0001681903-18-000027.txt : 20180814 0001681903-18-000027.hdr.sgml : 20180814 20180814151557 ACCESSION NUMBER: 0001681903-18-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 60 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180814 DATE AS OF CHANGE: 20180814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICC Holdings, Inc. CENTRAL INDEX KEY: 0001681903 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 813359409 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38046 FILM NUMBER: 181016763 BUSINESS ADDRESS: STREET 1: 225 20TH STREET CITY: ROCK ISLAND STATE: IL ZIP: 61201 BUSINESS PHONE: 309-793-1700 MAIL ADDRESS: STREET 1: 225 20TH STREET CITY: ROCK ISLAND STATE: IL ZIP: 61201 10-Q 1 icch-20180630x10q.htm 10-Q 63018 ICC 10Q

 



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 June  30, 2018

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)

_______________________________

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):





 

 



Large accelerated filer   

Accelerated filer   



Non-accelerated filer     (Do not check if a smaller reporting company)

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 August  9, 2018 was 3,500,000.

 



 

 


 

Table of Contents





 

 



 

Page 

PART I

 

 

Item 1.

Financial Statements



Condensed Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017



Condensed Consolidated Statements of Earnings and Comprehensive Earnings For the Three-Month Periods Ended June 30, 2018 and 2017 (unaudited)



Condensed Consolidated Statements of Earnings and Comprehensive Earnings For the Six-Month Periods Ended June 30, 2018 and 2017 (unaudited)



Condensed Consolidated Statements of Cash Flows For the Six-Month Periods Ended June 30, 2018 and 2017 (unaudited)



Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38 

Item 4.

Controls and Procedures

39 



 

 

PART II

 

 

Item 1.

Legal Proceedings

40 

Item 1A.

Risk Factors

40 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40 

Item 3.

Default Upon Senior Securities

40 

Item 4.

Mine Safety Disclosures

40 

Item 5.

Other Information

40 

Item 6.

Exhibits

41 



 

 

Signatures 

42 



 

~  2  ~


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets





 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2018

 

2017



 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments and cash:

 

 

 

 

 

 

Available for sale securities, at fair value

 

 

 

 

 

 

Fixed maturity securities (amortized cost - $89,975,510 at

 

$

89,694,843 

 

$

89,605,073 

6/30/2018 and $87,773,047 at 12/31/2017)

 

 

 

 

 

 

Common stocks¹ (cost - $13,100,640 at

 

 

12,907,136 

 

 

8,534,109 

6/30/2018 and $7,631,180 at 12/31/2017)

 

 

 

 

 

 

Preferred stocks (cost - $66,675 at

 

 

65,650 

 

 

3,867,429 

6/30/2018 and $3,783,311 at 12/31/2017)

 

 

 

 

 

 

Other invested assets

 

 

139,200 

 

 

 —

Property held for investment, at cost, net of accumulated depreciation of

 

 

3,112,608 

 

 

3,126,566 

$172,791 at 6/30/2018 and $50,948 at 12/31/2017

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,055,577 

 

 

6,876,519 

Total investments and cash

 

 

109,975,014 

 

 

112,009,696 

Accrued investment income

 

 

668,230 

 

 

687,453 

Premiums and reinsurance balances receivable, net of allowances for

 

 

21,433,743 

 

 

19,013,262 

uncollectible amounts of $50,000 at 6/30/2018 and 12/31/2017

 

 

 

 

 

 

Ceded unearned premiums

 

 

685,736 

 

 

274,972 

Reinsurance balances recoverable on unpaid losses and settlement expenses,

 

 

8,287,587 

 

 

10,029,834 

net of allowances for uncollectible amounts of $0 at 6/30/2018 and 12/31/2017

 

 

 

 

 

 

Federal income taxes

 

 

1,492,828 

 

 

922,405 

Deferred policy acquisition costs, net

 

 

5,090,527 

 

 

4,592,415 

Property and equipment, at cost, net of accumulated depreciation of

 

 

3,474,335 

 

 

3,503,904 

$4,815,812 at 6/30/2018 and $4,896,042 at 12/31/2017

 

 

 

 

 

 

Other assets

 

 

1,289,712 

 

 

1,301,420 

Total assets

 

$

152,397,712 

 

$

152,335,361 

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

51,387,881 

 

$

51,074,126 

Unearned premiums

 

 

29,298,437 

 

 

26,555,582 

Reinsurance balances payable

 

 

943,686 

 

 

327,483 

Corporate debt

 

 

