events, including those related to health emergencies and the spread of infectious diseases and pandemics;

•  the effect of legislative, judicial, economic, demographic and regulatory events in the jurisdictions where we do business, especially changes with respect to laws, regulations and judicial decisions relating to liquor liability;

•  our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our producer network;

•  financial market conditions, including, but not limited to, changes in interest rates and the stock markets causing a reduction of investment income or investment gains and a reduction in the value of our investment portfolio;

•  heightened competition, including specifically the intensification of price competition, the entry of new competitors and the development of new products by new or existing competitors, resulting in a reduction in the demand for our products;

• actual claims may exceed our best estimate of ultimate insurance losses incurred through September 30, 2020 resulting directly from the COVID-19 pandemic and consequent economic crises;

• our reserves at September 30, 2020 could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19; 

• the continued impact of COVID-19 and related risks, including from shelter-in-place orders, unemployment, and the financial market volatility, could continue to adversely impact our results, including premiums written and investment income; 

• infection rates, severity of pandemics, including COVID-19, civil unrest and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees; 

•  the impact of acts of terrorism and acts of war;

•  the effects of terrorist related insurance legislation and laws;

•  changes in general economic conditions, including inflation, unemployment, interest rates, volatility in the stock and credit markets, the depth and duration of potential recession and other factors;

•  the cost, availability and collectability of reinsurance;

•  estimates and adequacy of loss reserves and trends in loss and settlement expenses;

•  changes in the coverage terms selected by insurance customers, including higher limits;

•  our inability to obtain regulatory approval of, or to implement, premium rate increases;

•  our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us;

•  the potential impact on our reported net income that could result from the adoption of future auditing or accounting standards issued by the Public Company Accounting Oversight Board or the Financial Accounting Standards Board or other standard-setting bodies;

•  unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations;

•  adverse litigation or arbitration results;

•  litigation tactics and developments, including those related to business interruption claims; and

•  adverse changes in applicable laws, regulations or rules governing insurance holding companies and insurance companies, and environmental, tax or accounting matters including limitations on premium levels, increases in minimum capital and reserves, and other financial viability requirements, and changes that affect the cost of, or demand for our products. 

Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from that expressed or implied by the forward-looking information.

All subsequent written and oral forward-looking information attributable to ICC Holdings, Inc. or any person acting on our behalf is expressly qualified in its entirety by the cautionary statement contained or referred to in this section.

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Overview

ICC is a regional property and casualty insurance company incorporated in Illinois and focused exclusively on the food and beverage industry. On the effective date of the mutual-to-public company conversion, ICC became a wholly owned subsidiary of ICC Holdings, Inc.

For the nine months ended September 30, 2020, we had direct written premiums of $44,240,000, net premiums earned of $36,922,000, and net loss of $787,000. For the nine months ended September 30, 2019, we had direct premiums written of $48,349,000, net premiums earned of $39,220,000, and net earnings of $717,000. At September 30, 2020, we had total assets of $179,984,000 and equity of $68,032,000. At December 31, 2019, we had total assets of $163,004,000 and equity of $66,342,000. In response to the ongoing novel coronavirus (COVID-19) pandemic, in March 2020, we announced that we would be temporarily suspending all insurance premium billing for at least 30 days. As of August 10, 2020, normal billing has resumed in all states we operate in.

We are an “emerging growth company” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to: not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; exemptions from the requirements of holding an annual non-binding advisory vote on executive compensation and nonbinding stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have taken advantage of the extended transition period provided by Section 107 of the JOBS Act. We decided to comply with the effective dates for financial accounting standards applicable to emerging growth companies later in compliance with the requirements in Sections 107(b)(2) and (3) of the JOBS Act. Such decision is irrevocable.

Principal Revenue and Expense Items 

We derive our revenue primarily from premiums earned, net investment income and net realized and unrealized gains (losses) from investments. 

Gross and net premiums written

Gross premiums written is equal to direct and assumed premiums before the effect of ceded reinsurance. Net premiums written is the difference between gross premiums written and premiums ceded or paid to reinsurers (ceded premiums written). 

Net premiums earned

Premiums earned is the earned portion of our net premiums written. Gross premiums written include all premiums recorded by an insurance company during a specified policy period. Insurance premiums on property and casualty insurance contracts are recognized in proportion to the underlying risk insured and are earned ratably over the duration of the policies. At the end of each accounting period, the portion of the premiums that is not yet earned is included in unearned premiums and is realized as revenue in subsequent periods over the remaining term of the policy. Our policies typically have a term of twelve months. Thus, for example, for a policy that is written on July 1, 2020, one-half of the premiums would be earned in 2020 and the other half would be earned in 2021.

Net investment income and net realized gains (losses) on investments 

We invest our surplus and the funds supporting our insurance liabilities (including unearned premiums and unpaid loss and loss adjustment expenses) in cash, cash equivalents, equities, fixed maturity securities and real estate. Investment income includes interest and dividends earned on invested assets as well as rental income on investment properties. Net realized gains and losses on invested assets are reported separately from net investment income. We recognize realized gains when invested assets are sold for an amount greater than their cost or amortized cost (in the case of fixed maturity securities) and recognize realized losses when investment securities are written down as a result of an other than temporary impairment or sold for an amount less than their cost or amortized cost, as applicable. We recognize in earnings the change in unrealized gains and losses on equity securities when our equity securities are trading at an amount greater than or less than their cost, respectively. Unrealized gains for the three and nine months ended September 30, 2020 for equity securities held as of September 30, 2020 were $982,000 and $2,000, respectively. Unrealized (losses) gains for the three and nine months ended September 30, 2019 for equity securities held as of September 30, 2019 were $(8,000) and $1,716,000, respectively. Our portfolio of investment securities is managed by two independent third parties with managers specializing in the insurance industry.

ICC’s expenses consist primarily of:

Losses and settlement expenses

Losses and settlement expenses represent the largest expense item and include: (1) claim payments made, (2) estimates for future claim payments and changes in those estimates for prior periods, and (3) costs associated with investigating, defending and adjusting claims.

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Amortization of deferred policy acquisition costs and other operating expenses

Expenses incurred to underwrite risks are referred to as policy acquisition expenses. Variable policy acquisition costs consist of commission expenses, premium taxes and certain other underwriting expenses that vary with and are primarily related to the writing and acquisition of new and renewal business. These policy acquisition costs are deferred and amortized over the effective period of the related insurance policies. Fixed policy acquisition costs are expensed as incurred. These costs include salaries, rent, office supplies, and depreciation. Other operating expenses consist primarily of information technology costs, accounting and internal control salaries, as well as audit and legal expenses.

Income taxes

We use the asset and liability method of accounting for income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the tax bases of our assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date.

Key Financial Measures 

We evaluate our insurance operations by monitoring certain key measures of growth and profitability. In addition to reviewing our financial performance based on results determined in accordance with generally accepted accounting principles in the United States (GAAP), we utilize certain operational financial measures that we believe are valuable in managing our business and for comparison to our peers. These operational measures are combined ratio, written premiums, underwriting income, the losses and settlement expense ratio, the expense ratio, the ratio of net written premiums to statutory surplus and return on average equity.

We measure growth by monitoring changes in gross premiums written and net premiums written. We measure underwriting profitability by examining losses and settlement expense, underwriting expense and combined ratios. We also measure profitability by examining underwriting income (loss) and net earnings (loss).

Losses and settlement expense ratio

The losses and settlement expense ratio is the ratio (expressed as a percentage) of losses and settlement expenses incurred to net premiums earned. We measure the losses and settlement expense ratio on an accident year and calendar year loss basis to measure underwriting profitability. An accident year loss ratio measures losses and settlement expenses for insured events occurring in a particular year, regardless of when they are reported, as a percentage of premiums earned during that year. A calendar year loss ratio measures loss and settlement expense for insured events occurring during a particular year and the change in loss reserves from prior accident years as a percentage of premiums earned during that year.

Expense ratio

The underwriting expense ratio is the ratio (expressed as a percentage) of amortization of deferred policy acquisition costs and other operating expenses to premiums earned, and measures our operational efficiency in producing, underwriting and administering our insurance business.

GAAP combined ratio

Our GAAP combined ratio is the sum of the losses and settlement expense ratio and the expense ratio and measures our overall underwriting profit. If the GAAP combined ratio is below 100%, we are making an underwriting profit. If our combined ratio is at or above 100%, we are not profitable without investment income and may not be profitable if investment income is insufficient.

Net premiums written to statutory surplus ratio

The net premiums written to statutory surplus ratio represents the ratio of net premiums written, after reinsurance ceded, to statutory surplus. This ratio measures our exposure to pricing errors in our current book of business. The higher the ratio, the greater the impact on surplus should pricing prove inadequate.

Underwriting income (loss)

Underwriting income (loss) measures the pre-tax profitability of our insurance operations. It is derived by subtracting losses and settlement expense, amortization of deferred policy acquisition costs, and underwriting and administrative expenses from net earned premiums. Each of these items is presented as a caption in our statements of earnings.

Net earnings (loss) and return on average equity

We use net earnings (loss) to measure our profit and return on average equity to measure our effectiveness in utilizing equity to generate net earnings. In determining return on average equity for a given year, net earnings (loss) is divided by the average of the beginning and ending equity for that year.

Critical Accounting Policies 

The accounting policies and estimates considered by management to be critically important in the preparation and understanding of the Company’s financial statements and related disclosures are presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 

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Results of Operations 

Our results of operations are influenced by factors affecting the property and casualty insurance industry in general. The operating results of the United States property and casualty insurance industry are subject to significant variations due to competition, weather, catastrophic events, regulation, general economic conditions, judicial trends, fluctuations in interest rates and other changes in the investment environment. In response to the ongoing novel coronavirus (COVID-19) pandemic, in March 2020, we announced that we would be temporarily suspending all insurance premium billing for 30 days. As of August 10, 2020 normal billing has resumed in all states we operate in.

Our premium and underwriting results have been, and continue to be, influenced by market conditions. Pricing in the property and casualty insurance industry historically has been cyclical. During a soft market cycle, price competition is more significant than during a hard market cycle and makes it difficult to attract and retain properly priced commercial business. A hard market typically has a positive effect on premium growth.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The major components of operating revenues and net earnings are as follows:

	For the Nine-Months Ended
	September 30,
(In thousands)	2020			2019
Revenues
Total premiums earned	$	36,922		$	39,220
Investment income, net of investment expense		2,645			2,407
Realized investment (losses) gains, net		(402	)		741
Net unrealized gains on equity securities		2			1,716
Other income (loss)		83			(44	)
Total revenues	$	39,250		$	44,040
Summarized components of net earnings
Underwriting (loss)¹	$	(2,734	)	$	(3,439	)
Investment income, net of investment expense		2,645			2,407
Realized investment (losses) gains, net		(402	)		741
Net unrealized gains on equity securities		2			1,716
Other income (loss)		83			(44	)
General corporate expenses		471			445
Interest expense		151			96
(Loss) earnings, before income taxes		(1,028	)		840
Income tax (benefit) expense		(241	)		123
Net (loss) earnings	$	(787	)	$	717
Total other comprehensive earnings		2,255			3,423
Comprehensive earnings	$	1,468		$	4,140

¹Calculated by subtracting the sum of loss and settlement expenses (2020 -$25,914 and 2019 -$28,117) and policy and acquisition costs and other operating expenses (2020 - $13,742 and 2019 - $14,542) from net premiums earned (2020 -$36,922 and 2019 - $39,220).

	For the Nine-Months Ended
	September 30,
	2020			2019
Operational Ratios:
Losses and settlement expense ratio1		70.19	%		71.69	%
Expense ratio2		37.22	%		37.08	%
Combined ratio3		107.40	%		108.77	%

¹Calculated by dividing loss and settlement expenses by net premiums earned. 

²Calculated by dividing the sum of policy acquisition costs and operating expenses by net earned premiums. 

³The sum of the losses and settlement expense ratio and the expense ratio. A combined ratio of under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss. 

The following summarizes our results for the nine months ended September 30, 2020 and 2019:

Premiums

Direct premiums written decreased by $4,109,000, or 8.5%, to $44,240,000 for the nine months ended September 30, 2020 from $48,349,000 for the same period of 2019. Net written premium decreased by $4,364,000, or 10.7%, to $36,433,000 for the nine months ended September 30, 2020 from $40,797,000 for the same period in 2019. Net premiums earned decreased by $2,298,000, or 5.9%, in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to policy exposure decreases resulting from state mandated shutdowns of restaurants and taverns and increased reinstatement costs associated with the civil unrest and protests occurring in Minneapolis, MN and the greater Chicago area in Illinois.  

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For the nine months ended September 30, 2020, we ceded to reinsurers $7,905,000 of earned premiums, compared to $7,665,000 of earned premiums for the nine months ended September 30, 2019. Ceded earned premiums as a percent of direct premiums written increased to 17.9% from 15.9% for the nine months ended September 30, 2020 and September 30, 2019, respectfully, primarily due to increased reinstatement premium costs associated with the civil unrest and protests occurring in Minnesota and Illinois. 

Premiums are earned ratably over the term of the policy whereas written premiums are reflected on the effective date of the policy. 

Investment Income

Net investment income increased by $238,000, or 9.9%, to $2,645,000 for the nine months ended September 30, 2020, as compared to $2,407,000 for the same period in 2019 as a result of our increased property held for investment.

Other Income

Other income is derived from policies we write and represents additional charges to policyholders for services outside of the premium charge, such as installment billing or policy issuance costs. Other income increased by $127,000 or 288.6% during the nine months ended September 30, 2020 as a result of a decrease in audit premiums, which resulted in fewer write offs as compared to the same period in 2019.

Unpaid Losses and Settlement Expenses

The following table details our unpaid losses and settlement expenses. 

	For the Nine-Months Ended
	September 30,
(In thousands)	2020		2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	56,838	$	51,447
Less: Ceded		11,036		6,736
Net		45,802		44,711
Increase in incurred losses and settlement expense:
Current year		23,838		25,779
Prior years		2,076		2,338
Total incurred		25,914		28,117
Deduct: Loss and settlement expense payments for claims incurred:
Current year		10,534		10,455
Prior years		13,083		16,316
Total paid		23,617		26,771
Net unpaid losses and settlement expense - end of the period		48,099		46,057
Plus: Reinsurance recoverable on unpaid losses		13,844		12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943	$	58,323

Net unpaid losses and settlement expense increased $2,042,000, or 4.4%, in the nine months ended September 30, 2020 as compared to the same period in 2019. For the nine months ended September 30, 2020 and 2019, we experienced unfavorable development of $2,076,000 and $2,338,000, respectively. The 2020 unfavorable development was primarily driven by the Business Owners Liability and Business Owners Property lines of business. Business Owners Liability and Liquor Liability lines of business were the primary drivers of adverse development for the nine months ended September 30, 2019.

Losses and Settlement Expenses 

Losses and settlement expenses decreased by $2,203,000, or 7.8%, to $25,914,000 for the nine months ended September 30, 2020, from $28,117,000 for the same period in 2019. Losses and settlement expenses decreased for the nine months ended September 30, 2020, primarily due to decreased losses due to state mandated shutdowns for restaurants and taverns and offset by increased losses related to the civil unrest and rioting that occurred in Minnesota and Illinois in late May and early June of 2020. 

Policy Acquisition Costs and Other Operating Expenses and the Expense Ratio

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports, and underwriter compensation costs. The Company offsets the direct commissions it pays with ceded commissions it receives from reinsurers. Other operating expenses consist primarily of information technology costs, accounting and internal control salaries, as well as audit and legal expenses. Policy acquisition costs and other operating expenses decreased by $800,000, or 5.5%, to $13,742,000 for the nine months ended September 30, 2020 from $14,542,000 for the same period in 2019 due to decreased premium writings coupled with a corresponding decrease in contingent commission expense.

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Our expense ratio is calculated by dividing the sum of policy acquisition costs and operating expenses by net earned premiums. We use the expense ratio to evaluate the operating efficiency of our consolidated operations. Costs that cannot be readily identifiable as a direct cost of a product line remain in Corporate and Other. Our expense ratio increased by 14 basis points from 37.08% to 37.22% for the nine months ended September 30, 2020 as compared to 2019.  

General Corporate Expenses

General corporate expenses consist primarily of occupancy costs, such as rent and utilities. These costs are largely fixed and, therefore, do not vary significantly with premium volume but do vary with the Company’s changes in properties held for investment. Our general corporate expenses increased by $26,000, or 5.8%, in the nine months ended September 30, 2020 as compared to the same period in 2019.

