63017 ICC 10Q

Table of Contents

 

 



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, 2017

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: 333-214081

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 website, 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, a non-accelerated filer, or a smaller reporting 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, 2017 was 3,158,680.

 



 

 


 

Table of Contents

 

Table of Contents





 

 



 

Page 

PART I

 

 

Item 1.

Financial Statements



Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016



Condensed Consolidated Statements of Earnings and Comprehensive Earnings For the Three-Month Periods Ended June 30, 2017 and 2016 (unaudited)



Condensed Consolidated Statements of Earnings and Comprehensive Earnings For the Six-Month Periods Ended June 30, 2017 and 2016 (unaudited)



Condensed Consolidated Statements of Cash Flows For the Six-Month Periods Ended June 30, 2017 and 2016 (unaudited)



Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

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

19 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

36 

Item 4.

Controls and Procedures

37 



 

 

PART II

 

 

Item 1.

Legal Proceedings

37 

Item 1A.

Risk Factors

37 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38 

Item 3.

Default Upon Senior Securities

38 

Item 4.

Mine Safety Disclosures

38 

Item 5.

Other Information

38 

Item 6.

Exhibits

39 



 

 

Signatures 

40 



 

~  2  ~


 

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets





 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2017

 

2016



 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments and cash:

 

 

 

 

 

 

Available for sale securities, at fair value

 

 

 

 

 

 

Fixed maturity securities (amortized cost - $81,233,167 at

 

$

83,005,975 

 

$

64,134,023 

6/30/2017 and $62,929,091 at 12/31/2016)

 

 

 

 

 

 

Common stocks¹ (cost - $9,823,126 at

 

 

10,590,764 

 

 

6,982,547 

6/30/2017 and $6,311,708 at 12/31/2016)

 

 

 

 

 

 

Preferred stocks (cost - $3,669,342 at

 

 

3,782,049 

 

 

2,798,413 

6/30/2017 and $2,925,434 at 12/31/2016)

 

 

 

 

 

 

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

 

 

2,852,216 

 

 

2,207,424 

$83,872 at 6/30/2017 and $50,948 at 12/31/2016

 

 

 

 

 

 

Cash and cash equivalents

 

 

10,102,965 

 

 

4,376,847 

Total investments and cash

 

 

110,333,969 

 

 

80,499,254 

Accrued investment income

 

 

647,126 

 

 

524,156 

Premiums and reinsurance balances receivable, net of allowances for

 

 

17,841,248 

 

 

17,479,487 

uncollectible amounts of $50,000 at 6/30/2017 and 12/31/2016

 

 

 

 

 

 

Ceded unearned premiums

 

 

296,208 

 

 

270,751 

Reinsurance balances recoverable on unpaid losses and settlement expenses,

 

 

9,750,254 

 

 

12,114,998 

net of allowances for uncollectible amounts of $0 at 6/30/2017 and 12/31/2016

 

 

 

 

 

 

Federal income taxes

 

 

1,023,361 

 

 

1,037,506 

Deferred policy acquisition costs, net

 

 

4,302,888 

 

 

4,162,927 

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

 

 

3,657,217 

 

 

3,719,535 

$4,571,613 at 6/30/2017 and $4,308,247 at 12/31/2016

 

 

 

 

 

 

Other assets

 

 

1,319,812 

 

 

2,351,347 

Total assets

 

$

149,172,083 

 

$

122,159,961 



 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

49,691,372 

 

$

52,817,254 

Unearned premiums

 

 

25,800,387 

 

 

24,777,712 

Reinsurance balances payable

 

 

130,221 

 

 

109,790 

Corporate debt

 

 

4,991,138 

 

 

3,786,950 

Accrued expenses

 

 

3,181,956 

 

 

4,827,042 

Other liabilities

 

 

1,312,382 

 

 

2,241,003 

Total liabilities

 

 

85,107,456 

 

 

88,559,751 

Equity:

 

 

 

 

 

 

Common stock2  

 

 

35,000 

 

 

 —

Additional paid-in capital

 

 

32,631,781 

 

 

 —

Accumulated other comprehensive earnings, net of tax

 

 

1,751,083 

 

 

1,154,175 

Retained earnings

 

 

33,059,956 

 

 

32,446,035 

Less: Unearned Employee Stock Ownership Plan shares at cost3

 

 

(3,413,193)

 

 

 —

Total equity

 

 

64,064,627 

 

 

33,600,210 

Total liabilities and equity

 

$

149,172,083 

 

$

122,159,961 



1Common stock securities consist of exchange trade funds (ETF) made up primarily of Dividends Select and the S&P 500.