3,489,056 

 

 

4,339,208 

Accrued expenses

 

 

2,940,084 

 

 

4,274,002 

Other liabilities

 

 

1,922,410 

 

 

1,663,415 

Total liabilities

 

 

89,981,554 

 

 

88,233,816 

Equity:

 

 

 

 

 

 

Common stock2  

 

 

35,000 

 

 

35,000 

Additional paid-in capital

 

 

32,418,807 

 

 

32,333,290 

Accumulated other comprehensive (loss) earnings, net of tax

 

 

(375,404)

 

 

2,227,069 

Retained earnings

 

 

33,502,434 

 

 

32,787,406 

Less: Unearned Employee Stock Ownership Plan shares at cost3

 

 

(3,164,679)

 

 

(3,281,220)

Total equity

 

 

62,416,158 

 

 

64,101,545 

Total liabilities and equity

 

$

152,397,712 

 

$

152,335,361 



1At June 30, 2018, common stock securities consist entirely of individual common stocks. At December 31, 2017, common stock consisted of exchange trade funds (ETF) made up primarily of Dividends Select and the S&P 500.

2Par value $0.01; authorized: 2018 - 10,000,000 shares and  2017  10,000,000 shares; issued: 2018 - 3,500,000 shares and 2017  3,500,000 shares;  outstanding: 2018 - 3,183,532 and 2017 - 3,171,878 shares.

32018  –316,468 shares and 2017328,122 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



 

June 30,



 

2018

 

2017

Net premiums earned

 

$

11,485,071 

 

$

10,710,758 

Net investment income

 

 

685,492 

 

 

688,963 

Net realized investment losses

 

 

(29,930)

 

 

(3)

Other-than-temporary impairment losses

 

 

 —

 

 

(57,316)

Other (loss) income

 

 

(507)

 

 

64,722 

Consolidated revenues

 

 

12,140,126 

 

 

11,407,124 

Losses and settlement expenses

 

 

7,790,587 

 

 

6,864,258 

Policy acquisition costs and other operating expenses

 

 

4,160,071 

 

 

4,720,298 

Interest expense on debt

 

 

27,621 

 

 

57,229 

General corporate expenses

 

 

133,806 

 

 

128,905 

Total expenses

 

 

12,112,085 

 

 

11,770,690 

Earnings (loss) before income taxes

 

 

28,041 

 

 

(363,566)

Total income tax benefit

 

 

(11,159)

 

 

(128,443)

Net earnings (loss)

 

$

39,200 

 

$

(235,123)



 

 

 

 

 

 

Other comprehensive (loss) earnings, net of tax

 

 

(35,396)

 

 

542,427 

Comprehensive earnings

 

$

3,804 

 

$

307,304 



 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net earnings (loss) per share

 

$

0.01 

 

$

(0.07)

Diluted:

 

 

 

 

 

 

Diluted net earnings (loss) per share

 

$

0.01 

 

$

(0.07)



 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

3,179,669 

 

 

3,153,876 

Diluted

 

 

3,180,679 

 

 

3,153,876 







See accompanying notes to consolidated financial statements.

~  4  ~


 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended



 

June 30,



 

2018

 

2017

Net premiums earned

 

$

22,782,015 

 

$

21,548,864 

Net investment income

 

 

1,388,376 

 

 

1,161,287 

Net realized investment gains

 

 

1,072,200 

 

 

444,778 

Other-than-temporary impairment losses

 

 

 —

 

 

(57,316)

Other income

 

 

56,171 

 

 

148,980 

Consolidated revenues

 

 

25,298,762 

 

 

23,246,593 

Losses and settlement expenses

 

 

15,786,436 

 

 

13,463,642 

Policy acquisition costs and other operating expenses

 

 

8,297,422 

 

 

8,454,950 

Interest expense on debt

 

 

75,782 

 

 

109,539 

General corporate expenses

 

 

270,056 

 

 

268,120 

Total expenses

 

 

24,429,696 

 

 

22,296,251 

Earnings before income taxes

 

 

869,066 

 

 

950,342 

Total income tax expense

 

 

154,039 

 

 

336,421 

Net earnings

 

$

715,027 

 

$

613,921 



 

 

 

 

 

 

Other comprehensive (loss) earnings, net of tax

 

 

(2,602,473)

 

 

596,908 

Comprehensive (loss) earnings

 

$

(1,887,446)

 

$

1,210,829 



 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net earnings per share

 

$

0.23 

 

$

0.19 

Diluted:

 

 

 

 

 

 

Diluted net earnings per share

 

$

0.23 

 

$

0.19 



 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

3,174,324 

 

 

3,151,946 

Diluted

 

 

3,175,334 

 

 

3,151,946 







See accompanying notes to consolidated financial statements.