Interest Expense

Interest expense increased to $151,000 for the nine months ended September 30, 2020 from $96,000 for the same period during 2019. This increase is primarily due to $46,000 in interest expense for the $6 million FHLBC borrowing in March 2020.

Income Tax Expense

We reported income tax benefit of $241,000 and income tax expense of $123,000 for the nine months ended September 30, 2020 and 2019, respectively. The increase in income tax benefit in 2020 relates to a pretax loss for the nine months ended September 30, 2020 compared to pretax earnings for the same period in 2019. Our effective tax rate for the nine months ended September 30, 2020 was 23.4%, compared to 14.6% for the same period in 2019. Effective rates are dependent upon components of pretax (loss) or earnings and the related tax effects.

The Company has not established a valuation allowance against any of the net deferred tax assets.

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Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The major components of operating revenues and net earnings are as follows:

	For the Three-Months Ended
	September 30,
(In thousands)	2020			2019
Revenues
Total premiums earned	$	12,533		$	13,680
Investment income, net of investment expense		901			811
Realized investment (losses) gains, net		(59	)		141
Net unrealized gains (losses) on equity securities		982			(8	)
Other (loss)		(36	)		(112	)
Total revenues	$	14,321		$	14,512
Summarized components of net earnings (loss)
Underwriting (loss)¹	$	(1,052	)	$	(662	)
Investment income, net of investment expense		901			811
Realized investment (losses) gains, net		(59	)		141
Net unrealized gains (losses) on equity securities		982			(8	)
Other (loss)		(36	)		(112	)
General corporate expenses		173			164
Interest expense		59			32
Earnings (loss), before income taxes		504			(26	)
Income tax expense (benefit)		100			(13	)
Net earnings (loss)	$	404		$	(13	)
Total other comprehensive earnings		441			703
Comprehensive earnings	$	845		$	690

¹Calculated by subtracting the sum of loss and settlement expenses (2020- $8,863 and 2019 - $9,609) and policy and acquisition costs and other operating expenses (2020 - $4,722 and 2019 - $4,733) from net premiums earned (2020 - $12,533 and 2019- $13,680).

	For the Three-Months Ended
	September 30,
	2020			2019
Operational Ratios:
Losses and settlement expense ratio1		70.72	%		70.24	%
Expense ratio2		37.68	%		34.60	%
Combined ratio3		108.39	%		104.84	%

¹Calculated by dividing loss and settlement expenses by net premiums earned. 

²Calculated by dividing the sum of policy acquisition costs and operating expenses by net earned premiums. 

³The sum of the losses and settlement expense ratio and the expense ratio. A combined ratio of under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss. 

The following summarizes our results for the three months ended September 30, 2020 and 2019:

Premiums

Direct premiums written decreased by $1,771,000, or 10.9%, to $14,534,000 for the three months ended September 30, 2020 from $16,305,000 for the same period of 2019. Net written premium decreased by $1,708,000, or 12.2%, to $12,257,000 for the three months ended September 30, 2020 from $13,965,000 for the same period in 2019. Net premiums earned decreased by $1,147,000, or 8.4%, in the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, primarily due to policy exposure decreases resulting from state mandated shutdowns of restaurants and taverns.  

For the three months ended September 30, 2020, we ceded to reinsurers $2,344,000 of earned premiums, compared to $2,392,000 of earned premiums for the three months ended September 30, 2019. Ceded earned premiums as a percent of direct premiums written increased to 16.1% in the three months ended September 30, 2020, from 14.7% in the three months ended September 30, 2019.  

Premiums are earned ratably over the term of the policy whereas written premiums are reflected on the effective date of the policy.

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Investment Income

Net investment income increased by $90,000, or 11.1%, to $901,000 for the period ended September 30, 2020, as compared to $811,000 for the same period in 2019.

Other Income

Other income (loss) is derived from policies we write and represents additional charges to policyholders for services outside of the premium charge, such as installment billing or policy issuance costs. Other (loss) decreased by $76,000 or 67.9% during the three months ended September 30, 2020 as a result of a decrease in administrative billing charges due to decreased written premiums as compared to the same period in 2019.

Losses and Settlement Expenses 

Losses and settlement expenses decreased by $746,000, or 7.8%, to $8,863,000 for the three months ended September 30, 2020, from $9,609,000for the same period in 2019. Losses and settlement expenses decreased for the three months ended September 30, 2020, primarily due to favorable development in prior year reported claims during the three months ended September 30, 2020. 

Policy Acquisition Costs and Other Operating Expenses and the Expense Ratio

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports, and underwriter compensation costs. The Company offsets the direct commissions it pays with ceded commissions it receives from reinsurers. Other operating expenses consist primarily of information technology costs, accounting and internal control salaries, as well as audit and legal expenses. Policy acquisition costs and other operating expenses decreased by $11,000, or 0.2%, to $4,722,000 for the three months ended September 30, 2020 from $4,733,000 for the same period in 2019.

Our expense ratio is calculated by dividing the sum of policy acquisition costs and operating expenses by net earned premiums. We use the expense ratio to evaluate the operating efficiency of our consolidated operations. Costs that cannot be readily identifiable as a direct cost of a product line remain in Corporate and Other. Our expense ratio increased by 308 basis points from 34.60% to 37.68% for the three months ended September 30, 2020 as compared to 2019. This increase was primarily driven by a decrease in the current quarter's written and earned premium. 

General Corporate Expenses

General corporate expenses consist primarily of occupancy costs, such as rent and utilities. These costs are largely fixed and, therefore, do not vary significantly with premium volume but do vary with the Company’s changes in properties held for investment. Our general corporate expenses increased by $9,000, or 5.5%, in the three months ended September 30, 2020 as compared to the same period in 2019.  

Interest Expense

Interest expense increased to $59,000 for the three months ended September 30, 2020 from $32,000 for the same period during 2019. This increase is due to $24,000 in interest expense for the three months ended September 30, 2020 relating to the $6 million FHLBC borrowing in September 30, 2020.

Income Tax Expense

We reported income tax expense of $100,000 and income tax benefit of $13,000 for the three months ended September 30, 2020 and 2019, respectively. The increase in income tax expense in 2020 relates to an increase in pretax earnings for the three months ended September 30, 2020 compared to pretax earnings for the same period in 2019. Our effective tax rate for the three months ended September 30, 2020 was 19.8%, compared to 48.6% for the same period in 2019. Effective rates are dependent upon components of pretax (loss) or earnings and the related tax effects.

The Company has not established a valuation allowance against any of the net deferred tax assets.

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Financial Position

The major components of our assets and liabilities are as follows:

	As of
	September 30,			December 31,
	2020			2019
(In thousands)	(Unaudited)
Assets
Investments and cash:
Fixed maturity securities (amortized cost - $96,726 at 9/30/2020 and $88,348 at 12/31/2019)	$	103,318		$	92,087
Common stocks at fair value		12,597			14,449
Preferred stocks at fair value		1,638			—
Other invested assets		1,779			878
Property held for investment, at cost, net of accumulated depreciation of $439 at 9/30/2020 and $332 at 12/31/2019		5,516			4,354
Cash and cash equivalents		6,599			6,627
Total investments and cash		131,447			118,395
Accrued investment income		720			646
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $100 at 9/30/2020 and 12/31/2019		22,738			22,369
Ceded unearned premiums		840			823
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $0 at 9/30/2020 and 12/31/2019		13,844			11,036
Federal income taxes		718			193
Deferred policy acquisition costs, net		5,267			5,269
Property and equipment, at cost, net of accumulated depreciation of $5,950 at 9/30/2020 and $5,620 at 12/31/2019		2,851			3,033
Other assets		1,559			1,240
Total assets	$	179,984		$	163,004
Liabilities and Equity
Liabilities:
Unpaid losses and settlement expenses	$	61,943		$	56,838
Unearned premiums		29,922			30,393
Reinsurance balances payable		729			375
Corporate debt		15,098			3,475
Accrued expenses		3,094			4,217
Income taxes - deferred		215			39
Other liabilities		951			1,325
Total liabilities		111,952			96,662
Equity:
Common stock1		35			35
Treasury stock, at cost2		(3,113	)		(3,147	)
Additional paid-in capital		32,717			32,703
Accumulated other comprehensive earnings, net of tax		5,209			2,954
Retained earnings		35,821			36,609
Less: Unearned ESOP shares at cost3		(2,637	)		(2,812	)
Total equity		68,032			66,342
Total liabilities and equity	$	179,984		$	163,004

¹ Par value $0.01; authorized: 2020 - 10,000 shares and 2019 – 10,000 shares; issued: 2020 – 3,500 shares and 2019 – 3,500 shares;  outstanding: 2020 – 3,031 shares and 2019 – 3,015 shares.

²2020 – 206 shares and 2019 – 204 shares

³2020 – 264 shares and 2019 – 281 shares

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Unpaid Losses and Settlement Expense 

Our reserves for unpaid loss and settlement expense are summarized below:

	As of September 30,		As of December 31,
(In thousands)	2020		2019
Case reserves	$	27,533	$	24,370
IBNR reserves		20,566		21,432
Net unpaid losses and settlement expense		48,099		45,802
Reinsurance recoverable on unpaid loss and settlement expense		13,844		11,036
Reserves for unpaid loss and settlement expense	$	61,943	$	56,838

As of September 30, 2020, the Company had received 1,283 claims for business interruption related to COVID-19. Based on policy language, the Company does not anticipate that coverage will be triggered for these property claims requiring loss payment.

Actuarial Ranges

The selection of the ultimate loss is based on information unique to each line of business and accident year and the judgment and expertise of our actuary and management.

The following table provides case and IBNR reserves for losses and loss adjustment expenses as of September 30, 2020 and December 31, 2019.

As of September 30, 2020

(In thousands)	Case Reserves		IBNR Reserves			Total Reserves
Commercial liability	$	18,556	$	18,312		$	36,868
Property		4,394		(423	)		3,971
Other		4,583		2,677			7,260
Total net reserves		27,533		20,566			48,099
Reinsurance recoverables		6,732		7,112			13,844
Gross reserves	$	34,265	$	27,678		$	61,943

As of December 31, 2019

(In thousands)	Case Reserves		IBNR Reserves			Total Reserves
Commercial liability	$	18,406	$	18,249		$	36,655
Property		2,706		(178	)		2,528
Other		3,258		3,361			6,619
Total net reserves		24,370		21,432			45,802
Reinsurance recoverables		4,488		6,548			11,036
Gross reserves	$	28,858	$	27,980		$	56,838

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Our actuary determined a range of reasonable reserve estimates which reflect the uncertainty inherent in the loss reserve process. This range does not represent the range of all possible outcomes. We believe that the actuarially determined ranges represent reasonably likely changes in the loss and settlement expense estimates, however actual results could differ significantly from these estimates. The range was determined by line of business and accident year after a review of the output generated by the various actuarial methods utilized. The actuary reviewed the variance around the select loss reserve estimates for each of the actuarial methods and selected reasonable low and high estimates based on his knowledge and judgment. In making these judgments the actuary typically assumed, based on his experience, that the larger the reserve the less volatility and that property reserves would exhibit less volatility than casualty reserves. In addition, when selecting these low and high estimates, the actuary considered:

• historical industry development experience in our business line;

•  historical company development experience;

•  the impact of court decisions on insurance coverage issues, which can impact the ultimate cost of settling claims;

•  changes in our internal claims processing policies and procedures; and

•  trends and risks in claim costs, such as risk that medical cost inflation could increase.

Our actuary is required to exercise a considerable degree of judgment in the evaluation of all of these and other factors in the analysis of our loss and settlement expense reserves, and related range of anticipated losses. Because of the level of uncertainty impacting the estimation process, it is reasonably possible that different actuaries would arrive at different conclusions. The method of determining the reserve range has not changed and the reserve range generated by our actuary is consistent with the observed development of our loss reserves over the last few years.

The width of the range in reserves arises primarily because specific losses may not be known and reported for some period and the ultimate losses paid and loss adjustment expenses incurred with respect to known losses may be larger than currently estimated. The ultimate frequency or severity of these claims can be very different than the assumptions we used in our estimation of ultimate reserves for these exposures.

Specifically, the following factors could impact the frequency and severity of claims, and therefore, the ultimate amount of loss and settlement expense paid:

• the rate of increase in labor costs, medical costs, and material costs that underlie insured risks;

•  development of risk associated with our expanding producer relationships and our growth in new states or states where we currently have small market share; and

•  impact of changes in laws or regulations.

The estimation process for determining the liability for unpaid loss and settlement expense inherently results in adjustments each year for claims incurred (but not paid) in preceding years. Negative amounts reported for claims incurred related to prior years are a result of claims being settled for amounts less than originally estimated (favorable development). Positive amounts reported for claims incurred related to prior years are a result of claims being settled for amounts greater than originally estimated (unfavorable development). For the nine months ended September 30, 2020 and 2019, we experienced unfavorable development of $2,076,000 and $2,338,000, respectively.

Potential for variability in our reserves is evidenced by this development. As further illustration of reserve variability, we initially estimated unpaid loss and settlement expense net of reinsurance at the end of 2019 at $45,802,000. As of September 30, 2020, that reserve was re-estimated at $47,878,000, which is $2,076,000, or 4.5%, higher than the initial estimate.

The estimation of our reserves is based on several actuarial methods, each of which incorporates many quantitative assumptions. The judgment of the actuary plays an important role in selecting among various loss development factors and selecting the appropriate method, or combination of methods, to use for a given accident year. The ranges presented above represent the expected variability around the actuarially determined central estimate. The total range around our actuarially determined estimate varies from (6.0)% to 7.5%. As shown in the table below, since 2015 the variance in our originally estimated accident year selections range from (2.6)% deficient to 9.0% redundant as of September 30, 2020.

Recent Variabilities of Incurred Losses and Settlement Expense, Net of Reinsurance

	Accident Year Data
(In thousands)	2015			2016			2017			2018			2019
As originally estimated		24,293			25,619			29,801			29,762			33,563
As estimated at September 30, 2020		22,108			25,695			30,258			28,451			34,427
Net cumulative (deficiency) redundancy	$	2,185		$	(76	)	$	(456	)	$	1,311		$	(864	)
% (deficiency) redundancy		9.0	%		(0.3	)%		(1.5	)%		4.4	%		(2.6	)%

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The table below summarizes the impact on equity, net of tax, from changes in estimates of net unpaid loss and settlement expense:

	December 31,
	2019
(In thousands)	Aggregate Loss and Settlement Reserve		Percentage Change in Equity
Reserve Range for Unpaid Losses and Settlement Expense
Low End	$	41,371		5.3	%
Recorded		45,802		0.0	%
High End		47,312		(1.8	)%

If the net loss and settlement expense reserves were recorded at the high end of the actuarially determined range as of December 31, 2019, the loss and settlement expense reserves would increase by $1.5 million before taxes. This increase in reserves would have the effect of decreasing net earnings and equity as of December 31, 2019 by $1.2 million. If the loss and settlement expense reserves were recorded at the low end of the actuarially-determined range as of December 31, 2019, the net loss and settlement expense reserves at December 31, 2019 would be reduced by $4.4 million with corresponding increases in net earnings and equity of $3.5 million.

Investments

Our investments are primarily composed of fixed maturity debt securities, and both common and preferred stock equity securities. We categorize all our debt securities as available-for-sale (AFS), which are carried at fair as determined by management based upon quoted market prices when available. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. Changes in unrealized investment gains or losses on our AFS securities, net of applicable income taxes, are reflected directly in equity as a component of comprehensive earnings (loss) and, accordingly, have no effect on net earnings (loss). Equity securities are carried at fair value with subsequent changes in fair value recorded in net earnings (loss). Investment income is recognized when earned, and capital gains and losses are recognized when investments are sold, or other-than-temporarily impaired.

