Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies [Abstract]

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 25.7% and 25.6% of the premium is written in Illinois for the three months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019, approximately 26.1% and 27.5% of the premium is written in Illinois, respectively. The Company operates as a single segment.

Principles of Consolidation and Basis of Presentation

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 June 30, 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.

Significant Accounting Policies

C. SIGNIFICANT ACCOUNTING POLICIES

The Company reported its significant accounting policies in the 2019 10-K.

Prospective Accounting Standards

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.

Property and Equipment

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, 2020 and 2019, the Company recognized no impairments. Property and equipment are summarized as follows:



	As of
	June 30,		December 31,
	2020		2019
Automobiles	$	530,722	$	505,788
Furniture and fixtures		469,659		457,218
Computer equipment and software		3,875,559		3,823,416
Home office		3,871,179		3,866,632
Total cost		8,747,120		8,653,054
Accumulated depreciation		(5,818,924)		(5,619,706)
Net property and equipment	$	2,928,196	$	3,033,348

Comprehensive Earnings

F. COMPREHENSIVE EARNINGS

Comprehensive earnings (loss) 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 earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense of $271,932 and $636,537 for the six months ended June 30, 2020 and 2019, respectively.

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


		Six-Month Periods Ended June 30,
				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)
Other comprehensive earnings before reclassification			2,086,077			2,837,836
Amount reclassified from accumulated other comprehensive earnings			(272,194)			(117,823)
Net current period other comprehensive earnings			1,813,883			2,720,013
Ending balance	$		4,767,819		$	2,505,334

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,
	2020						2019
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Other comprehensive earnings, net of tax
Unrealized gains and losses on investments:
Unrealized holding gains arising during the period	$	4,456,968	$	(843,931)	$	3,613,037	$	1,576,968	$	(224,377)	$	1,352,591
Reclassification adjustment for losses included in net earnings		(111,782)		23,474		(88,308)		(135,173)		28,386		(106,787)
Total other comprehensive earnings	$	4,345,186	$	(820,457)	$	3,524,729	$	1,441,795	$	(195,991)	$	1,245,804



	Six-Month Periods Ended June 30,
	2020						2019
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Other comprehensive (loss) earnings, net of tax
Unrealized gains and losses on AFS investments:
Unrealized holding gains arising during the period	$	2,285,654	$	(199,577)	$	2,086,077	$	3,443,053	$	(605,217)	$	2,837,836
Reclassification adjustment for (gains) included in net earnings		(344,549)		72,355		(272,194)		(149,143)		31,320		(117,823)
Total other comprehensive earnings	$	1,941,105	$	(127,222)	$	1,813,883	$	3,293,910	$	(573,897)	$	2,720,013

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				Six-Month Period Ended
Details about Accumulated Other	June 30,				June 30,				Affected Line Item in the Statement
Comprehensive Earnings Component	2020		2019		2020		2019		where Net Earnings is Presented
Unrealized (gains) losses on AFS investments:
	$	(111,782)	$	(135,173)	$	(344,549)	$	(149,143)	Net realized investment (gains)
		23,474		28,386		72,355		31,320	Income tax expense (benefit)
Total reclassification adjustment, net of tax	$	(88,308)	$	(106,787)	$	(272,194)	$	(117,823)

Risk and Uncertainties

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 has resulted in, and is expected to continue to result in, significant disruptions in economic activity and financial markets. The cumulative effects of COVID-19 on the Company, and the effect of any other public health outbreak, cannot be predicted at this time, 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.