~  5  ~


 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)







 

 

 

 

 



 

 

 

 

 



Six-Month Periods Ended June 30,



2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

Net earnings

$

715,027 

 

$

613,921 

Adjustments to reconcile net earnings to net cash

 

 

 

 

 

used in operating activities

 

 

 

 

 

Net realized investment gains

 

(1,072,200)

 

 

(444,778)

Other-than-temporary impairment losses

 

 —

 

 

57,316 

Depreciation

 

310,857 

 

 

428,161 

Deferred income tax

 

(35,427)

 

 

190,257 

Amortization of bond premium and discount

 

158,743 

 

 

135,265 

Stock-based compensation expense

 

202,058 

 

 

 —

Change in:

 

 

 

 

 

Accrued investment income

 

19,223 

 

 

(122,970)

Premiums and reinsurance balances receivable, (net)

 

(2,420,481)

 

 

(361,761)

Ceded unearned premiums

 

(410,764)

 

 

(25,457)

Reinsurance balances payable

 

616,203 

 

 

20,431 

Reinsurance balances recoverable

 

1,742,247 

 

 

2,364,744 

Deferred policy acquisition costs

 

(498,112)

 

 

(139,961)

Unpaid losses and settlement expenses

 

313,755 

 

 

(3,125,882)

Unearned premiums

 

2,742,855 

 

 

1,022,675 

Accrued expenses

 

(1,333,918)

 

 

(1,645,086)

Current federal income tax

 

156,800 

 

 

(483,608)

Other

 

270,703 

 

 

102,915 

Net cash provided by (used in) operating activities

 

1,477,569 

 

 

(1,413,818)

Cash flows from investing activities:

 

 

 

 

 

Purchases of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

(9,003,061)

 

 

(22,821,724)

Common stocks, available-for-sale

 

(13,363,215)

 

 

(5,216,872)

Preferred stocks, available-for-sale

 

(140,925)

 

 

(638,922)

Other invested assets

 

(39,200)

 

 

 —

Property held for investment

 

(31,673)

 

 

(677,714)

Property and equipment

 

(300,484)

 

 

(333,887)

Proceeds from sales, maturities and calls of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

6,669,276 

 

 

4,414,597 

Common stocks, available-for-sale

 

8,834,375 

 

 

1,955,715 

Preferred stocks, available-for-sale

 

3,861,722 

 

 

 —

Property and equipment

 

64,826 

 

 

967 

Net cash used in investing activities

 

(3,448,359)

 

 

(23,317,840)

Cash flows from financing activities:

 

 

 

 

 

Net proceeds received from issuance of shares of common stock

 

 —

 

 

29,253,588 

Proceeds from loans

 

 —

 

 

3,499,149 

Repayments of borrowed funds

 

(850,152)

 

 

(2,294,961)

Net cash (used in) provided by financing activities

 

(850,152)

 

 

30,457,776 

Net (decrease) increase in cash and cash equivalents

 

(2,820,942)

 

 

5,726,118 

Cash and cash equivalents at beginning of year

 

6,876,519 

 

 

4,376,847 

Cash and cash equivalents at end of period

$

4,055,577 

 

$

10,102,965 

Supplemental information:

 

 

 

 

 

Federal income tax paid

$

 —

 

$

600,000 

Interest paid

 

108,336 

 

 

109,451 



See accompanying notes to consolidated financial statements. 

~  6  ~


 

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 for the period after the completion of the stock conversion and refer to Illinois Casualty Company (ICC) and its subsidiaries for the period prior to the stock conversion. 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., an inactive insurance agency; Estrella Innovative Solutions, Inc., an outsourcing company; and ICC, an operating insurance company. ICC is an Illinois domiciled company.



ICC Holdings, Inc. was formed so that it could acquire all of the capital stock of ICC in a mutual-to-stock conversion. The plan of conversion was approved by ICC policyholders at a special meeting on March 17, 2017. Simultaneously, surplus notes totaling $1.65 million were converted into 165,000 shares of the Company’s common stock. The Company’s offering closed on March 24, 2017, and our Employee Stock Ownership Plan (ESOP) purchased 350,000 of the shares in the offering. On March 28, 2017, the Company’s stock began trading on the NASDAQ Capital Market under the “ICCH” ticker. The Company paid $1.0 million of underwriting fees to Griffin Financial Group, LLC. Proceeds received from the offering, net of offering costs and underwriting fees, was $28.7 million.