The fair value and unrealized losses for our securities that were temporarily impaired are as follows:

	September 30, 2020
	Less than 12 Months					12 Months or Longer					Total
(In thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury		300		—			—		—			300		—
MBS/ABS/CMBS	$	11,438	$	(118	)	$	2,015	$	(23	)	$	13,453	$	(141	)
Corporate		1,075		(97	)		—		—			1,075		(97	)
Municipal		491		(8	)		—		—			491		(8	)
Total temporarily impaired fixed maturity securities	$	13,304	$	(223	)	$	2,015	$	(23	)	$	15,319	$	(246	)

	December 31, 2019
	Less than 12 Months					12 Months or Longer					Total
(In thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	—	$	—		$	699	$	(1	)	$	699	$	(1	)
MBS/ABS/CMBS		6,399		(22	)		5,057		(31	)		11,456		(53	)
Corporate		1,397		(9	)		—		—			1,397		(9	)
Municipal		1,969		(30	)		—		—			1,969		(30	)
Total temporarily impaired fixed maturity securities	$	9,765	$	(61	)	$	5,756	$	(32	)	$	15,521	$	(93	)

Corporate Bonds 

The net unrealized gain in the Corporate bond portfolio increased by about $1.6 million from a gain of $2,473,000 at the end of 2019 to a gain of $4,044,000 as of September 30, 2020. The increase in unrealized gains was driven by a strong rally in Treasuries which resulted in the yield curve dropping about 125 bps due to COVID-19 concerns and the subsequent change in Federal policy. While spreads on Corporate bonds have been volatile through the year, they are generally back to where they were at the end of the year, so spreads have had a limited impact on unrealized gains so far in 2020.

Municipal Bonds 

The net unrealized gain in the Municipal portfolio rose from $778,000 at the end of 2019 to $1,280,000 at the end of September 30, 2020, an increase of $502,000.  Like Corporates, Municipals benefitted from a strong rally in the Treasury market which caused prices in Municipals to move higher.

We monitor our investment portfolio and review securities that have experienced a decline in fair value below cost to evaluate whether the decline is other than temporary. When assessing whether the amortized cost basis of the security will be recovered, we compare the present value of the cash flows likely to be collected, based on an evaluation of all available information relevant to the collectability of the security, to the amortized cost basis of the security. The shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is referred to as the “credit loss.” If there is a credit loss, the impairment is other-than-temporary. If we identify that an other-than-temporary impairment loss has occurred, we then determine whether we intend to sell the security, or if it is more likely than not that we will be required to sell the security prior to recovering the amortized cost basis less any current-period credit losses. If we determine that we do not intend to sell, and it is not more likely than not that we will be required to sell the security, the amount of the impairment loss related to the credit loss will be recorded in earnings, and the remaining portion of the other-than-temporary impairment loss will be recognized in other comprehensive income (loss), net of tax. If we determine that we intend to sell the security, or that it is more likely than not that we will be required to sell the security prior to recovering its amortized cost basis less any current-period credit losses, the full amount of the other-than-temporary impairment (OTTI) will be recognized in earnings.

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For the nine months ended September 30, 2020, the Company did not take an impairment charge on any of its security holdings. Adverse investment market conditions, or poor operating results of underlying investments, could result in impairment charges in the future.

We use quoted values and other data provided by independent pricing services in our process for determining fair values of our investments. The evaluations of such pricing services represent an exit price and a good faith opinion as to what a buyer in the marketplace would pay for a security in a current sale. This pricing service provides us with one quote per instrument. For fixed maturity securities that have quoted prices in active markets, market quotations are provided. For fixed maturity securities that do not trade daily, the independent pricing service prepares estimates of fair value using a wide array of observable inputs including relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. The observable market inputs that our independent pricing service utilizes may include (listed in order of priority for use) benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers, and other reference data on markets, industry, and the economy. Additionally, the independent pricing service uses an option adjusted spread model to develop prepayment and interest rate scenarios. The pricing service did not use broker quotes in determining fair values of our investments.

Should the independent pricing service be unable to provide a fair value estimate, we would attempt to obtain a non-binding fair value estimate from a number of broker-dealers and review this estimate in conjunction with a fair value estimate reported by an independent business news service or other sources. In instances where only one broker-dealer provides a fair value for a fixed maturity security, we use that estimate. In instances where can obtain fair value estimates from more than one broker-dealer, we would review the range of estimates and would select the most appropriate value based on the facts and circumstances. Should neither the independent pricing service nor a broker-dealer provide a fair value estimate, we would develop a fair value estimate based on cash flow analyses and other valuation techniques that utilize certain unobservable inputs. Accordingly, we would classify such a security as a Level 3 investment.

The fair value estimates of our investments provided by the independent pricing service at September 30, 2020 and December 31, 2019, respectively, were utilized, among other resources, in reaching a conclusion as to the fair value of our investments.

Management reviews the reasonableness of the pricing provided by the independent pricing service by employing various analytical procedures. We review all securities to identify recent downgrades, significant changes in pricing, and pricing anomalies on individual securities relative to other similar securities. This will include looking for relative consistency across securities in common sectors, durations, and credit ratings. This review will also include all fixed maturity securities rated lower than “A” by Moody’s or S&P. If, after this review, management does not believe the pricing for any security is a reasonable estimate of fair value, then it will seek to resolve the discrepancy through discussions with the pricing service. In our review, we did not identify any such discrepancies for the nine months ended September 30, 2020 and 2019 and for the year ended December 31, 2019, and no adjustments were made to the estimates provided by the pricing service. The classification within the fair value hierarchy of Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement, is then confirmed based on the final conclusions from the pricing review.

Deferred Policy Acquisition Costs

Certain acquisition costs consisting of direct and ceded commissions, premium taxes and certain other direct underwriting expenses that vary with and are primarily related to the production of business are deferred and amortized over the effective period of the related insurance policies as the underlying policy premiums are earned. At September 30, 2020 and December 31, 2019, deferred acquisition costs and the related unearned premium reserves were as follows: 

(In thousands)	September 30, 2020		December 31, 2019
Deferred acquisition costs	$	5,267	$	5,269
Unearned premium reserves		29,922		30,393

The method followed in computing deferred acquisition costs limits the amount of deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, loss and loss adjustment expenses, and certain other costs expected to be incurred as the premium is earned. Future changes in estimates, the most significant of which is expected loss and loss adjustment expenses, may require adjustments to deferred policy acquisition costs. If the estimation of net realizable value indicates that the deferred acquisition costs are not recoverable, they would be written off.

Income Taxes 

We use the asset and liability method of accounting for income taxes. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the tax bases of our assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The effect of a change in tax rates is recognized in the period of the enactment date.

We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record an additional valuation allowance against our deferred tax assets.

As of September 30, 2020, and December 31, 2019, we had no material unrecognized tax benefits or accrued interest and penalties. Federal tax years 2016 through current year are open for examination.

Other Assets 

As of September 30, 2020 and December 31, 2019 other assets totaled $1,559,000 and $1,240,000, respectively. The other assets balances on the consolidated balance sheets are primarily composed of Corporate Owned Life Insurance asset value as well as prepaid fees. The increase in other assets relates to $298,000 of securities receivable as of September 30, 2020.

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Outstanding Debt

As of September 30, 2020 and December 31, 2019, outstanding debt balances totaled $15,098,000 and $3,475,000, respectively. The average rate on remaining debt was 1.5% as of September 30, 2020 and 3.7% as of  December 31, 2019, respectively.  

Debt Obligation 

ICC Holdings, Inc. secured a loan with a commercial bank in March 2017 in the amount of $3.5 million and used the proceeds to repay ICC for the money borrowed by the ESOP. The term of the loan is five years bearing interest at 3.65%. The Company pledged stock and $1.0 million of marketable assets as collateral for the loan.

The Company also has borrowing capacity up to approximately $33 million in the aggregate from its membership with FHLBC.

In March 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency. As part of the Company’s response to COVID-19, the Company obtained, in March 2020, a $6.0 million loan from the Federal Home Loan Bank of Chicago (FHLBC) as a precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections. The term of the loan is five years bearing interest at 1.4%. The Company pledged $6.8 million of fixed income securities as collateral for this loan. The Company also obtained in May 2020 a $4.0 million loan from the FHLBC as an additional precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections as a result of the Company’s announcement in March 2020 to temporarily suspend all insurance premium billing for 30 days. The Company pledged an additional $7.4 million of fixed income securities as collateral for both FHLBC loans.

In April 2020, the Company obtained a $1.6 million loan (the PPP loan) from a commercial bank pursuant to the federally authorized Paycheck Protection Program (Program) administered by the Small Business Administration (the SBA). The PPP loan matures in the second quarter of 2022 and bears interest at a rate of 1.0% per annum. Commencing the fourth quarter of 2020, we will begin making loan payments. All or a portion of the PPP loan may be forgiven by the SBA upon application by us beginning 60 days, but not later than 120 days, after loan approval and upon documentation of expenditures in accordance with the SBA's requirements. Under the Paycheck Protection Program Flexibility Act of 2020 (the PPP Flexibility Act), (i) the first payment date for the PPP loan will be the earlier of (a) 10 months after the end of the “covered period” (as determined under the Program) or (b) the date the bank receives a remittance of the forgiven amount from the SBA, and (ii) the PPP loan’s maturity is extended to five years (from 2 years). Pursuant to the PPP Flexibility Act, we can obtain the lender's consent for the PPP loan maturity to be extended to the second quarter of 2025 (from 2022) and for the first payment date under the PPP loan to be extended as described in clause (i) of the previous sentence. 

Revolving Line of Credit 

We also maintain a revolving line of credit with another commercial bank, which permits borrowing up to an aggregate principal amount of $2.0 million. This facility was initially entered into in early August of 2020. The line of credit is priced at Prime plus 0.5%. In order to secure the lowest rate possible, the Company pledged business assets not to exceed $2.0 million in the event the Company draws down on the line of credit. There were no borrowings outstanding and there was no interest paid on the line of credit during the nine months ended September 30, 2020 and 2019. There are no financial covenants governing this line of credit.

Other Liabilities 

As of September 30, 2020 and December 31, 2019 other liabilities totaled $951,000 and $1,325,000, respectively. The decrease in other liabilities relates to decreases in accounts payable and advance premiums as of September 30, 2020.

ESOP 

In connection with our conversion and public offering, the ESOP financed the purchase of 10.0% of the common stock issued in the offering for $3,500,000 with the proceeds of a loan from ICC prior to the expiration of the offering. ICC makes annual contributions to the ESOP sufficient to repay that loan. See Note 8 – Employee Benefits of this Form 10-Q as well as the “Management — Benefit Plans and Employment Agreements —Employee Stock Ownership Plan” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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Stock-based Incentive Plan

Under the ICC Holdings, Inc. 2016 Equity Incentive Plan, we reserved for issuance a total of 490,000 shares of common stock. Of this amount, 350,000 shares of common stock may be granted in the form of restricted stock and stock-settled restricted stock unit awards, and 140,000 shares of common stock may be granted in the form of stock options under the stock-based incentive plan. The grant-date fair value of any common stock used for restricted stock and restricted stock unit awards will represent unearned compensation. As we accrue compensation expense to reflect the vesting of such shares, unearned compensation will be reduced accordingly. We compute compensation expense at the time stock units are awarded based on the fair value of such options on the date they are granted. This compensation expense is recognized over the appropriate service period. Restricted stock units (RSUs) were granted for the first time in February 2018 with additional RSUs granted in March 2019 and April 2020. The RSUs vest 1/3 over three years from the date of grant. See Note 8 – Employee Benefits of this Form 10-Q as well as the “Management — Benefit Plans and Employment Agreements” section of the Company’s 2019 Annual Report on Form 10-K.

Liquidity and Capital Resources 

We generate sufficient funds from our operations and maintain a high degree of liquidity in our investment portfolio to meet the demands of claim settlements and operating expenses. The primary sources of funds are premium collections, investment earnings and maturing investments. The increase in cash used in investing activities during the nine months ended September 30, 2020 compared to the same period in 2019 relates to purchases of both fixed maturity securities and preferred stocks. The increase in cash provided by financing activities during the nine months ended September 30, 2020 compared to the same period in 2019 relates to $11.6 million in loans obtained from FHLBC and SBA during the first six months of 2020. See Note 4 – Debt of this Form 10-Q for more information.

We maintain investment and reinsurance programs that are intended to provide sufficient funds to meet our obligations without forced sales of investments. We maintain a portion of our investment portfolio in relatively short-term and highly liquid assets to ensure the availability of funds.

Cash flows from continuing operations for the nine months ended September 30, 2020 and 2019 were as follows:

	Nine-Months Ended September 30,
(In thousands)	2020			2019
Net cash (used in) operating activities	$	(413	)	$	(2,351	)
Net cash (used in) investing activities		(11,128	)		(153	)
Net cash provided by (used in) financing activities		11,513			(110	)
Net (decrease) in cash and cash equivalents	$	(28	)	$	(2,614	)

ICC Holdings, Inc.’s principal source of liquidity will be dividend payments and other fees received from ICC and its other subsidiaries. ICC is restricted by the insurance laws of Illinois as to the amount of dividends or other distributions it may pay to us. Under Illinois law, there is a maximum amount that may be paid by ICC during any twelve-month period. ICC may pay dividends to us after notice to, but without prior approval of the Illinois Department of Insurance in an amount “not to exceed” the greater of (i) 10% of the surplus as regards policyholders of ICC as reported on its most recent annual statement filed with the Illinois Department of Insurance, or (ii) the statutory net income of ICC for the period covered by such annual statement. Dividends in excess of this amount are considered “extraordinary” and are subject to the approval of the Illinois Department of Insurance.

The amount available for payment of dividends from ICC in 2020 without the prior approval of the Illinois Department of Insurance is approximately $5.5 million based upon the insurance company’s 2019 annual statement. Prior to its payment of any dividend, ICC is required to provide notice of the dividend to the Illinois Department of Insurance. This notice must be provided to the Illinois Department of Insurance 30 days prior to the payment of an extraordinary dividend and 10 days prior to the payment of an ordinary dividend. The Illinois Department of Insurance has the power to limit or prohibit dividend payments if ICC is in violation of any law or regulation. These restrictions or any subsequently imposed restrictions may affect our future liquidity. In March 2020, ICC paid a $500,000 dividend to ICC Holdings, Inc.

The following table summarizes, as of September 30, 2020, our future payments under contractual obligations and estimated claims and claims related payments for continuing operations. As of September 30, 2020, the Company had received 1,283 claims for business interruption related to COVID-19. Based on policy language, the Company does not anticipate that coverage will be triggered for these property claims requiring loss payment.

	Payments Due by Period
(In thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Estimated gross loss and settlement expense payments	$	61,944	$	21,313	$	22,265	$	12,482	$	5,884
Debt obligations		15,758		307		9,346		6,105		—
Operating lease obligations		411		286		125		—		—
Total	$	78,113	$	21,906	$	31,736	$	18,587	$	5,884

The timing of the amounts of the gross loss and loss adjustment expense payments is an estimate based on historical experience and the expectations of future payment patterns. However, the timing of these payments may vary from the amounts stated above.

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Off-Balance Sheet Arrangements 

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital reserves.

Item 3. Quantitative and Qualitative Information about Market Risk

Market Risk

Market risk is the risk that we will incur losses due to adverse changes in the fair value of financial instruments. We have exposure to three principal types of market risk through our investment activities: interest rate risk, credit risk and equity risk. Our primary market risk exposure is to changes in interest rates. We have not entered, and do not plan to enter, into any derivative financial instruments for hedging, trading or speculative purposes.

Interest Rate Risk

Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Our exposure to interest rate changes primarily results from our significant holdings of fixed rate investments. Fluctuations in interest rates have a direct impact on the fair value of these securities.

The average maturity of the debt securities in our investment portfolio at September 30, 2020, was 8.15 years. Our debt securities investments include U.S. government bonds, securities issued by government agencies, obligations of state and local governments and governmental authorities, and corporate bonds, most of which are exposed to changes in prevailing interest rates and which may experience moderate fluctuations in fair value resulting from changes in interest rates. We carry these investments as available for sale. This allows us to manage our exposure to risks associated with interest rate fluctuations through active review of our investment portfolio by our management and board of directors and consultation with our third-party investment manager.

Fluctuations in near-term interest rates could have an impact on our results of operations and cash flows. Certain of these securities may have call features. In a declining interest rate environment these securities may be called by their issuer and replaced with securities bearing lower interest rates. If we are required to sell these securities in a rising interest rate environment, we may recognize losses.

As a general matter, we attempt to match the durations of our assets with the durations of our liabilities. Our investment objectives include maintaining adequate liquidity to meet our operational needs, optimizing our after-tax investment income, and our after-tax total return, all of which are subject to our tolerance for risk.

The table below shows the interest rate sensitivity of our fixed maturity investments measured in terms of fair value (which is equal to the carrying value for all our investment securities that are subject to interest rate changes):

	September 30, 2020
Hypothetical Change in Interest Rates (In thousands)	Estimated Change in Fair Value			Fair Value
200 basis point increase	$	(10,528	)	$	92,790
100 basis point increase		(5,414	)		97,904
No change		—			103,318
100 basis point decrease1		3,337			106,655
200 basis point decrease1		4,370			107,688

¹Assumes US rates are floored at 0%.

