Note 4 - Debt

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

4. DEBT

Debt Obligation

Debt Obligations

The Company had $15,000,000 in outstanding debt as of  September 30, 2023 and December 31, 2022.

The Company also has borrowing capacity of $44.3 million with the Federal Home Loan Bank of Chicago (FHLBC), which is 25% of net admitted statutory assets of Illinois Casualty Company as of the prior year-end. As of  September 30, 2023, the Company has used $15.0 million of that capacity.

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, to provide increased liquidity, and to 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.

In May 2021, the Company entered into a $4.0 million, 0.74% fixed interest, five-year FHLBC loan.

In  May 2022, the Company entered into a $5.0 million, 1.36%, fixed interest, five-year FHLBC loan.

The Company has $17.7 million in bonds pledged as collateral for all FHLBC loans.

Revolving Line of Credit

We increased our revolving line of credit with a commercial bank from $2.0 million to $4.0 million in July 2022. As of September 30, 2023, the balance on the line of credit was $0. As of  July 5, 2023, this line of credit is priced at prime plus 0.5% with a floor of 6.00% and renews annually with a current expiration date of July 5, 2024. The Company pledged $4.0 million of business assets in the event the Company draws down on the line of credit. This agreement includes an annually calculated financial debt covenant requiring a minimum total adjusted capital of $21.0 million. Total adjusted capital is the sum of an insurer’s statutory capital and surplus as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed with Illinois Department of Insurance. As of September 30, 2023, our total adjusted capital is approximately $59.9 million. There was no interest paid on the line of credit during the nine months ended September 30, 2023 and 2022.