Prior to the conversion on March 24, 2017, ICC Holdings, Inc. did not engage in any operations. Since the conversion, ICC Holdings, Inc’s primary assets are the outstanding equity of ICC,  ICC Realty, LLC, Estrella Innovative Solutions, Inc., Beverage Insurance Agency, Inc., and a portion of the net proceeds from the stock offering completed in connection with the mutual-to-stock conversion. On the effective date of the conversion, ICC became a wholly owned subsidiary of ICC Holdings, Inc. The mutual-to-stock conversion was accounted for as a change in corporate form with the historic basis of ICC’s assets, liabilities, and equity unchanged as a result.



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 Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Ohio, and Wisconsin and markets through independent agents. Approximately 28.8% and 36.5% of the premium is written in Illinois for the three months ended June  30, 2018 and 2017, respectively. For the six months ended, June 30, 2018 and 2017, approximately 30.9% and 36.2% of the premium is written in Illinois, respectively.  ICC sold its two wholly-owned subsidiaries, Beverage Insurance Agency, Inc. and Estrella Innovative Solutions, Inc. to ICC Holdings during the second quarter of 2018. ICC sold all of its real estate holdings held by ICC Realty, LLC to its parent, ICC Holdings, Inc.; via the sale of all of the outstanding equity of ICC Realty, LLC to ICC Holdings, Inc. during the fourth quarter of 2017. 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 of 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, 2017 (the “2017 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 June  30, 2018, 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 significant accounting policies in the 2017 10-K. The following are new or revised disclosures.



~  7  ~


 

STOCK-BASED COMPENSATION



We have compensation plans under which stock-based awards may be granted to our employees as described in Note 8 – Employee Benefits. The Company recognizes the fair value of stock-based compensation ratably during each year through a charge to compensation expense and a corresponding entry to equity based on vesting criteria and other pertinent terms of the awards. Stock-based awards are accounted for as equity awards in instances where the awards’ vesting are linked to market, performance, or service condition. The Company granted Restricted Stock Units (RSUs) for the first time in February of 2018. Upon vesting of any outstanding RSUs, the Company has the option to elect to pay cash or part cash and part Common Stock in lieu of delivering on shares of Common Stock for vested units. The Company’s intention is to settle vested units in Common Stock, and therefore the RSUs are accounted for as equity awards. Equity awards to employees are generally expensed based on the grant date fair value.



EARNINGS PER SHARE



Basic and diluted earnings per share (EPS) are calculated by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. The denominator for basic and diluted EPS includes ESOP shares committed to be released. Dilutive earnings per share includes the effect of all potentially dilutive instruments, such as restricted stock units (RSUs), outstanding during the period.



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 2017 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 at a later date 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 June 30, 2018 and 2017, the Company recognized no impairments.  Property and equipment are summarized as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2018

 

2017

Automobiles

 

$

567,291 

 

$

794,959 

Furniture and fixtures

 

 

427,453 

 

 

425,825 

Computer equipment and software

 

 

3,453,042 

 

 

3,404,975 

Home office

 

 

3,842,361 

 

 

3,774,187 

Total cost

 

 

8,290,147 

 

 

8,399,946 

Accumulated depreciation

 

 

(4,815,812)

 

 

(4,896,042)

Net property and equipment

 

$

3,474,335 

 

$

3,503,904 



F.     COMPREHENSIVE EARNINGS



Comprehensive earnings (loss) include net earnings (loss) plus the change in unrealized gains and 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% and a  34% tax rate for the periods ending June 30, 2018 and 2017, respectively.  



~  8  ~


 

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 June 30,



 

2018

 

2017



 

Pre-tax

 

Tax

 

After-tax

 

Pre-tax

 

Tax

 

After-tax

Other comprehensive earnings (loss),
  net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains and losses on investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains
  arising during the period

 

$

(74,733)

 

$

15,692 

 

$

(59,041)

 

$

764,541 

 

$

(259,944)

 

$

504,597 

Reclassification adjustment for

  (gains) losses included in net earnings

 

 

29,930 

 

 

(6,285)

 

 

23,645 

 

 

57,319 

 

 

(19,489)

 

 

37,830 

Total other comprehensive (loss) earnings

 

$

(44,803)

 

$

9,407 

 

$

(35,396)

 

$

821,860 

 