Credit Risk

Credit risk is the potential economic loss principally arising from adverse changes in the financial condition of a specific debt issuer. We address this risk by investing primarily in fixed maturity securities that are rated investment grade and at least 70% of our investment securities must be rated at least “A” by Moody’s or an equivalent rating quality. We also independently, and through our independent third-party investment manager, monitor the financial condition of all of the issuers of fixed maturity securities in the portfolio. To limit our exposure to risk, we employ diversification rules that limit the credit exposure to any single issuer or asset class.

Equity Risk

Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices.

Impact of Inflation

Inflation increases our customers’ needs for property and casualty insurance coverage due to the increase in the value of the property covered and any potential liability exposure. Inflation also increases claims incurred by property and casualty insurers as property repairs, replacements and medical expenses increase. These cost increases reduce profit margins to the extent that rate increases are not implemented on an adequate and timely basis. We establish property and casualty insurance premiums levels before the amount of loss and loss expenses, or the extent to which inflation may impact these expenses, are known. Therefore, we attempt to anticipate the potential impact of inflation when establishing rates. Because inflation has remained relatively low in recent years, financial results have not been significantly affected by it.

34

Item 4. Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe as specified in the SEC’s rules and forms of the SEC. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision of and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, as of September 30, 2020, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that as of September 30, 2020, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) identified during the third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

35

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes to report.

Item 1A. Risk Factors

A description of the risks associated with our business, financial conditions and results of operations is set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and filed with the SEC on March 30, 2020 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and filed with the SEC on May 15, 2020. 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers 

The following table summarizes repurchases of common stock pursuant to share repurchase programs authorized by the Board of Directors.

Purchases of Equity Securities 

Period	(a) Total number of shares (or units) purchased		(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs (1)
July 1 – July 31, 2020		3,672	$	11.66		3,672	$	2,833,779
August 1 – August 31, 2020		1,100		11.35		1,100		2,832,679
September 1 – September 30, 2020		3,283		11.64		3,283		2,829,396
Total		8,055	$	11.61		8,055

(1) In August 2018, the Company announced the establishment of a $3.0 million share repurchase program, with no expiration date.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable. 

Item 5. Other Information

Not applicable. 

36

Item 6. Exhibits

Exhibit Number	Description
3.1	Form of Amended and Restated Articles of Incorporation of ICC Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-214081) filed on December 23, 2016)
3.2	Form of Amended and Restated Bylaws of ICC Holdings, Inc. (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-214081) filed on December 23, 2016)
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Link Document

37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 12, 2020.

ICC HOLDINGS, INC.
By:	/s/ Arron K. Sutherland
	Arron K. Sutherland President, Chief Executive Officer and Director (Principal Executive Officer)
By:	/s/ Michael R. Smith
	Michael R. Smith Chief Financial Officer (Principal Financial and Accounting Officer)

38

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER’S 302 CERTIFICATION

I, Arron K. Sutherland, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ICC Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2020

/s/ Arron K. Sutherland

Arron K. Sutherland

Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER’S 302 CERTIFICATION

I, Michael R. Smith, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ICC Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2020 

/s/ Michael R. Smith

Michael R. Smith

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ICC Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arron K. Sutherland, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2020 

/s/Arron K. Sutherland

Arron K. Sutherland

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ICC Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael R. Smith, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2020

/s/ Michael R. Smith

Michael R. Smith

Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 06, 2020
Document Information [Line Items]
Entity Registrant Name	ICC Holdings, Inc.
Entity Central Index Key	0001681903
Trading Symbol	icch
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		3,293,325
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock, par value $0.01 per share

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)		Sep. 30, 2020	Dec. 31, 2019
Investments and cash:
Fixed maturity securities (cost or amortized cost - $96,725,639 at 9/30/2020 and $88,348,415 at 12/31/2019)		$ 103,318,485	$ 92,087,572
Other invested assets		1,779,060	877,900
Property held for investment, at cost, net of accumulated depreciation of $438,720 at 9/30/2020 and $332,218 at 12/31/2019		5,515,676	4,353,713
Cash and cash equivalents		6,598,640	6,626,585
Total investments and cash		131,446,949	118,394,543
Accrued investment income		719,389	646,504
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $100,000 at 9/30/2020 and 12/31/2019		22,737,615	22,368,526
Ceded unearned premiums		839,718	822,818
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $0 at 9/30/2020 and 12/31/2019		13,844,420	11,036,170
Federal income taxes		717,862	192,559
Deferred policy acquisition costs, net		5,267,470	5,269,256
Property and equipment, at cost, net of accumulated depreciation of $5,949,933 at 9/30/2020 and $5,619,706 at 12/31/2019		2,851,235	3,033,348
Other assets		1,559,179	1,239,794
Total assets		179,983,837	163,003,518
Liabilities:
Unpaid losses and settlement expenses		61,943,244	56,838,307
Unearned premiums		29,921,669	30,392,817
Reinsurance balances payable		728,674	374,998
Corporate debt		15,097,960	3,475,088
Accrued expenses		3,093,882	4,216,988
Income taxes - deferred		214,674	39,213
Other liabilities		950,858	1,324,273
Total liabilities		111,950,961	96,661,684
Equity:
Common stock	[1]	35,000	35,000
Treasury stock, at cost	[2]	(3,112,656)	(3,146,576)
Additional paid-in capital		32,717,495	32,703,209
Accumulated other comprehensive earnings, net of tax		5,208,657	2,953,936
Retained earnings		35,821,408	36,608,750
Less: Unearned Employee Stock Ownership Plan shares at cost	[3]	(2,637,028)	(2,812,485)
Total equity		68,032,876	66,341,834
Total liabilities and equity		179,983,837	163,003,518
Common Stock [Member]
Investments and cash:
Stocks at fair value		12,596,635	14,448,773
Preferred Stock [Member]
Investments and cash:
Stocks at fair value		$ 1,638,453

[1] Par value $0.01; authorized: 2020 - 10,000,000 shares and 2019 - 10,000,000 shares; issued: 2020 - 3,500,000 shares and 2019 - 3,500,000 shares; outstanding: 2020 - 3,030,522 and 2019 - 3,014,941 shares.

[2] 2020 - 205,775 shares and 2019 - 203,811 shares

[3] 2020 - 263,703 shares and 2019 - 281,248 shares

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($)		Sep. 30, 2020	Dec. 31, 2019
Fixed maturity securities, amortized cost		$ 96,725,639	$ 88,348,415
Property held for investment, accumulated depreciation		438,720	332,218
Premiums and reinsurance balances receivable, allowances for uncollectible amounts		100,000	100,000
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts		0	0
Property and equipment, at cost, accumulated depreciation		$ 5,949,933	$ 5,619,706
Common stock, par value (in dollars per share)	[1]	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	[1]	10,000,000	10,000,000
Common stock, shares issued (in shares)	[1]	3,500,000	3,500,000
Common stock, shares outstanding (in shares)	[1]	3,030,522	3,014,941
Treasury stock (in shares)	[2]	205,775	203,811
Unearned Employee Stock Ownership Plan (in shares)	[3]	263,703	281,248

[1] Par value $0.01; authorized: 2020 - 10,000,000 shares and 2019 - 10,000,000 shares; issued: 2020 - 3,500,000 shares and 2019 - 3,500,000 shares; outstanding: 2020 - 3,030,522 and 2019 - 3,014,941 shares.

[2] 2020 - 205,775 shares and 2019 - 203,811 shares

[3] 2020 - 263,703 shares and 2019 - 281,248 shares

XML

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net premiums earned	$ 12,532,967	$ 13,679,746	$ 36,921,702	$ 39,219,882
Net investment income	900,950	811,462	2,644,900	2,406,965
Net realized investment (losses) gains	(59,333)	141,481	(402,320)	741,123
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	981,779	(7,603)	2,195	1,716,124
Other income (loss)	(36,333)	(112,763)	82,934	(43,838)
Consolidated revenues	14,320,030	14,512,323	39,249,411	44,040,256
Losses and settlement expenses	8,863,053	9,609,347	25,913,619	28,117,369
Policy acquisition costs and other operating expenses	4,722,485	4,733,206	13,741,725	14,541,986
Interest expense on debt	58,724	32,458	150,773	96,353
General corporate expenses	171,860	164,378	471,616	444,829
Total expenses	13,816,122	14,539,389	40,277,733	43,200,537
Earnings (loss) before income taxes	503,908	(27,066)	(1,028,322)	839,719
Total income tax expense (benefit)	99,919	(13,150)	(240,980)	122,796
Net earnings (loss)	403,989	(13,916)	(787,342)	716,923
Other comprehensive earnings, net of tax	440,838	703,220	2,254,721	3,423,233
Comprehensive earnings	$ 844,827	$ 689,304	$ 1,467,379	$ 4,140,156
Basic:
Basic net earnings (loss) per share (in dollars per share)	$ 0.13	$ 0	$ (0.26)	$ 0.24
Diluted:
Diluted net earnings (loss) per share (in dollars per share)	$ 0.13	$ 0	$ (0.26)	$ 0.24
Weighted average number of common shares outstanding:
Basic (in shares)	3,030,571	3,011,034	3,023,794	3,004,887
Diluted (in shares)	3,039,658	3,015,038	3,032,881	3,008,891
Net premiums earned	$ 12,532,967	$ 13,679,746	$ 36,921,702	$ 39,219,882
Net investment income	900,950	811,462	2,644,900	2,406,965
Net realized investment (losses) gains	(59,333)	141,481	(402,320)	741,123
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	981,779	(7,603)	2,195	1,716,124
Other income (loss)	(36,333)	(112,763)	82,934	(43,838)
Consolidated revenues	14,320,030	14,512,323	39,249,411	44,040,256
Losses and settlement expenses	8,863,053	9,609,347	25,913,619	28,117,369
Policy acquisition costs and other operating expenses	4,722,485	4,733,206	13,741,725	14,541,986
Interest expense on debt	58,724	32,458	150,773	96,353
General corporate expenses	171,860	164,378	471,616	444,829
Total expenses	13,816,122	14,539,389	40,277,733	43,200,537
Earnings (loss) before income taxes	503,908	(27,066)	(1,028,322)	839,719
Total income tax expense (benefit)	99,919	(13,150)	(240,980)	122,796
Net earnings (loss)	403,989	(13,916)	(787,342)	716,923
Other comprehensive earnings, net of tax	440,838	703,220	2,254,721	3,423,233
Comprehensive earnings	$ 844,827	$ 689,304	$ 1,467,379	$ 4,140,156

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)		Cumulative Effect, Period of Adoption, Adjustment [Member] Common Stock [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Treasury Stock [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Unearned ESOP [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Additional Paid-in Capital [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] AOCI Attributable to Parent [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Common Stock [Member]	Treasury Stock [Member]		Unearned ESOP [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (Accounting Standards Update 2016-01 [Member]) at Dec. 31, 2018	[1]					$ (1,366,297)	$ 1,366,297
Balance at Dec. 31, 2018									$ 35,000	$ (2,999,995)		$ (3,046,855)	$ 32,505,423	$ 33,680,702	$ (1,580,976)	$ 58,593,299
Purchase of common stock										(102,855)						(102,855)
Net (loss)														716,923		716,923
Other comprehensive earnings, net of tax															3,423,233	3,423,233
Restricted stock unit expense													78,226			78,226
ESOP compensation expense												175,296	57,839			233,135
Balance at Sep. 30, 2019									35,000	(3,102,850)		(2,871,559)	32,641,488	33,031,328	3,208,554	62,941,961
Balance (Accounting Standards Update 2016-01 [Member]) at Dec. 31, 2019
Balance at Dec. 31, 2019									35,000	(3,146,576)		(2,812,485)	32,703,209	36,608,750	2,953,936	66,341,834
Purchase of common stock										(109,460)						(109,460)
Net (loss)														(787,342)		(787,342)
Other comprehensive earnings, net of tax															2,254,721	2,254,721
Restricted stock unit expense										143,380	[2]		(16,792)			126,588
ESOP compensation expense												175,457	31,078			206,535
Balance at Sep. 30, 2020									$ 35,000	$ (3,112,656)		$ (2,637,028)	$ 32,717,495	$ 35,821,408	$ 5,208,657	$ 68,032,876

[1] See discussion of Accounting Standards Update 2016-01 adoption in 2019 10-K, Note 1 - Summary of Significant Accounting Policies

[2] Amount represents restricted stock units that have fully vested in the period

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net (loss)	$ (787,342)	$ 716,923
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities
Net realized investment losses (gains)	402,320	(741,123)
Net unrealized (gains) on equity securities	(2,195)	(1,716,124)
Depreciation	508,152	613,916
Deferred income tax	(423,896)	360,009
Amortization of bond premium and discount	175,114	172,691
Stock-based compensation expense	333,123	311,361
Change in:
Accrued investment income	(72,885)	(2,371)
Premiums and reinsurance balances receivable	(369,089)	(1,847,981)
Ceded unearned premiums	(16,900)	(65,406)
Reinsurance balances payable	353,676	(897,013)
Reinsurance balances recoverable	(2,808,250)	(5,530,517)
Deferred policy acquisition costs	1,786	(278,207)
Unpaid losses and settlement expenses	5,104,937	6,875,171
Unearned premiums	(471,148)	1,642,978
Accrued expenses	(1,123,106)	(1,376,476)
Current federal income tax	(525,303)	(18,097)
Other	(692,009)	(570,277)
Net cash (used in) operating activities	(413,015)	(2,350,543)
Cash flows from investing activities:
Fixed maturity securities, available-for-sale	(20,946,699)	(19,060,848)
Other invested assets	(901,500)	(738,300)
Property held for investment	(1,268,464)	(332,393)
Property and equipment	(231,291)	(321,704)
Proceeds from sales, maturities and calls of:
Fixed maturity securities, available-for-sale	12,813,180	19,522,461
Property and equipment	11,753	31,137
Net cash (used in) investing activities	(11,128,342)	(153,466)
Cash flows from financing activities:
Proceeds from loans	11,629,800
Repayments of borrowed funds	(6,928)	(7,020)
Purchase of treasury stock	(109,460)	(102,855)
Net cash provided by (used in) financing activities	11,513,412	(109,875)
Net (decrease) in cash and cash equivalents	(27,945)	(2,613,884)
Cash and cash equivalents at beginning of year	6,626,585	4,644,784
Cash and cash equivalents at end of period	6,598,640	2,030,900
Supplemental information:
Federal income tax paid (recovered)		(164,543)
Interest paid	135,800	96,700
Common Stock [Member]
Cash flows from investing activities:
Equity securities	(3,356,465)	(5,252,095)
Proceeds from sales, maturities and calls of:
Equity securities	4,247,936	5,998,276
Preferred Stock [Member]
Cash flows from investing activities:
Equity securities	(1,718,782)
Proceeds from sales, maturities and calls of:
Equity securities	$ 221,990

XML

Note 1 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. DESCRIPTION OF BUSINESS

ICC Holdings, Inc. is a Pennsylvania corporation that was organized in

2016.

As used in this Form

10

-Q, references to the “Company,” “we,” “us,” and “our” refer to the consolidated group. On a stand-alone basis ICC Holdings, Inc. is referred to as the “Parent Company.” The consolidated group consists of the holding company, ICC Holdings, Inc.; ICC Realty, LLC, a real estate services and holding company; Beverage Insurance Agency, Inc., a non-insurance subsidiary; Estrella Innovative Solutions, Inc., an outsourcing company; and Illinois Casualty Company (ICC), an operating insurance company that is the parent company of ICC Properties, LLC, a real estate series limited liability company. Both ICC and ICC Properties, LLC are Illinois domiciled companies.

We are a specialty insurance carrier primarily underwriting commercial multi-peril, liquor liability, workers' compensation, and umbrella liability coverages for the food and beverage industry through our subsidiary insurance company, ICC. ICC writes business in Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Wisconsin and markets through independent agents.

Approximately

22.7%

 and 

22.3%

of the premium is written in Illinois for the

three

months ended

September 30, 2020

and

2019

, respectively. For the

nine

months ended

September 30, 2020

and

2019

, approximately 

25.0%

and 

25.8%

of the premium is written in Illinois, respectively. The Company operates as a single segment.

