Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

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. (the Company) 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; Southern Hospitality Education, LLC, dba Katkin, a full-service food safety and education company; and Illinois Casualty Company (ICC), an operating insurance company and parent company of ICC Properties, LLC, a real estate series limited liability company. Both ICC and ICC Properties, LLC are Illinois domiciled entities.

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, Utah, and Wisconsin and markets through independent agents. Approximately 23.0% and 23.3% of the premium is written in Illinois for the three months ended March 31, 2023 and 2022, respectively. The Company operates as one 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, 2022 (the “2022 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 March 31, 2023 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

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to improve recognition and measurement of credit losses and to provide more decision-useful information about those losses. This new impairment model is based on expected losses rather than incurred losses. ASU 2016- 13 requires that a financial asset measured at amortized cost be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses but is limited to the amount by which fair value is less than amortized cost. The Company applied this standard to fixed maturity securities, premiums and reinsurance balances receivable, ceded unearned premiums, reinsurance balances recoverable on unpaid losses and settlement expenses, and other assets using the loss-rate method. The impact of this standard was and is expected to continue to be minimal. In total, the cumulative-effect adjustment made to the financials as of the beginning of the year resulted in a $113,760 decrease in retained earnings. 

D. PROSPECTIVE ACCOUNTING STANDARDS

There are no prospective accounting standards that would have a material impact on our financial statements as of  March 31, 2023.

E. PROPERTY AND EQUIPMENT

Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended March 31, 2023 and 2022, the Company recognized no impairments. Property and equipment are summarized as follows:

	As of
	March 31,			December 31,
	2023			2022
Automobiles	$	608,170		$	637,306
Furniture and fixtures		534,464			520,835
Computer equipment and software		4,811,406			4,720,932
Home office		4,079,060			4,025,248
Total cost		10,033,100			9,904,321
Accumulated depreciation		(6,688,410	)		(6,590,602	)
Net property and equipment	$	3,344,690		$	3,313,719

F. COMPREHENSIVE EARNINGS

Comprehensive (loss) earnings include net earnings (loss) 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 and comprehensive 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 $424,347 and benefit of $1,320,892 for the three months ended March 31, 2023 and 2022, respectively.

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

	Three-Months Ended March 31,
	2023			2022
Beginning balance	$	(8,841,517	)	$	2,920,027
Other comprehensive earnings (loss) before reclassification		1,564,342			(4,961,385	)
Amount reclassified from accumulated other comprehensive earnings (loss)		32,011			(7,684	)
Net current period other comprehensive earnings (loss)		1,596,353			(4,969,069	)
Ending balance	$	(7,245,164	)	$	(2,049,042	)

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 March 31,
	2023							2022
	Pre-tax		Tax			After-tax		Pre-tax			Tax		After-tax
Other comprehensive earnings (loss), net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains (losses) arising during the period	$	1,980,180	$	(415,838	)	$	1,564,342	$	(6,280,234	)	$	1,318,849	$	(4,961,385	)
Reclassification adjustment for losses (gains) included in net earnings		40,520		(8,509	)		32,011		(9,727	)		2,043		(7,684	)
Total other comprehensive earnings (loss)	$	2,020,700	$	(424,347	)	$	1,596,353	$	(6,289,961	)	$	1,320,892	$	(4,969,069	)

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
Details about Accumulated Other	March 31,						Affected Line Item in the Statement
Comprehensive Earnings Component	2023			2022			where Net Earnings is Presented
Unrealized losses (gains) on AFS investments:
	$	40,520		$	(9,727	)	Net realized investment losses (gains)
		(8,509	)		2,043		Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	32,011		$	(7,684	)

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 and subsequent governmental policies, including fiscal and monetary policies have resulted in, and may continue to result in, significant disruptions in economic activity and financial markets. Russia’s invasion of Ukraine, supply chain disruptions, labor shortages and tightening, inflation and related monetary policy responses, and recession fears are also causing volatility and disruptions in credit and capital markets, adverse developments or general investor sentiment regarding the value of our investment securities as a result of rising interest rates or otherwise, and the business prospects of the industry we serve. The cumulative effects of these events on the Company cannot be predicted, 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.