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. 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 26.5% and 29.6% of the premium is written in Illinois for the three months ended March 31, 2020 and 2019, 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 March 31, 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 March 31, 2020 and 2019, the Company recognized no impairments. Property and equipment are summarized as follows:



	As of
	March 31,		December 31,
	2020		2019
Automobiles	$	521,010	$	505,788
Furniture and fixtures		471,215		457,218
Computer equipment and software		3,855,126		3,823,416
Home office		3,869,886		3,866,632
Total cost		8,717,237		8,653,054
Accumulated depreciation		(5,715,991)		(5,619,706)
Net property and equipment	$	3,001,246	$	3,033,348

F. COMPREHENSIVE EARNINGS

Comprehensive (loss) earnings 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 (loss) earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax (benefit) expense of $(595,473) and $419,383 for the three months ended March 31, 2020 and 2019, respectively.

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


	Three-Month Periods Ended March 31,
		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)
Oher comprehensive (loss) earnings before reclassifications		(1,526,960)		1,436,742
Amount reclassified from accumulated other comprehensive (loss) earnings		(183,886)		37,467
Net current period other comprehensive (loss) earnings		(1,710,846)		1,474,209
Ending balance	$	1,243,090	$	1,259,530

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,
	2020						2019
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on investments:
Unrealized holding (losses) gains arising during the period	$	(2,171,314)	$	644,354	$	(1,526,960)	$	1,866,085	$	(429,343)	$	1,436,742
Reclassification adjustment for (gains) losses included in net earnings		(232,767)		48,881		(183,886)		47,426		(9,959)		37,467
Total other comprehensive (loss) earnings	$	(2,404,081)	$	693,235	$	(1,710,846)	$	1,913,511	$	(439,302)	$	1,474,209

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	2020		2019		where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(232,767)	$	47,426	Net realized investment (gains) losses
		48,881		(9,959)	Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(183,886)	$	37,467