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form

10

-Q.  Accordingly, they do

not

include all the disclosures required by GAAP for complete financial statements.  As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company's Annual Report on Form

10

-K, for the year ended

December 31, 2019

(the

“2019

10

-K”). Management believes that the disclosures are adequate to make the information presented

not

misleading, and all normal and recurring adjustments necessary to present fairly the financial position at

September 30, 2020

, and the results of operations of the Company and its subsidiaries for all periods presented have been made. The results of operations for any interim period are

not

necessarily indicative of the operating results for a full year.

The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These amounts are inherently subject to change and actual results could differ significantly from these estimates.

C. SIGNIFICANT ACCOUNTING POLICIES

The Company reported its significant accounting policies in the

2019

10

-K.

D. PROSPECTIVE ACCOUNTING STANDARDS

For information regarding accounting standards that the Company has

not

yet adopted, see the “Prospective Accounting Standards” in

Note

1

– Summary of Significant Accounting Policies

in the

2019

10

-K. The Company maintains its status as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of

2012

(the “JOBS Act”). We have taken advantage of the extended transition period provided by Section

107

of the JOBS Act. We decided to comply with the effective dates for financial accounting standards applicable to emerging growth companies later in compliance with the requirements in Sections

107

(b)(

2

) and (

3

) of the JOBS Act. Such decision is irrevocable. 

E. PROPERTY AND EQUIPMENT

Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended 

September 30, 2020

and 

December 31, 2019

, the Company recognized

no

impairments.  Property and equipment are summarized as follows:

	As of
	September 30,			December 31,
	2020			2019
Automobiles	$	530,722		$	505,788
Furniture and fixtures		474,401			457,218
Computer equipment and software		3,917,136			3,823,416
Home office		3,878,909			3,866,632
Total cost		8,801,168			8,653,054
Accumulated depreciation		(5,949,933	)		(5,619,706	)
Net property and equipment	$	2,851,235		$	3,033,348

F. COMPREHENSIVE EARNINGS

Comprehensive earnings (loss) include net (loss) earnings plus unrealized (gains) losses on available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, the Company used a

21%

tax rate. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is

net of tax expense

of $

343,316

and $

771,697

for the

nine

months ended

September 30, 2020

and

2019

, respectively.

The following table presents changes in accumulated other comprehensive earnings for unrealized gains and losses on available-for-sale securities:

	Nine-Month Periods Ended
	September 30,
	2020			2019
Beginning balance	$	2,953,936		$	(1,580,976	)
Cumulative effect of adoption of ASU 2016-01		-			1,366,297
Adjusted beginning balance		2,953,936			(214,679	)
Other comprehensive earnings before reclassification		2,579,925			3,611,573
Amount reclassified from accumulated other comprehensive earnings		(325,204	)		(188,340	)
Net current period other comprehensive earnings		2,254,721			3,423,233
Ending balance	$	5,208,657		$	3,208,554

The

following table

illustrates the components of other comprehensive earnings for each period presented in the condensed consolidated interim financial statements.

	Three-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	551,140		$	(57,292	)	$	493,848		$	890,152		$	(116,415	)	$	773,737
Reclassification adjustment for (gains) included in net earnings		(67,102	)		14,092			(53,010	)		(89,262	)		18,745			(70,517	)
Total other comprehensive earnings	$	484,038		$	(43,200	)	$	440,838		$	800,890		$	(97,670	)	$	703,220

	Nine-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	2,836,794		$	(256,869	)	$	2,579,925		$	4,333,205		$	(721,632	)	$	3,611,573
Reclassification adjustment for (gains) included in net earnings		(411,651	)		86,447			(325,204	)		(238,405	)		50,065			(188,340	)
Total other comprehensive earnings	$	2,425,143		$	(170,422	)	$	2,254,721		$	4,094,800		$	(671,567	)	$	3,423,233

The following table provides the reclassifications from accumulated other comprehensive earnings for the periods presented:

Amounts Reclassified from
Accumulated Other Comprehensive Earnings
	Three-Month Periods Ended						Nine-Month Periods Ended
Details about Accumulated Other	September 30,						September 30,						Affected Line Item in the Statement
Comprehensive Earnings Component	2020			2019			2020			2019			where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(67,102	)	$	(89,262	)	$	(411,651	)	$	(238,405	)	Net realized investment (gains) losses
		14,092			18,745			86,447			50,065		Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(53,010	)	$	(70,517	)	$	(325,204	)	$	(188,340	)

G. RISKS AND UNCERTAINTIES

Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-

19

pandemic has resulted in, and is expected to continue to result in, significant disruptions in economic activity and financial markets. The cumulative effects of COVID-

19

on the Company, and the effect of any civil unrest or other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, or reduce the market value of invested assets held by the Company.

XML

Note 2 - Investments

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

2. INVESTMENTS

The Company's investments are primarily composed of fixed income debt securities and common and preferred stock equity securities. We carry our equity securities at fair value and categorize all our fixed maturity debt securities as available-for-sale (AFS), which are carried at fair value. When available, quoted market prices are obtained to determine fair value for the Company's investments. If a quoted market price is

not

available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. The Company has

no

investment securities for which fair value is determined using Level

3

inputs as defined in

Note

3

– Fair Value Disclosures

. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date, which does

not

differ significantly from trade date accounting.

Available-for-Sale Fixed Maturity and Equity Securities

 

The

following tables

are a summary of the proceeds from sales, maturities, and calls of AFS fixed maturity and equity securities and the related gross realized gains and losses.

	For the Three-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	3,428,951	$	67,102	$	—		$	67,102
Common stocks		986,939		93,984		(226,398	)		(132,414	)
Preferred stocks		76,500		5,979		—			5,979
2019
Fixed maturity securities	$	5,771,988	$	99,445	$	(10,183	)	$	89,262
Common stocks		1,320,803		185,319		(133,100	)		52,219

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	12,813,180	$	412,577	$	(926	)	$	411,651
Common stocks		4,247,936		470,406		(1,282,423	)		(812,017	)
Preferred stocks		221,990		8,808		(10,762	)		(1,954	)
2019
Fixed maturity securities	$	19,522,461	$	264,737	$	(26,332	)	$	238,405
Common stocks		5,998,276		960,420		(457,702	)		502,718

The amortized cost and estimated fair value of fixed income securities at

September 30, 2020

, by contractual maturity,

are shown as follows

:

	Amortized Cost		Fair Value
Due in one year or less	$	1,275,943	$	1,305,900
Due after one year through five years		18,436,788		19,612,776
Due after five years through 10 years		16,366,929		18,431,137
Due after 10 years		21,586,567		23,678,509
Asset and mortgage backed securities without a specific due date		38,843,607		40,057,464
Redeemable preferred stocks		215,805		232,699
Total fixed maturity securities	$	96,725,639	$	103,318,485

Expected maturities

may

differ from contractual maturities due to call provisions on some existing securities.

The following table is a schedule of cost or amortized cost and estimated fair values of investments in securities classified as available for sale at

September 30, 2020

and

December 31, 2019

:

	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2020
Fixed maturity securities:
U.S. Treasury	$	1,352,935	$	1,390,344	$	37,491	$	(82	)
MBS/ABS/CMBS		38,843,607		40,057,464		1,354,537		(140,680	)
Corporate		38,295,706		42,339,992		4,141,760		(97,474	)
Municipal		18,017,586		19,297,986		1,288,389		(7,989	)
Redeemable preferred stock		215,805		232,699		16,894		—
Total fixed maturity securities	$	96,725,639	$	103,318,485	$	6,839,071	$	(246,225	)

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2019
Fixed maturity securities:
U.S. Treasury	$	800,462	$	800,219	$	684	$	(927	)
MBS/ABS/CMBS		33,802,911		34,290,995		540,743		(52,659	)
Corporate		39,442,202		41,915,103		2,482,378		(9,477	)
Municipal		14,302,840		15,081,255		808,081		(29,666	)
Total fixed maturity securities	$	88,348,415	$	92,087,572	$	3,831,886	$	(92,729	)

All the Company's collateralized securities carry an average credit rating of AA+ by

one

or more major rating agencies and continue to pay according to contractual terms. Included within MBS/ABS/CMBS, as defined in

Note

3

– Fair Value Disclosures,

are residential mortgage backed securities with

fair values o

f $

13,590,690

 and $

9,909,462

 and commercial mortgage backed securities of $

13,811,945

and $

13,408,898

at

September 30, 2020

and

December 31, 2019

, respectively.

ANALYSIS

 

The following tables are also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of

September 30, 2020

and

December 31, 2019

.

The tables

segregate the securities based on type, noting the fair value, cost or amortized cost, and unrealized loss on each category of investment as well as in total. The table further classifies the securities based on the length of time they have been in an unrealized loss position.

	September 30, 2020									December 31, 2019
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	300,000		$	—		$	300,000		$	—		$	699,391		$	699,391
Amortized cost		300,082			—			300,082			—			700,318			700,318
Unrealized loss		(82	)		—			(82	)		—			(927	)		(927	)
MBS/ABS/CMBS
Fair value		11,438,192			2,014,666			13,452,858			6,398,581			5,056,732			11,455,313
Amortized cost		11,556,312			2,037,226			13,593,538			6,420,488			5,087,484			11,507,972
Unrealized loss		(118,120	)		(22,560	)		(140,680	)		(21,907	)		(30,752	)		(52,659	)
Corporate
Fair value		1,075,259			—			1,075,259			1,396,706			—			1,396,706
Amortized cost		1,172,733			—			1,172,733			1,406,183			—			1,406,183
Unrealized loss		(97,474	)		—			(97,474	)		(9,477	)		—			(9,477	)
Municipal
Fair value		491,160			—			491,160			1,969,468			—			1,969,468
Amortized cost		499,149			—			499,149			1,999,134			—			1,999,134
Unrealized loss		(7,989	)		—			(7,989	)		(29,666	)		—			(29,666	)
Total
Fair value		13,304,611			2,014,666			15,319,277			9,764,755			5,756,123			15,520,878
Amortized cost		13,528,276			2,037,226			15,565,502			9,825,805			5,787,802			15,613,607
Unrealized loss	$	(223,665	)	$	(22,560	)	$	(246,225	)	$	(61,050	)	$	(31,679	)	$	(92,729	)

The fixed income portfolio contained 

22

securities in an

unrealized loss position

as of

September 30, 2020

. Of these 

22

securities, 

4

have been in an unrealized loss position for

12

consecutive months or longer and represent $

22,560

in unrealized losses. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Credit-related impairments on fixed income securities that we do

not

plan to sell, and for which we are

not

more likely than

not

to be required to sell, are recognized in net earnings. Any non-credit related impairment is recognized in comprehensive earnings. Based on management's analysis, the fixed income portfolio is of a high credit quality and it is believed it will recover the amortized cost basis of the fixed income securities. Management monitors the credit quality of the fixed income investments to assess if it is probable that the Company will receive its contractual or estimated cash flows in the form of principal and interest.

There were

no

other-than-temporary impairment losses recognized in net earnings during the

nine

months ended

September 30, 2020

. For all fixed income securities at a loss at

September 30, 2020

, management believes it is probable that the Company will receive all contractual payments in the form of principal and interest. In addition, the Company is

not

required to, nor does it intend to sell these investments prior to recovering the entire amortized cost basis for each security, which

may

be at maturity. The fixed income securities in an unrealized loss position were

not

other-than-temporarily impaired at

September 30, 2020

and

December 31, 2019

.

UNREALIZED GAINS AND LOSSES ON EQUITY SECURITIES

 

Net unrealized gains

for the

three

and

nine

months ended

September 30, 2020

for equity securities held as of

September 30, 2020

were $

981,779

 and $

2,195

 respectively. Net unrealized (losses) gains for the

three

and

nine

months ended

September 30, 2019

for equity securities held as of

September 30, 2019

were $

(

7,603

)

 and $

1,716,124

, respectively.

Other Invested Assets

 

Other invested assets include membership in the Federal Home Loan Bank of Chicago (FHLBC), which occurred in

February 2018.

Our

$200,000

investment in FHLBC stock is carried at cost. Due to the nature of our membership in the FHLBC, the carrying amount approximates fair value.

In addition,

other invested assets

include privately held investments of

$305,000,

and notes issued for

$625,000

and

$650,000

on

July 30, 2019

and

January 28, 2020,

respectively. Both notes bear interest at

6.5%

and are amortized over

20

years with a balloon payment due

July 30, 2029.

XML

Note 3 - Fair Value Disclosures

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

3. FAIR VALUE DISCLOSURES

Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. The fair value of certain financial instruments is determined based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes

three

levels of inputs that

may

be used to measure fair value.

The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level:

●  Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets.

●  Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.

●  Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value.

As a part of the process to determine fair value, management utilizes widely recognized,

third

-party pricing sources to determine fair values. Management has obtained an understanding of the

third

-party pricing sources' valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy.

Corporate, Agencies, and Municipal Bonds—

The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two

-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level

2.

All Corporate, Agencies, and Municipal securities are deemed Level

2.

Mortgage-backed Securities (MBS), Collateralized Mortgage Obligations (CMO), Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS)—

The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile, or credit sensitivity) is based on the pricing vendors' interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, pre-payment assumptions and to incorporate collateral performance. To evaluate CMO volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates, and recent trade activity. MBS, CMBS, CMO and ABS with corroborated and observable inputs are classified as Level

2.

All MBS, CMBS, CMO and ABS holdings are deemed Level

2.

U.S. Treasury Bonds, Common Stocks and Exchange Traded Funds—

U.S. treasury bonds and exchange traded equities have readily observable price levels and are classified as Level

1

(fair value based on quoted market prices). All common stock holdings are deemed Level

1.

Preferred Stock—

Preferred stocks do

not

have readily observable prices, but do have quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are

not

active; and inputs other than quoted prices and are classified as Level

2.

All preferred stock holdings are deemed Level

2.

Due to the relatively short-term nature of cash and cash equivalents, their carrying amounts are reasonable estimates of fair value. Other invested assets as well as debt obligations are carried at face value and given that there is

no

readily available market for these to trade in, management believes that face value accurately reflects fair value.

Assets measured at fair value on a recurring basis

as of

September 30, 2020

, are summarized below:

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	1,390,344	$	—	$	—	$	1,390,344
MBS/ABS/CMBS		—		40,057,464		—		40,057,464
Corporate		—		42,339,992		—		42,339,992
Municipal		—		19,297,986		—		19,297,986
Redeemable preferred stocks		—		232,699		—		232,699
Total fixed maturity securities		1,390,344		101,928,141		—		103,318,485
Equity securities
Common stocks		12,596,635		—		—		12,596,635
Perpetual preferred stocks		—		1,638,453		—		1,638,453
Total equity securities		12,596,635		1,638,453		—		14,235,088
Total marketable investments measured at fair value	$	13,986,979	$	103,566,594	$	—	$	117,553,573

Assets measured at fair value on a recurring basis

as of

December 31, 2019

, are summarized below:

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	800,219	$	—	$	—	$	800,219
MBS/ABS/CMBS		—		34,290,995		—		34,290,995
Corporate		—		41,915,103		—		41,915,103
Municipal		—		15,081,255		—		15,081,255
Total fixed maturity securities		800,219		91,287,353		—		92,087,572
Equity securities
Common stocks		14,448,773		—		—		14,448,773
Total marketable investments measured at fair value	$	15,248,992	$	91,287,353	$	—	$	106,536,345

As noted in the previous tables, the Company did

not

have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level

3

) as of

September 30, 2020

and

December 31, 2019

.

Additionally, there were

no

securities transferred in or out of Levels

1

or

2

during the

nine

-month periods ended

September 30, 2020

and

2019

.

XML

Note 4 - Debt

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

4. DEBT

Debt Obligation

 

ICC Holdings, Inc. secured a loan with a commercial bank in

March 2017

in the amount of

$3.5

million and used the proceeds to repay ICC for the money borrowed by the ESOP. The term of the loan is

five

years bearing interest at

3.65%.

The Company pledged stock and

$1.0

million of marketable assets as collateral for the loan.

The Company also has borrowing capacity up to approximately

$33

million in the aggregate from its membership with the Federal Home Loan Bank of Chicago (FHLBC).

In

March 2020,

the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (COVID-

19

) outbreak, which has led to a global health emergency. As part of the Company's response to COVID-

19,

the Company obtained, in

March 2020,

a

$6.0

million loan from the FHLBC as a precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections. The term of the loan is

five

years bearing interest at

1.4%.