$

(279,433)

 

$

542,427 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six-Month Periods Ended June 30,



 

2018

 

2017



 

Pre-tax

 

Tax

 

After-tax

 

Pre-tax

 

Tax

 

After-tax

Other comprehensive earnings (loss),
  net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains and losses on investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains
  arising during the period

 

$

(2,222,069)

 

$

466,634 

 

$

(1,755,435)

 

$

1,291,868 

 

$

(439,235)

 

$

852,633 

Reclassification adjustment for
  (gains) losses included in net earnings

 

 

(1,072,200)

 

 

225,162 

 

 

(847,038)

 

 

(387,462)

 

 

131,737 

 

 

(255,725)

Total other comprehensive (loss) earnings

 

$

(3,294,269)

 

$

691,796 

 

$

(2,602,473)

 

$

904,406 

 

$

(307,498)

 

$

596,908 





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







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Reclassified from

Accumulated Other Comprehensive Earnings

Details about Accumulated Other

 

Three-Month Periods Ended June 30,

 

Six-Month Periods Ended June 30,

 

Affected Line Item in the Statement

Comprehensive Earnings Component

 

2018

 

2017

 

2018

 

2017

 

where Net Earnings is Presented

Unrealized gains (losses) on AFS investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

$

29,930 

 

$

 

$

(1,072,200)

 

$

(444,778)

 

Net realized invesment losses (gains)



 

 

 —

 

 

57,316 

 

 

 —

 

 

57,316 

 

Other-than-temporary impairment losses



 

 

(6,285)

 

 

(19,489)

 

 

225,162 

 

 

131,737 

 

Income tax (benefit) expense

Total reclassification adjustment, net of tax

 

$

23,645 

 

$

37,830 

 

$

(847,038)

 

$

(255,725)

 

 

 

2.     INVESTMENTS



The Company’s investments are primarily composed of fixed income debt securities and common and preferred stock equity securities. All of the Company’s fixed maturity debt and equity investments are presented 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.

~  9  ~


 



Fixed Income Securities - Available-for-Sale



The following tables are a summary of the proceeds from sales, maturities, and calls of available-for-sale securities and the related gross realized gains and losses.









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three-Months Ended Ended June 30,



 

 

 

 

 

 

 

 

 

 

Net realized



 

Proceeds

 

Gains

 

Losses

 

gain / (Loss)

2018

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

2,598,335 

 

$

4,669 

 

$

(13,084)

 

$

(8,415)

Common stocks

 

 

241,047 

 

 

16,473 

 

 

(37,988)

 

 

(21,515)

2017

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

906,700 

 

$

 —

 

$

(3)

 

$

(3)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended June 30,



 

 

 

 

 

 

 

 

 

 

Net realized



 

Proceeds

 

Gains

 

Losses

 

gain

2018

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

6,669,276 

 

$

52,787 

 

$

(26,115)

 

$

26,672 

Common stocks

 

 

8,834,375 

 

 

1,102,862 

 

 

(62,242)

 

 

1,040,620 

Preferred stocks

 

 

3,861,722 

 

 

86,862 

 

 

(81,954)

 

 

4,908 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

4,414,597 

 

$

29,328 

 

$

(21)

 

$

29,307 

Common stocks

 

 

1,955,715 

 

 

415,471 

 

 

 —

 

 

415,471 







The amortized cost and estimated fair value of fixed income securities at June 30, 2018, by contractual maturity, are shown as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized Cost

 

Fair Value

Due in one year or less

 

$

311,535 

 

$

311,420 

Due after one year through five years

 

 

23,915,785 

 

 

23,924,513 

Due after five years through 10 years

 

 

10,685,245 

 

 

10,767,086 

Due after 10 years

 

 

18,034,819 

 

 

18,283,025 

Asset and mortgage backed securities without a specific due date

 

 

37,028,126 

 

 

36,408,799 

Total fixed maturity securities

 

$

89,975,510 

 

$

89,694,843 



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 fixed income and equity securities as of June 30, 2018 and December 31, 2017:  









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2018

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury

 

$

1,347,640 

 

$

1,321,469 

 

$

 —

 

$

(26,171)

MBS/ABS/CMBS

 

 

37,028,126 

 

 

36,408,799 

 

 

49,487 

 

 

(668,814)

Corporate

 

 

31,210,729 

 

 

31,157,991 

 

 

356,164 

 

 

(408,902)

Municipal

 

 

20,389,015 

 

 

20,806,584 

 

 

