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., an inactive insurance agency; Estrella Innovative Solutions, Inc., an outsourcing company; and Illinois Casualty Company (ICC), an operating insurance company. ICC is an Illinois domiciled company.

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, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Wisconsin and markets through independent agents. Approximately 25.6% and 28.8% of the premium is written in Illinois for the three months ended June 30, 2019 and 2018, respectively. For the six months ended June 30, 2019 and 2018, approximately 27.5% and 30.9% 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 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, 2018 (the “2018 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, 2019, 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 2018 10-K.

D. ADOPTED ACCOUNTING PRONOUNCEMENTS

Revenue Recognition (ASU 2017-13, ASU 2016-20, ASU 2016-12, ASU 2016-11, ASU 2016-10, ASU 2016-08, ASU 2015-14 and ASU 2014-09) – This update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. We adopted these updates effective January 1, 2019. All contracts within the scope of Topic 944, Financial Services – Insurance, investment income, investment related gains and losses and equity in earnings of unconsolidated investees are outside the scope of this ASU. As such, the adoption did not have a material effect on our consolidated financial statements.

Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15) – This guidance addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. We adopted this update effective January 1, 2019, and the adoption did not have a material effect on our consolidated financial statements.

Financial Instruments – Recognition and Measurement (ASU 2016-01) – This guidance affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements of financial instruments. This update requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. Prior to the effective date of this update, changes in fair value related to available-for-sale (AFS) equity securities were recognized in OCI. We adopted this update effective January 1, 2019. Upon adoption, we recognized a cumulative-effect decrease to beginning retained earnings of $1.4 million and a corresponding increase to accumulated other comprehensive income (AOCI).

E. 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 2018 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.

F. PROPERTY AND EQUIPMENT

Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended June 30, 2019 and 2018, the Company recognized no impairments. Property and equipment are summarized as follows:



	As of
	June 30,		December 31,
	2019		2018
Automobiles	$	664,533	$	603,046
Furniture and fixtures		447,639		436,568
Computer equipment and software		3,620,370		3,542,339
Home office		3,866,632		3,849,947
Total cost		8,599,174		8,431,900
Accumulated depreciation		(5,418,842)		(5,099,090)
Net property and equipment	$	3,180,332	$	3,332,810

G. 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% tax rate.

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,
	2019						2018
	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	$	1,576,968	$	(224,377)	$	1,352,591	$	(74,733)	$	15,692	$	(59,041)
Reclassification adjustment for (gains) losses included in net earnings		(135,173)		28,386		(106,787)		29,930		(6,285)		23,645
Total other comprehensive (loss) earnings	$	1,441,795	$	(195,991)	$	1,245,804	$	(44,803)	$	9,407	$	(35,396)



	Six-Month Periods Ended June 30,
	2019						2018
	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	$	3,443,053	$	(605,217)	$	2,837,836	$	(2,222,069)	$	466,634	$	(1,755,435)
Reclassification adjustment for losses (gains) included in net earnings		(149,143)		31,320		(117,823)		(1,072,200)		225,162		(847,038)
Total other comprehensive earnings (loss)	$	3,293,910	$	(573,897)	$	2,720,013	$	(3,294,269)	$	691,796	$	(2,602,473)

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	2019		2018		2019		2018		where Net Earnings is Presented
Unrealized losses (gains) on AFS investments:
	$	(135,173)	$	29,930	$	(149,143)	$	(1,072,200)	Net realized investment losses (gains)
		28,386		(6,285)		31,320		225,162	Income tax (benefit) expense
Total reclassification adjustment, net of tax	$	(106,787)	$	23,645	$	(117,823)	$	(847,038)