The Company pledged

$6.8

million of fixed income securities as collateral for this loan. The Company also obtained, in

May 2020,

a

$4.0

million

0%

interest,

one

-year loan from the FHLBC as an additional precautionary measure to increase its cash position and compensate for potential reductions in premium receivable collections as a result of the Company's announcement in

March 2020

to temporarily suspend all insurance premium billing for

30

days. The Company pledged an additional

$7.4

million of fixed income securities as collateral for both FHLBC loans.

In

April 2020,

the Company obtained a

$1.6

million loan (the PPP loan) from a commercial bank pursuant to the federally authorized Paycheck Protection Program (Program) administered by the Small Business Administration (the SBA). The PPP loan matures in the

second

quarter of

2022

and bears interest at a rate of

1.0%

per annum. Commencing the

fourth

quarter of

2020,

we will begin making loan payments. All or a portion of the PPP loan

may

be forgiven by the SBA upon application by us beginning

60

days, but

not

later than

120

days, after loan approval and upon documentation of expenditures in accordance with the SBA's requirements. Under the Paycheck Protection Program Flexibility Act of

2020

(the PPP Flexibility Act), (i) the

first

payment date for the PPP loan will be the earlier of (a)

10

months after the end of the “covered period” (as determined under the Program) or (b) the date the bank receives a remittance of the forgiven amount from the SBA, and (ii) the PPP loan's maturity is extended to

five

years (from

2

years). Pursuant to the PPP Flexibility Act, we can obtain the lender's consent for the PPP loan maturity to be extended to the

second

quarter of

2025

(from

2022

) and for the

first

payment date under the PPP loan to be extended as described in clause (i) of the previous sentence. 

The total balance of the debt agreements at

September 30, 2020

and

December 31, 2019

was $

15,097,960

 and $

3,475,088

, respectively. The average interest rate on remaining debt was

1.5%

 as of

September 30, 2020

and 

3.7%

as of

December 31, 2019

.

On

July 30, 2020,

the Company secured through FHLBC a fixed

0.74%

borrowing rate for a future

$4.0

million loan that becomes effective

May 3, 2021,

upon the maturity of the existing

$4.0

million FHLBC loan.  

No

collateral was pledged for this forward advance.

Revolving Line of Credit

 

We maintained a revolving line of credit with a commercial bank, which permitted borrowing up to an aggregate principal amount of

$1.75

million. This facility was initially entered into during

2013

and expired

August 5, 2020.

The line of credit was priced at

30

-day LIBOR plus

2%

with a floor of

3.5%.

In order to secure the lowest rate possible, the Company pledged marketable securities

not

to exceed

$5.0

million in the event the Company would draw down on the line of credit. There was

no

interest paid on the line of credit during the

nine

months ended

September 30, 2020

and

2019

. There were

no

financial covenants governing this agreement.

Effective

August 3, 2020,

the Company replaced its expiring line of credit with a

$2.0

million revolving line of credit with another commercial bank, which renews annually and has a current expiration date of

August 3, 2021.  

This new line of credit is priced at Prime plus

0.5%.

The Company pledged

$2.0

million of business assets in the event the Company draws down on the line of credit.  There are

no

financial covenants governing this line of credit.

XML

Note 5 - Reinsurance

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Reinsurance [Text Block]

5. REINSURANCE

In the ordinary course of business, the Company assumes and cedes premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk (known as facultative reinsurance). In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any

one

occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, management monitors the concentration of risks exposed to catastrophic events.

Through the purchase of reinsurance, the Company also generally limits its net loss on any individual risk to a maximum of

$1,000,000

for casualty business,

$500,000

for property, and

$500,000

for workers' compensation, although certain treaties contain an annual aggregate deductible before reinsurance applies.

Premiums, written and earned, along with losses and settlement expenses incurred for the periods presented is summarized

as follows:

 

	Three-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	14,534,058		$	16,305,222
Reinsurance assumed		51,551			70,200
Reinsurance ceded		(2,328,734	)		(2,410,170	)
Net	$	12,256,875		$	13,965,252
EARNED
Direct	$	14,825,942		$	16,007,232
Reinsurance assumed		51,108			64,863
Reinsurance ceded		(2,344,083	)		(2,392,349	)
Net	$	12,532,967		$	13,679,746
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	10,536,397		$	13,034,216
Reinsurance assumed		6,073			36,297
Reinsurance ceded		(1,679,417	)		(3,461,166	)
Net	$	8,863,053		$	9,609,347

	Nine-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	44,240,437		$	48,349,466
Reinsurance assumed		114,924			178,446
Reinsurance ceded		(7,921,708	)		(7,730,458	)
Net	$	36,433,653		$	40,797,454
EARNED
Direct	$	44,710,106		$	46,710,351
Reinsurance assumed		116,404			174,583
Reinsurance ceded		(7,904,808	)		(7,665,052	)
Net	$	36,921,702		$	39,219,882
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	37,370,896		$	37,778,378
Reinsurance assumed		44,409			119,498
Reinsurance ceded		(11,501,686	)		(9,780,507	)
Net	$	25,913,619		$	28,117,369

XML

Note 6 - Unpaid Losses and Settlement Expenses

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]

6. UNPAID LOSSES AND SETTLEMENT EXPENSES

The following

table

is a reconciliation of the Company's unpaid losses and settlement expenses:

	For the Three-Months Ended
	September 30,
(In thousands)	2020			2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	66,415		$	61,264
Less: Ceded		19,463			13,974
Net		46,952			47,290
Increase in incurred losses and settlement expense:
Current year		9,298			9,092
Prior years		(435	)		517
Total incurred		8,863			9,609
Deduct: Loss and settlement expense payments for claims incurred:
Current year		4,885			6,064
Prior years		2,831			4,778
Total paid		7,716			10,842
Net unpaid losses and settlement expense - end of the period		48,099			46,057
Plus: Reinsurance recoverable on unpaid losses		13,844			12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943		$	58,323

	For the Nine-Months Ended
	September 30,
(In thousands)	2020		2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	56,838	$	51,447
Less: Ceded		11,036		6,736
Net		45,802		44,711
Increase in incurred losses and settlement expense:
Current year		23,838		25,779
Prior years		2,076		2,338
Total incurred		25,914		28,117
Deduct: Loss and settlement expense payments for claims incurred:
Current year		10,534		10,455
Prior years		13,083		16,316
Total paid		23,617		26,771
Net unpaid losses and settlement expense - end of the period		48,099		46,057
Plus: Reinsurance recoverable on unpaid losses		13,844		12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943	$	58,323

Net unpaid losses and

settlement expense

increased

 

$2,042,000

, or

4.4%

, in the

nine

months ended

September 30, 2020

as compared to the same period in

2019

. For the

nine

months ended

September 30, 2020

and

2019

, we experienced 

unfavorable

development of 

$2,076,000

and

$2,338,000

, respectively. The  

unfavorable

 development for the

three

and

nine

months ended

September 30, 2020

was primarily driven by the Business Owners Liability and Business Owners Property lines of business. Business Owners Liability and Liquor Liability lines of business were the

primary drivers

of adverse development for the

three

and

nine

-month periods ended

September 30, 2019

.

XML

Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7. INCOME TAXES

The Company's

effective tax rate

for the

three

and

nine

-month periods ended

September 30, 2020

, were

19.8%

 and

23.4%

, respectively, compared to 

48.6%

and 

14.6%

 for the same periods in

2019

, respectively. Effective rates are dependent upon components of pretax earnings and the related tax effects.

Income tax expense for the

three

and

nine

months ended

September 30, 2020

and

2019

, differed from the amounts computed by applying the U.S. federal tax rate of

21%

to pretax income from continuing operations as demonstrated in the following tables:

	For the Three-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	105,820		$	(5,684	)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(7,871	)		(8,955	)
Tax-exempt interest income		(15,531	)		(16,433	)
Proration of tax-exempt interest and dividends received deduction		5,715			5,939
Nondeductible expenses		11,523			8,404
Officer life insurance, net		263			3,579
Total	$	99,919		$	(13,150	)

	For the Nine-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	(215,948	)	$	176,341
Increase (reduction) in taxes resulting from:
Dividends received deduction		(21,567	)		(28,482	)
Tax-exempt interest income		(46,795	)		(60,249	)
Proration of tax-exempt interest and dividends received deduction		16,683			21,775
Nondeductible expenses		25,751			24,450
Officer life insurance, net		896			(11,039	)
Total	$	(240,980	)	$	122,796

Management believes it is more likely than

not

that all deferred tax assets will be recovered as the result of future operations, which will generate sufficient taxable income to realize the deferred tax asset.

As of

September 30, 2020

and

December 31, 2019

, the Company does

not

have any capital or operating loss carryforwards. Periods still subject to IRS audit include

2016

through current year. There are currently

no

open tax exams.

XML

Note 8 - Employee Benefits

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

8. EMPLOYEE BENEFITS

ESOP

 

In connection with our conversion and public offering, we established an ESOP. The ESOP borrowed from the Company to purchase

350,000

shares in the offering. The issuance of the shares to the ESOP resulted in a contra account established in the equity section of the balance sheet for the unallocated shares at an amount equal to their

$10.00

per share purchase price.

The Company

may

make discretionary contributions to the ESOP and pay dividends on unallocated shares to the ESOP. ICC makes annual contributions to the ESOP sufficient to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation.  

No

contributions to the ESOP were made during the

nine

months ended

September 30, 2020

and

2019

, respectively.

A compensation expense charge is booked monthly during each year for the shares committed to be allocated to participants that year, determined with reference to the fair market value of our stock at the time the commitment to allocate the shares is accrued and recognized. For the

nine

months ended

September 30, 2020

, we

recognized compensation expense

of $

206,535

related to 

17,546

shares of our common stock that are committed to be released to participants' accounts at

December 31, 2020.

Of the

17,546

 shares committed to be released, 

1,921

shares were committed on

September 30, 2020

and had

no

impact on the weighted average common shares outstanding for the 

three

and

nine

months ended

September 30, 2020

. For the

nine

months ended

September 30, 2019

, we recognized compensation expense of $

233,135

related to 

17,530

shares of our common stock that were committed to be released to participants' accounts at

December 31, 2019

. Of the

17,530

 shares committed to be released at

December 31, 2019

, 

1,926

shares were committed on

September 30, 2019

and had

no

impact on the weighted average common shares outstanding for the

three

and

nine

months ended

September 30, 2019

.  

RESTRICTED STOCK UNITS

 

Restricted stock units (RSUs) were granted for the

first

time in

February 2018

with additional RSUs granted in

March 2019

and

April 2020.

RSUs have a grant date value equal to the closing price of the Company's stock on the dates the shares are granted. The RSUs vest

1/3

over

three

years from the date of grant.

As of

September 30, 2020

,

18,040,

 

13,071,

and

11,700

RSUs have been granted

at a fair market value of

$11.03,

 

$13.70,

and

$15.10,

respectively. We recognized $

126,588

and $

78,226

of expense on these units in the

nine

months ended

September 30, 2020

and

September 30, 2019

, respectively. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $

269,359

 as of

September 30, 2020

, which will be recognized over the remainder of the

three

-year vesting periods.

XML

Note 9 - Subsequent Events

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

9. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the financial statements were issued.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Description of Business [Policy Text Block]

A. DESCRIPTION OF BUSINESS

ICC Holdings, Inc. is a Pennsylvania corporation that was organized in

2016.

As used in this Form

10

-Q, references to the “Company,” “we,” “us,” and “our” refer to the consolidated group. On a stand-alone basis ICC Holdings, Inc. is referred to as the “Parent Company.” The consolidated group consists of the holding company, ICC Holdings, Inc.; ICC Realty, LLC, a real estate services and holding company; Beverage Insurance Agency, Inc., a non-insurance subsidiary; Estrella Innovative Solutions, Inc., an outsourcing company; and Illinois Casualty Company (ICC), an operating insurance company that is the parent company of ICC Properties, LLC, a real estate series limited liability company. Both ICC and ICC Properties, LLC are Illinois domiciled companies.

We are a specialty insurance carrier primarily underwriting commercial multi-peril, liquor liability, workers' compensation, and umbrella liability coverages for the food and beverage industry through our subsidiary insurance company, ICC. ICC writes business in Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Wisconsin and markets through independent agents.

Approximately

22.7%

 and 

22.3%

of the premium is written in Illinois for the

three

months ended

September 30, 2020

and

2019

, respectively. For the

nine

months ended

September 30, 2020

and

2019

, approximately 

25.0%

and 

25.8%

of the premium is written in Illinois, respectively. The Company operates as a single segment.

Consolidation, Policy [Policy Text Block]

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form

10

-Q.  Accordingly, they do

not

include all the disclosures required by GAAP for complete financial statements.  As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company's Annual Report on Form

10

-K, for the year ended

December 31, 2019

(the

“2019

10

-K”). Management believes that the disclosures are adequate to make the information presented

not

misleading, and all normal and recurring adjustments necessary to present fairly the financial position at

September 30, 2020

, and the results of operations of the Company and its subsidiaries for all periods presented have been made. The results of operations for any interim period are

not

necessarily indicative of the operating results for a full year.

The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These amounts are inherently subject to change and actual results could differ significantly from these estimates.

Adopted Accounting Pronouncements [Policy Text Block]

C. SIGNIFICANT ACCOUNTING POLICIES

The Company reported its significant accounting policies in the

2019

10

-K.

New Accounting Pronouncements, Policy [Policy Text Block]

D. PROSPECTIVE ACCOUNTING STANDARDS

For information regarding accounting standards that the Company has

not

yet adopted, see the “Prospective Accounting Standards” in

Note

1

– Summary of Significant Accounting Policies

in the

2019

10

-K. The Company maintains its status as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of

2012

(the “JOBS Act”). We have taken advantage of the extended transition period provided by Section

107

of the JOBS Act. We decided to comply with the effective dates for financial accounting standards applicable to emerging growth companies later in compliance with the requirements in Sections

107

(b)(

2

) and (

3

) of the JOBS Act. Such decision is irrevocable. 

Property, Plant and Equipment, Policy [Policy Text Block]

E. PROPERTY AND EQUIPMENT

Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended 

September 30, 2020

and 

December 31, 2019

, the Company recognized

no

impairments.  Property and equipment are summarized as follows:

	As of
	September 30,			December 31,
	2020			2019
Automobiles	$	530,722		$	505,788
Furniture and fixtures		474,401			457,218
Computer equipment and software		3,917,136			3,823,416
Home office		3,878,909			3,866,632
Total cost		8,801,168			8,653,054
Accumulated depreciation		(5,949,933	)		(5,619,706	)
Net property and equipment	$	2,851,235		$	3,033,348

Comprehensive Income, Policy [Policy Text Block]

F. COMPREHENSIVE EARNINGS

Comprehensive earnings (loss) include net (loss) earnings plus unrealized (gains) losses on available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, the Company used a

21%

tax rate. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is

net of tax expense

of $

343,316

and $

771,697

for the

nine

months ended

September 30, 2020

and

2019

, respectively.

The following table presents changes in accumulated other comprehensive earnings for unrealized gains and losses on available-for-sale securities:

	Nine-Month Periods Ended
	September 30,
	2020			2019
Beginning balance	$	2,953,936		$	(1,580,976	)
Cumulative effect of adoption of ASU 2016-01		-			1,366,297
Adjusted beginning balance		2,953,936			(214,679	)
Other comprehensive earnings before reclassification		2,579,925			3,611,573
Amount reclassified from accumulated other comprehensive earnings		(325,204	)		(188,340	)
Net current period other comprehensive earnings		2,254,721			3,423,233
Ending balance	$	5,208,657		$	3,208,554

The

following table

illustrates the components of other comprehensive earnings for each period presented in the condensed consolidated interim financial statements.

	Three-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	551,140		$	(57,292	)	$	493,848		$	890,152		$	(116,415	)	$	773,737
Reclassification adjustment for (gains) included in net earnings		(67,102	)		14,092			(53,010	)		(89,262	)		18,745			(70,517	)
Total other comprehensive earnings	$	484,038		$	(43,200	)	$	440,838		$	800,890		$	(97,670	)	$	703,220

	Nine-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	2,836,794		$	(256,869	)	$	2,579,925		$	4,333,205		$	(721,632	)	$	3,611,573
Reclassification adjustment for (gains) included in net earnings		(411,651	)		86,447			(325,204	)		(238,405	)		50,065			(188,340	)
Total other comprehensive earnings	$	2,425,143		$	(170,422	)	$	2,254,721		$	4,094,800		$	(671,567	)	$	3,423,233

The following table provides the reclassifications from accumulated other comprehensive earnings for the periods presented:

Amounts Reclassified from
Accumulated Other Comprehensive Earnings
	Three-Month Periods Ended						Nine-Month Periods Ended
Details about Accumulated Other	September 30,						September 30,						Affected Line Item in the Statement
Comprehensive Earnings Component	2020			2019			2020			2019			where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(67,102	)	$	(89,262	)	$	(411,651	)	$	(238,405	)	Net realized investment (gains) losses
		14,092			18,745			86,447			50,065		Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(53,010	)	$	(70,517	)	$	(325,204	)	$	(188,340	)

Risk And Uncertainties [Policy Text Block]

G. RISKS AND UNCERTAINTIES

Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-

19

pandemic has resulted in, and is expected to continue to result in, significant disruptions in economic activity and financial markets. The cumulative effects of COVID-

19

on the Company, and the effect of any civil unrest or other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, or reduce the market value of invested assets held by the Company.