486,377 

 

 

(68,808)

Total fixed maturity securities

 

 

89,975,510 

 

 

89,694,843 

 

 

892,028 

 

 

(1,172,695)

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

13,100,640 

 

 

12,907,136 

 

 

656,830 

 

 

(850,334)

Preferred stocks

 

 

66,675 

 

 

65,650 

 

 

 —

 

 

(1,025)

Total equity securities

 

 

13,167,315 

 

 

12,972,786 

 

 

656,830 

 

 

(851,359)

Total AFS securities

 

$

103,142,825 

 

$

102,667,629 

 

$

1,548,858 

 

$

(2,024,054)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2017

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury

 

$

1,346,712 

 

$

1,333,725 

 

$

 —

 

$

(12,987)

MBS/ABS/CMBS

 

 

31,584,141 

 

 

31,518,662 

 

 

158,944 

 

 

(224,423)

Corporate

 

 

31,038,526 

 

 

31,989,174 

 

 

1,001,906 

 

 

(51,258)

Municipal

 

 

23,803,668 

 

 

24,763,512 

 

 

976,872 

 

 

(17,028)

Total fixed maturity securities

 

 

87,773,047 

 

 

89,605,073 

 

 

2,137,722 

 

 

(305,696)

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

7,631,180 

 

 

8,534,109 

 

 

920,629 

 

 

(17,700)

Preferred stocks

 

 

3,783,311 

 

 

3,867,429 

 

 

132,054 

 

 

(47,936)

Total equity securities

 

 

11,414,491 

 

 

12,401,538 

 

 

1,052,683 

 

 

(65,636)

Total AFS securities

 

$

99,187,538 

 

$

102,006,611 

 

$

3,190,405 

 

$

(371,332)



All of the Company’s collaterized securities carry an average credit rating of AA+ by one or more major rating agency 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 $14,271,429 and $13,517,725 and commercial mortgage backed securities of $9,177,628 and $8,469,852 at June 30, 2018 and December 31, 2017, respectively.

~  11  ~


 

ANALYSIS



The following table is also used as part of the impairment analysis and displays the total value of securities that were in an unrealized loss position as of June 30, 2018, and December 31, 2017. The table segregates 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.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017



 

 

 

 

12 Months

 

 

 

 

 

 

 

12 Months

 

 

 



 

< 12 Months

 

& Greater

 

Total

 

< 12 Months

 

& Greater

 

Total

U.S. treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

1,029,263 

 

$

292,206 

 

$

1,321,469 

 

$

1,038,297 

 

$

295,428 

 

$

1,333,725 

Cost or amortized cost

 

 

1,047,472 

 

 

300,168 

 

 

1,347,640 

 

 

1,046,508 

 

 

300,204 

 

 

1,346,712 

Unrealized loss

 

 

(18,209)

 

 

(7,962)

 

 

(26,171)

 

 

(8,211)

 

 

(4,776)

 

 

(12,987)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MBS/ABS/CMBS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

20,073,237 

 

 

6,708,127 

 

 

26,781,364 

 

 

9,754,119 

 

 

7,445,071 

 

 

17,199,190 

Cost or amortized cost

 

 

20,368,837 

 

 

7,081,341 

 

 

27,450,178 

 

 

9,778,528 

 

 

7,645,085 

 

 

17,423,613 

Unrealized loss

 

 

(295,600)

 

 

(373,214)

 

 

(668,814)

 

 

(24,409)

 

 

(200,014)

 

 

(224,423)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

17,434,719 

 

 

755,371 

 

 

18,190,090 

 

 

5,583,942 

 

 

2,023,856 

 

 

7,607,798 

Cost or amortized cost

 

 

17,799,788 

 

 

799,204 

 

 

18,598,992 

 

 

5,610,093 

 

 

2,048,963 

 

 

7,659,056 

Unrealized loss

 

 

(365,069)

 

 

(43,833)

 

 

(408,902)

 

 

(26,151)

 

 

(25,107)

 

 

(51,258)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

3,644,260 

 

 

839,947 

 

 

4,484,207 

 

 

478,019 

 

 

1,171,520 

 

 

1,649,539 

Cost or amortized cost

 

 

3,677,077 

 

 

875,938 

 

 

4,553,015 

 

 

479,904 

 

 

1,186,663 

 

 

1,666,567 

Unrealized loss

 

 

(32,817)

 

 

(35,991)

 

 

(68,808)

 

 

(1,885)

 

 

(15,143)

 

 

(17,028)