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	As of
	September 30,			December 31,
	2020			2019
Automobiles	$	530,722		$	505,788
Furniture and fixtures		474,401			457,218
Computer equipment and software		3,917,136			3,823,416
Home office		3,878,909			3,866,632
Total cost		8,801,168			8,653,054
Accumulated depreciation		(5,949,933	)		(5,619,706	)
Net property and equipment	$	2,851,235		$	3,033,348

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Nine-Month Periods Ended
	September 30,
	2020			2019
Beginning balance	$	2,953,936		$	(1,580,976	)
Cumulative effect of adoption of ASU 2016-01		-			1,366,297
Adjusted beginning balance		2,953,936			(214,679	)
Other comprehensive earnings before reclassification		2,579,925			3,611,573
Amount reclassified from accumulated other comprehensive earnings		(325,204	)		(188,340	)
Net current period other comprehensive earnings		2,254,721			3,423,233
Ending balance	$	5,208,657		$	3,208,554

Comprehensive Income (Loss) [Table Text Block]

	Three-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	551,140		$	(57,292	)	$	493,848		$	890,152		$	(116,415	)	$	773,737
Reclassification adjustment for (gains) included in net earnings		(67,102	)		14,092			(53,010	)		(89,262	)		18,745			(70,517	)
Total other comprehensive earnings	$	484,038		$	(43,200	)	$	440,838		$	800,890		$	(97,670	)	$	703,220

	Nine-Month Periods Ended September 30,
	2020									2019
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	2,836,794		$	(256,869	)	$	2,579,925		$	4,333,205		$	(721,632	)	$	3,611,573
Reclassification adjustment for (gains) included in net earnings		(411,651	)		86,447			(325,204	)		(238,405	)		50,065			(188,340	)
Total other comprehensive earnings	$	2,425,143		$	(170,422	)	$	2,254,721		$	4,094,800		$	(671,567	)	$	3,423,233

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

Amounts Reclassified from
Accumulated Other Comprehensive Earnings
	Three-Month Periods Ended						Nine-Month Periods Ended
Details about Accumulated Other	September 30,						September 30,						Affected Line Item in the Statement
Comprehensive Earnings Component	2020			2019			2020			2019			where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(67,102	)	$	(89,262	)	$	(411,651	)	$	(238,405	)	Net realized investment (gains) losses
		14,092			18,745			86,447			50,065		Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(53,010	)	$	(70,517	)	$	(325,204	)	$	(188,340	)

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Note 2 - Investments (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Realized Gain (Loss) [Table Text Block]

	For the Three-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	3,428,951	$	67,102	$	—		$	67,102
Common stocks		986,939		93,984		(226,398	)		(132,414	)
Preferred stocks		76,500		5,979		—			5,979
2019
Fixed maturity securities	$	5,771,988	$	99,445	$	(10,183	)	$	89,262
Common stocks		1,320,803		185,319		(133,100	)		52,219

	For the Nine-Months Ended September 30,
								Net Realized
	Proceeds		Gains		Losses			Gains (Losses)
2020
Fixed maturity securities	$	12,813,180	$	412,577	$	(926	)	$	411,651
Common stocks		4,247,936		470,406		(1,282,423	)		(812,017	)
Preferred stocks		221,990		8,808		(10,762	)		(1,954	)
2019
Fixed maturity securities	$	19,522,461	$	264,737	$	(26,332	)	$	238,405
Common stocks		5,998,276		960,420		(457,702	)		502,718

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized Cost		Fair Value
Due in one year or less	$	1,275,943	$	1,305,900
Due after one year through five years		18,436,788		19,612,776
Due after five years through 10 years		16,366,929		18,431,137
Due after 10 years		21,586,567		23,678,509
Asset and mortgage backed securities without a specific due date		38,843,607		40,057,464
Redeemable preferred stocks		215,805		232,699
Total fixed maturity securities	$	96,725,639	$	103,318,485

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	Cost or				Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2020
Fixed maturity securities:
U.S. Treasury	$	1,352,935	$	1,390,344	$	37,491	$	(82	)
MBS/ABS/CMBS		38,843,607		40,057,464		1,354,537		(140,680	)
Corporate		38,295,706		42,339,992		4,141,760		(97,474	)
Municipal		18,017,586		19,297,986		1,288,389		(7,989	)
Redeemable preferred stock		215,805		232,699		16,894		—
Total fixed maturity securities	$	96,725,639	$	103,318,485	$	6,839,071	$	(246,225	)

					Gross Unrealized
	Amortized Cost		Fair Value		Gains		Losses
2019
Fixed maturity securities:
U.S. Treasury	$	800,462	$	800,219	$	684	$	(927	)
MBS/ABS/CMBS		33,802,911		34,290,995		540,743		(52,659	)
Corporate		39,442,202		41,915,103		2,482,378		(9,477	)
Municipal		14,302,840		15,081,255		808,081		(29,666	)
Total fixed maturity securities	$	88,348,415	$	92,087,572	$	3,831,886	$	(92,729	)

Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value [Table Text Block]

	September 30, 2020									December 31, 2019
				12 Months									12 Months
	< 12 Months			& Greater			Total			< 12 Months			& Greater			Total
Fixed Maturity Securities:
U.S. Treasury
Fair value	$	300,000		$	—		$	300,000		$	—		$	699,391		$	699,391
Amortized cost		300,082			—			300,082			—			700,318			700,318
Unrealized loss		(82	)		—			(82	)		—			(927	)		(927	)
MBS/ABS/CMBS
Fair value		11,438,192			2,014,666			13,452,858			6,398,581			5,056,732			11,455,313
Amortized cost		11,556,312			2,037,226			13,593,538			6,420,488			5,087,484			11,507,972
Unrealized loss		(118,120	)		(22,560	)		(140,680	)		(21,907	)		(30,752	)		(52,659	)
Corporate
Fair value		1,075,259			—			1,075,259			1,396,706			—			1,396,706
Amortized cost		1,172,733			—			1,172,733			1,406,183			—			1,406,183
Unrealized loss		(97,474	)		—			(97,474	)		(9,477	)		—			(9,477	)
Municipal
Fair value		491,160			—			491,160			1,969,468			—			1,969,468
Amortized cost		499,149			—			499,149			1,999,134			—			1,999,134
Unrealized loss		(7,989	)		—			(7,989	)		(29,666	)		—			(29,666	)
Total
Fair value		13,304,611			2,014,666			15,319,277			9,764,755			5,756,123			15,520,878
Amortized cost		13,528,276			2,037,226			15,565,502			9,825,805			5,787,802			15,613,607
Unrealized loss	$	(223,665	)	$	(22,560	)	$	(246,225	)	$	(61,050	)	$	(31,679	)	$	(92,729	)

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Note 3 - Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	1,390,344	$	—	$	—	$	1,390,344
MBS/ABS/CMBS		—		40,057,464		—		40,057,464
Corporate		—		42,339,992		—		42,339,992
Municipal		—		19,297,986		—		19,297,986
Redeemable preferred stocks		—		232,699		—		232,699
Total fixed maturity securities		1,390,344		101,928,141		—		103,318,485
Equity securities
Common stocks		12,596,635		—		—		12,596,635
Perpetual preferred stocks		—		1,638,453		—		1,638,453
Total equity securities		12,596,635		1,638,453		—		14,235,088
Total marketable investments measured at fair value	$	13,986,979	$	103,566,594	$	—	$	117,553,573

			Significant
	Quoted in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
AFS securities
Fixed maturity securities
U.S. treasury	$	800,219	$	—	$	—	$	800,219
MBS/ABS/CMBS		—		34,290,995		—		34,290,995
Corporate		—		41,915,103		—		41,915,103
Municipal		—		15,081,255		—		15,081,255
Total fixed maturity securities		800,219		91,287,353		—		92,087,572
Equity securities
Common stocks		14,448,773		—		—		14,448,773
Total marketable investments measured at fair value	$	15,248,992	$	91,287,353	$	—	$	106,536,345

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Note 5 - Reinsurance (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Effects of Reinsurance [Table Text Block]

	Three-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	14,534,058		$	16,305,222
Reinsurance assumed		51,551			70,200
Reinsurance ceded		(2,328,734	)		(2,410,170	)
Net	$	12,256,875		$	13,965,252
EARNED
Direct	$	14,825,942		$	16,007,232
Reinsurance assumed		51,108			64,863
Reinsurance ceded		(2,344,083	)		(2,392,349	)
Net	$	12,532,967		$	13,679,746
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	10,536,397		$	13,034,216
Reinsurance assumed		6,073			36,297
Reinsurance ceded		(1,679,417	)		(3,461,166	)
Net	$	8,863,053		$	9,609,347

	Nine-Month Periods Ended September 30,
	2020			2019
WRITTEN
Direct	$	44,240,437		$	48,349,466
Reinsurance assumed		114,924			178,446
Reinsurance ceded		(7,921,708	)		(7,730,458	)
Net	$	36,433,653		$	40,797,454
EARNED
Direct	$	44,710,106		$	46,710,351
Reinsurance assumed		116,404			174,583
Reinsurance ceded		(7,904,808	)		(7,665,052	)
Net	$	36,921,702		$	39,219,882
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	37,370,896		$	37,778,378
Reinsurance assumed		44,409			119,498
Reinsurance ceded		(11,501,686	)		(9,780,507	)
Net	$	25,913,619		$	28,117,369

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Note 6 - Unpaid Losses and Settlement Expenses (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

	For the Three-Months Ended
	September 30,
(In thousands)	2020			2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	66,415		$	61,264
Less: Ceded		19,463			13,974
Net		46,952			47,290
Increase in incurred losses and settlement expense:
Current year		9,298			9,092
Prior years		(435	)		517
Total incurred		8,863			9,609
Deduct: Loss and settlement expense payments for claims incurred:
Current year		4,885			6,064
Prior years		2,831			4,778
Total paid		7,716			10,842
Net unpaid losses and settlement expense - end of the period		48,099			46,057
Plus: Reinsurance recoverable on unpaid losses		13,844			12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943		$	58,323

	For the Nine-Months Ended
	September 30,
(In thousands)	2020		2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$	56,838	$	51,447
Less: Ceded		11,036		6,736
Net		45,802		44,711
Increase in incurred losses and settlement expense:
Current year		23,838		25,779
Prior years		2,076		2,338
Total incurred		25,914		28,117
Deduct: Loss and settlement expense payments for claims incurred:
Current year		10,534		10,455
Prior years		13,083		16,316
Total paid		23,617		26,771
Net unpaid losses and settlement expense - end of the period		48,099		46,057
Plus: Reinsurance recoverable on unpaid losses		13,844		12,266
Gross unpaid losses and settlement expense - end of the period	$	61,943	$	58,323

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Note 7 - Income Taxes (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	For the Three-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	105,820		$	(5,684	)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(7,871	)		(8,955	)
Tax-exempt interest income		(15,531	)		(16,433	)
Proration of tax-exempt interest and dividends received deduction		5,715			5,939
Nondeductible expenses		11,523			8,404
Officer life insurance, net		263			3,579
Total	$	99,919		$	(13,150	)

	For the Nine-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	(215,948	)	$	176,341
Increase (reduction) in taxes resulting from:
Dividends received deduction		(21,567	)		(28,482	)
Tax-exempt interest income		(46,795	)		(60,249	)
Proration of tax-exempt interest and dividends received deduction		16,683			21,775
Nondeductible expenses		25,751			24,450
Officer life insurance, net		896			(11,039	)
Total	$	(240,980	)	$	122,796

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%
Other Comprehensive Income (Loss) Taxes			$ 343,316	$ 771,697
Geographic Concentration Risk [Member] | Revenue from Contract with Customer Benchmark [Member] | ILLINOIS
Concentration Risk, Percentage	22.70%	22.30%	25.00%	25.80%

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Note 1 - Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Cost	$ 8,801,168	$ 8,653,054
Accumulated depreciation	(5,949,933)	(5,619,706)
Net property and equipment	2,851,235	3,033,348
Automobiles [Member]
Cost	530,722	505,788
Furniture and Fixtures [Member]
Cost	474,401	457,218
Computer Equipment [Member]
Cost	3,917,136	3,823,416
Home Office [Member]
Cost	$ 3,878,909	$ 3,866,632

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Note 1 - Summary of Significant Accounting Policies - Accumulated Other Comprehensive Earnings (Details) - USD ($)		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019
Balance		$ 66,341,834	$ 58,593,299
Balance		68,032,876	62,941,961
Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-01 [Member]
Balance	[1]
AOCI Attributable to Parent [Member]
Balance		2,953,936	(1,580,976)
Other comprehensive earnings before reclassification		2,579,925	3,611,573
Amount reclassified from accumulated other comprehensive earnings		(325,204)	(188,340)
Net current period other comprehensive earnings		2,254,721	3,423,233
Balance		5,208,657	3,208,554
AOCI Attributable to Parent [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-01 [Member]
Balance			1,366,297	[1]
AOCI Attributable to Parent [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Balance		$ 2,953,936	$ (214,679)

[1] See discussion of Accounting Standards Update 2016-01 adoption in 2019 10-K, Note 1 - Summary of Significant Accounting Policies

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Note 1 - Summary of Significant Accounting Policies - Other Comprehensive Earnings (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Unrealized holding gains arising during the period, pre-tax	$ 551,140	$ 890,152	$ 2,836,794	$ 4,333,205
Reclassification adjustment for (gains) included in net earnings, pre-tax	(67,102)	(89,262)	(411,651)	(238,405)
Total other comprehensive earnings, pre-tax	484,038	800,890	2,425,143	4,094,800
Unrealized holding gains arising during the period, tax	(57,292)	(116,415)	(256,869)	(721,632)
Reclassification adjustment for (gains) included in net earnings, tax	14,092	18,745	86,447	50,065
Total other comprehensive earnings, tax	(43,200)	(97,670)	(170,422)	(671,567)
Unrealized holding gains arising during the period, after-tax	493,848	773,737	2,579,925	3,611,573
Reclassification adjustment for (gains) included in net earnings, after tax	(53,010)	(70,517)	(325,204)	(188,340)
Total other comprehensive earnings, after-tax	$ 440,838	$ 703,220	$ 2,254,721	$ 3,423,233

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Note 1 - Summary of Significant Accounting Policies - Reclassifications from Accumulated Other comprehensive Earnings (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net realized investment losses (gains)	$ 59,333	$ (141,481)	$ 402,320	$ (741,123)
Income Tax Expense (Benefit), Total	(99,919)	13,150	240,980	(122,796)
Total reclassification adjustment, net of tax	(403,989)	13,916	787,342	(716,923)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Total reclassification adjustment, net of tax	(53,010)	(70,517)	(325,204)	(188,340)
Reclassification out of Accumulated Other Comprehensive Income [Member] | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Net realized investment losses (gains)	(67,102)	(89,262)	(411,651)	(238,405)
Income Tax Expense (Benefit), Total	$ 14,092	$ 18,745	$ 86,447	$ 50,065

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Note 2 - Investments (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Debt Securities, Available-for-sale, Total	$ 103,318,485		$ 103,318,485		$ 92,087,572
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	22		22
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	4		4
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	$ 22,560		$ 22,560		31,679
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Recognized in Earnings			0
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	981,779	$ (7,603)	2,195	$ 1,716,124
Other Investments, Total	305,000		305,000
Notes Issued on July 30, 2019 [Member]
Financing Receivable, after Allowance for Credit Loss, Total	625,000		$ 625,000
Financing Receivable, Interest Rate			6.50%
Financing Receivable, Amortization Period (Year)			20 years
Notes Issued on January 28, 2020 [Member]
Financing Receivable, after Allowance for Credit Loss, Total	650,000		$ 650,000
Financing Receivable, Interest Rate			6.50%
Financing Receivable, Amortization Period (Year)			20 years
Federal Home Loan Bank of Chicago [Member]
Federal Home Loan Bank Advances, Total	200,000		$ 200,000
Residential Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Total	13,590,690		13,590,690		9,909,462
Commercial Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Total	$ 13,811,945		$ 13,811,945		$ 13,408,898

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Note 2 - Investments - Summary of Proceeds from Investments and Related Gross Realized Gains and Losses (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Fixed Income Securities [Member]
Fixed maturity securities, proceeds	$ 3,428,951	$ 5,771,988	$ 12,813,180	$ 19,522,461
Fixed maturity securities, realized gains	67,102	99,445	412,577	264,737
Fixed maturity securities, realized losses		(10,183)	(926)	(26,332)
Fixed maturity securities, net realized gains (losses)	67,102	89,262	411,651	238,405
Common Stock [Member]
Equity securities, proceeds	986,939	1,320,803	4,247,936	5,998,276
Equity securities, realized gains	93,984	185,319	470,406	960,420
Equity securities, realized losses	(226,398)	(133,100)	(1,282,423)	(457,702)
Equity securities, net realized gains (losses)	(132,414)	$ 52,219	(812,017)	502,718
Preferred Stock [Member]
Equity securities, proceeds	76,500		221,990
Equity securities, realized gains	5,979		8,808
Equity securities, realized losses			(10,762)
Equity securities, net realized gains (losses)	$ 5,979		$ (1,954)

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Note 2 - Investments - Contractual Maturity of Fixed Income Securities (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Due in one year or less, amortized cost	$ 1,275,943
Due in one year or less, fair value	1,305,900
Due after one year through five years, amortized cost	18,436,788
Due after one year through five years, fair value	19,612,776
Due after five years through 10 years, amortized cost	16,366,929
Due after five years through 10 years, fair value	18,431,137
Due after 10 years, amortized cost	21,586,567
Due after 10 years, fair value	23,678,509
Total fixed maturity securities, amortized cost	96,725,639	$ 88,348,415
Total fixed maturity securities, fair value	103,318,485	$ 92,087,572
Collateralized Mortgage Backed Securities [Member]
Securities without a specific due date, amortized cost	38,843,607
Securities without a specific due date, fair value	40,057,464
Redeemable Preferred Stock [Member]
Securities without a specific due date, amortized cost	215,805
Securities without a specific due date, fair value	232,699
Total fixed maturity securities, amortized cost	215,805
Total fixed maturity securities, fair value	$ 232,699

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Note 2 - Investments - Schedule of Cost or Amortized cost and Estimated Fair Values of Investments (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Amortized Cost	$ 96,725,639	$ 88,348,415
Debt Securities, Available-for-sale, Total	103,318,485	92,087,572
Gross Unrealized Gains	6,839,071	3,831,886
Gross Unrealized Losses	(246,225)	(92,729)
US Treasury Securities [Member]
Amortized Cost	1,352,935	800,462
Debt Securities, Available-for-sale, Total	1,390,344	800,219
Gross Unrealized Gains	37,491	684
Gross Unrealized Losses	(82)	(927)
MBS/ABS/CMBS [Member]
Amortized Cost	38,843,607	33,802,911
Debt Securities, Available-for-sale, Total	40,057,464	34,290,995
Gross Unrealized Gains	1,354,537	540,743
Gross Unrealized Losses	(140,680)	(52,659)
Corporate Debt Securities [Member]
Amortized Cost	38,295,706	39,442,202
Debt Securities, Available-for-sale, Total	42,339,992	41,915,103
Gross Unrealized Gains	4,141,760	2,482,378
Gross Unrealized Losses	(97,474)	(9,477)
US States and Political Subdivisions Debt Securities [Member]
Amortized Cost	18,017,586	14,302,840
Debt Securities, Available-for-sale, Total	19,297,986	15,081,255
Gross Unrealized Gains	1,288,389	808,081
Gross Unrealized Losses	(7,989)	$ (29,666)
Redeemable Preferred Stock [Member]
Amortized Cost	215,805
Debt Securities, Available-for-sale, Total	232,699
Gross Unrealized Gains	16,894
Gross Unrealized Losses

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Note 2 - Investments - Fair Value of Securities in Unrealized Loss Position (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Fair value, less than 12 Months	$ 13,304,611	$ 9,764,755
Fair value, 12 months or longer	2,014,666	5,756,123
Fair value	15,319,277	15,520,878
Amortized cost, less than 12 Months	13,528,276	9,825,805
Amortized cost, 12 months or longer	2,037,226	5,787,802
Amortized cost	15,565,502	15,613,607
Unrealized loss, less than 12 Months	(223,665)	(61,050)
Unrealized loss, 12 months or longer	(22,560)	(31,679)
Unrealized loss	(246,225)	(92,729)
US Treasury Securities [Member]
Fair value, less than 12 Months	300,000
Fair value, 12 months or longer		699,391
Fair value	300,000	699,391
Amortized cost, less than 12 Months	300,082
Amortized cost, 12 months or longer		700,318
Amortized cost	300,082	700,318
Unrealized loss, less than 12 Months	(82)
Unrealized loss, 12 months or longer		(927)
Unrealized loss	(82)	(927)
MBS/ABS/CMBS [Member]
Fair value, less than 12 Months	11,438,192	6,398,581
Fair value, 12 months or longer	2,014,666	5,056,732
Fair value	13,452,858	11,455,313
Amortized cost, less than 12 Months	11,556,312	6,420,488
Amortized cost, 12 months or longer	2,037,226	5,087,484
Amortized cost	13,593,538	11,507,972
Unrealized loss, less than 12 Months	(118,120)	(21,907)
Unrealized loss, 12 months or longer	(22,560)	(30,752)
Unrealized loss	(140,680)	(52,659)
Corporate Debt Securities [Member]
Fair value, less than 12 Months	1,075,259	1,396,706
Fair value, 12 months or longer
Fair value	1,075,259	1,396,706
Amortized cost, less than 12 Months	1,172,733	1,406,183
Amortized cost, 12 months or longer
Amortized cost	1,172,733	1,406,183
Unrealized loss, less than 12 Months	(97,474)	(9,477)
Unrealized loss, 12 months or longer
Unrealized loss	(97,474)	(9,477)
US States and Political Subdivisions Debt Securities [Member]
Fair value, less than 12 Months	491,160	1,969,468
Fair value, 12 months or longer
Fair value	491,160	1,969,468
Amortized cost, less than 12 Months	499,149	1,999,134
Amortized cost, 12 months or longer
Amortized cost	499,149	1,999,134
Unrealized loss, less than 12 Months	(7,989)	(29,666)
Unrealized loss, 12 months or longer
Unrealized loss	$ (7,989)	$ (29,666)

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Note 3 - Fair Value Disclosures (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	$ 0		$ 0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0		$ 0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

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Note 3 - Fair Value Disclosures - Assets Measured at Fair Value on Recurring Basis (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Fixed maturity securities	$ 103,318,485	$ 92,087,572
Equity securities	14,235,088
Total marketable investments measured at fair value	117,553,573	106,536,345
Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities	1,390,344	800,219
Equity securities	12,596,635
Total marketable investments measured at fair value	13,986,979	15,248,992
Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities	101,928,141	91,287,353
Equity securities	1,638,453
Total marketable investments measured at fair value	103,566,594	91,287,353
Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
Equity securities
Total marketable investments measured at fair value
US Treasury Securities [Member]
Fixed maturity securities	1,390,344	800,219
US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities	1,390,344	800,219
US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities
US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
MBS/ABS/CMBS [Member]
Fixed maturity securities	40,057,464	34,290,995
MBS/ABS/CMBS [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities
MBS/ABS/CMBS [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities	40,057,464	34,290,995
MBS/ABS/CMBS [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
Corporate Debt Securities [Member]
Fixed maturity securities	42,339,992	41,915,103
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities	42,339,992	41,915,103
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
US States and Political Subdivisions Debt Securities [Member]
Fixed maturity securities	19,297,986	15,081,255
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities	19,297,986	15,081,255
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
Redeemable Preferred Stock [Member]
Fixed maturity securities	232,699
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities	232,699
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities
Common Stock [Member]
Equity securities	12,596,635	14,448,773
Common Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Equity securities	12,596,635	14,448,773
Common Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Equity securities
Common Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Equity securities
Preferred Stock [Member]
Equity securities	1,638,453
Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Equity securities
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Equity securities	1,638,453
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Equity securities

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Note 4 - Debt (Details Textual) - USD ($)			1 Months Ended				9 Months Ended
	May 03, 2021	Aug. 03, 2020	May 31, 2020	Apr. 30, 2020	Mar. 31, 2020	Mar. 31, 2017	Sep. 30, 2020	Sep. 30, 2019	Jul. 30, 2020	Dec. 31, 2019
Proceeds from Issuance of Long-term Debt, Total							$ 11,629,800
Long-term Debt, Total							$ 15,097,960			$ 3,475,088
Debt, Weighted Average Interest Rate							1.50%			3.70%
Revolving Credit Facility [Member] | American Bank & Trust [Member]
Debt Instrument, Collateral Amount							$ 5,000,000
Line of Credit Facility, Maximum Borrowing Capacity							1,750,000
Interest Expense, Total							$ 0	$ 0
Revolving Credit Facility [Member] | American Bank & Trust [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate							2.00%
Revolving Credit Facility [Member] | American Bank & Trust [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate							3.50%
Revolving Credit Facility [Member] | Quad City Bank & Trust [Member]
Debt Instrument, Collateral Amount		$ 2,000,000
Line of Credit Facility, Maximum Borrowing Capacity		$ 2,000,000
Revolving Credit Facility [Member] | Quad City Bank & Trust [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Long-term Debt, Total				$ 1,600,000
Federal Home Loan Bank of Chicago [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available							$ 33,000,000
Federal Home Loan Bank of Chicago [Member] | Federal Home Loan Bank Advances, One [Member]
Debt Instrument, Term (Year)					5 years
Debt Instrument, Interest Rate, Stated Percentage					1.40%
Proceeds from FHLBank Borrowings, Financing Activities					$ 6,000,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged					$ 6,800,000
Federal Home Loan Bank of Chicago [Member] | Federal Home Loan Bank Advances, Two [Member]
Debt Instrument, Term (Year)			1 year
Debt Instrument, Interest Rate, Stated Percentage			0.00%
Proceeds from FHLBank Borrowings, Financing Activities			$ 4,000,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged			$ 7,400,000
Federal Home Loan Bank of Chicago [Member] | Federal Home Loan Bank Advances, Three [Member]
Debt Instrument, Interest Rate, Stated Percentage									0.74%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged									$ 0
Federal Home Loan Bank of Chicago [Member] | Federal Home Loan Bank Advances, Three [Member] | Forecast [Member]
Proceeds from FHLBank Borrowings, Financing Activities	$ 4,000,000
Loans Payable [Member]
Debt Instrument, Face Amount						$ 3,500,000
Debt Instrument, Term (Year)						5 years
Debt Instrument, Interest Rate, Stated Percentage						3.65%
Debt Instrument, Collateral Amount						$ 1,000,000

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Note 5 - Reinsurance (Details Textual)	9 Months Ended
	Sep. 30, 2020 USD ($)
Casualty Business [Member]
Reinsurance Maximum Individual Risk	$ 1,000,000
Property [Member]
Reinsurance Maximum Individual Risk	500,000
Workers' Compensation [Member]
Reinsurance Maximum Individual Risk	$ 500,000

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Note 5 - Reinsurance - Summary of Effects of Reinsurance (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Direct	$ 14,534,058	$ 16,305,222	$ 44,240,437	$ 48,349,466
Reinsurance assumed	51,551	70,200	114,924	178,446
Reinsurance ceded	(2,328,734)	(2,410,170)	(7,921,708)	(7,730,458)
Net	12,256,875	13,965,252	36,433,653	40,797,454
Direct	14,825,942	16,007,232	44,710,106	46,710,351
Reinsurance assumed	51,108	64,863	116,404	174,583
Reinsurance ceded	(2,344,083)	(2,392,349)	(7,904,808)	(7,665,052)
Net	12,532,967	13,679,746	36,921,702	39,219,882
Direct	10,536,397	13,034,216	37,370,896	37,778,378
Reinsurance assumed	6,073	36,297	44,409	119,498
Reinsurance ceded	(1,679,417)	(3,461,166)	(11,501,686)	(9,780,507)
Net	$ 8,863,053	$ 9,609,347	$ 25,913,619	$ 28,117,369

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Note 6 - Unpaid Losses and Settlement Expenses (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease), Total			$ 2,042,000
Liability for Unpaid Claims and Claims Adjustment Expense, Percent Change			4.40%
Prior Year Claims and Claims Adjustment Expense	$ (435,000)	$ 517,000	$ 2,076,000	$ 2,338,000

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Note 6 - Unpaid Losses and Settlement Expenses - Reconciliation of Unpaid Losses and Settlement Expenses (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Unpaid losses and settlement expense - beginning of the period:
Gross	$ 66,415,000	$ 61,264,000	$ 56,838,307	$ 51,447,000
Less: Ceded	19,463,000	13,974,000	11,036,170	6,736,000
Net	46,952,000	47,290,000	45,802,000	44,711,000
Increase in incurred losses and settlement expense:
Current year	9,298,000	9,092,000	23,838,000	25,779,000
Prior years	(435,000)	517,000	2,076,000	2,338,000
Total incurred	8,863,000	9,609,000	25,914,000	28,117,000
Deduct: Loss and settlement expense payments for claims incurred:
Current year	4,885,000	6,064,000	10,534,000	10,455,000
Prior years	2,831,000	4,778,000	13,083,000	16,316,000
Total paid	7,716,000	10,842,000	23,617,000	26,771,000
Net unpaid losses and settlement expense - end of the period	48,099,000	46,057,000	48,099,000	46,057,000
Plus: Reinsurance recoverable on unpaid losses	13,844,420	12,266,000	13,844,420	12,266,000
Gross unpaid losses and settlement expense - end of the period	$ 61,943,244	$ 58,323,000	$ 61,943,244	$ 58,323,000

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Note 7 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Effective Income Tax Rate Reconciliation, Percent, Total	19.80%	48.60%	23.40%	14.60%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%
Tax Credit Carryforward, Amount	$ 0		$ 0		$ 0
Operating Loss Carryforwards, Total	$ 0		$ 0		$ 0

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Note 7 - Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Provision for income taxes at the statutory federal tax rates	$ 105,820	$ (5,684)	$ (215,948)	$ 176,341
Increase (reduction) in taxes resulting from:
Dividends received deduction	(7,871)	(8,955)	(21,567)	(28,482)
Tax-exempt interest income	(15,531)	(16,433)	(46,795)	(60,249)
Proration of tax-exempt interest and dividends received deduction	5,715	5,939	16,683	21,775
Nondeductible expenses	11,523	8,404	25,751	24,450
Officer life insurance, net	263	3,579	896	(11,039)
Total	99,919	(13,150)	(240,980)	122,796
Provision for income taxes at the statutory federal tax rates	$ 105,820	$ (5,684)	$ (215,948)	$ 176,341

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Note 8 - Employee Benefits (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Employee Stock Ownership Plan (ESOP), Number of Allocated Shares (in shares)	350,000
Employee Stock Ownership Plan (ESOP), Weighted Average Purchase Price of Shares Purchased (in dollars per share)	$ 10
Employee Stock Ownership Plan (ESOP), Cash Contributions to ESOP	$ 0	$ 0
Employee Stock Ownership Plan (ESOP), Compensation Expense	$ 206,535	$ 233,135
Employee Stock Ownership Plan (ESOP), Number of Committed-to-be-Released Shares (in shares)	17,546	17,530
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
Share-based Payment Arrangement, Expense	$ 126,588	$ 78,226
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	$ 269,359
Restricted Stock Units (RSUs) [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	0.33%
Restricted Stock Units (RSUs) [Member] | Share-based Payment Arrangement, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	0.33%
Restricted Stock Units (RSUs) [Member] | Share-based Payment Arrangement, Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	0.33%
Restricted Stock Units, One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	18,040
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 11.03
Restricted Stock Units, Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	13,071
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 13.70
Restricted Stock Units, Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	11,700
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 15.10
Committed on September 30, 2020 [Member]
Employee Stock Ownership Plan (ESOP), Number of Committed-to-be-Released Shares (in shares)	1,921
Committed on September 30, 2019 [Member]
Employee Stock Ownership Plan (ESOP), Number of Committed-to-be-Released Shares (in shares)			1,926