2Par value $0.01; authorized: 2017 - 10,000,000 shares and  2016 - 0 shares; issued: 2017 - 3,500,000 and 2016 - 0 shares;  outstanding: 2017 - 3,158,680 and 2016 - 0 shares.

32017 –348,054 shares and 2016 – 0 shares



See accompanying notes to consolidated financial statements. 

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ICC Holdings, Inc and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three-Months Ended



 

June 30,



 

2017

 

2016

Net premiums earned

 

$

10,710,758 

 

$

10,555,466 

Net investment income

 

 

688,963 

 

 

422,068 

Net realized investment (losses) gains

 

 

(3)

 

 

13,970 

Other-than-temporary impairment losses

 

 

(57,316)

 

 

 —

Other income

 

 

64,722 

 

 

17,536 

Consolidated revenues

 

 

11,407,124 

 

 

11,009,040 

Losses and settlement expenses

 

 

6,864,258 

 

 

6,177,420 

Policy acquisition costs and other operating expenses

 

 

4,720,298 

 

 

4,011,294 

Interest expense on debt

 

 

57,229 

 

 

50,275 

General corporate expenses

 

 

128,905 

 

 

106,582 

Total expenses

 

 

11,770,690 

 

 

10,345,571 

(Loss) earnings before income taxes

 

 

(363,566)

 

 

663,469 

Total income tax (benefit) expense

 

 

(128,443)

 

 

242,897 

Net (loss) earnings

 

$

(235,123)

 

$

420,572 



 

 

 

 

 

 

Other comprehensive earnings, net of tax

 

 

542,427 

 

 

810,414 

Comprehensive earnings

 

$

307,304 

 

$

1,230,986 



 

 

 

 

 

 

(Loss) earnings per share1:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net (loss) earnings per share

 

 

$           (0.07)

 

 

$            0.13

Diluted:

 

 

 

 

 

 

Diluted net (loss) earnings per share

 

 

$           (0.07)

 

 

$            0.13



 

 

 

 

 

 

Weighted average number of common shares outstanding2:

 

 

 

 

 

 

Basic

 

 

3,153,876 

 

 

3,150,000 

Diluted

 

 

3,153,876 

 

 

3,150,000 



1The unaudited pro forma earnings per share for the three months ended June 30, 2016 is provided as a basis for comparison of current period earnings.



2Weighted average number of common shares outstanding for the three months ended June 30, 2016 is based off of the resulting shares from the initial public offering that was completed in March 2017 and are used to calculate the pro forma earnings per share for the three months ended June 30, 2016.



See accompanying notes to consolidated financial statements.

~  4  ~


 

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ICC Holdings, Inc and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited)













 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended



 

June 30,



 

2017

 

2016

Net premiums earned

 

$

21,548,864 

 

$

20,846,228 

Net investment income

 

 

1,161,287 

 

 

769,894 

Net realized investment gains

 

 

444,778 

 

 

138,218 

Other-than-temporary impairment losses

 

 

(57,316)

 

 

 —

Other income

 

 

148,980 

 

 

75,861 

Consolidated revenues

 

 

23,246,593 

 

 

21,830,201 

Losses and settlement expenses

 

 

13,463,642 

 

 

12,556,916 

Policy acquisition costs and other operating expenses

 

 

8,454,950 

 

 

7,543,274 

Interest expense on debt

 

 

109,539 

 

 

91,622 

General corporate expenses

 

 

268,120 

 

 

199,471 

Total expenses

 

 

22,296,251 

 

 

20,391,283 

Earnings before income taxes

 

 

950,342 

 

 

1,438,918 

Total income tax expense

 

 

336,421 

 

 

548,350 

Net earnings

 

$

613,921 

 

$

890,568 



 

 

 

 

 

 

Other comprehensive earnings, net of tax

 

 

596,908 

 

 

1,819,432 

Comprehensive earnings

 

$

1,210,829 

 

$

2,710,000 



 

 

 

 

 

 

Earnings per share1:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net earnings per share

 

 

$            0.19

 

 

$            0.28

Diluted:

 

 

 

 

 

 

Diluted net earnings per share

 

 

$            0.19

 

 

$            0.28



 

 

 

 

 

 

Weighted average number of common shares outstanding2:

 

 

 

 

 

 

Basic

 

 

3,151,946 

 

 

3,150,000 

Diluted

 

 

3,151,946 

 

 

3,150,000 



1The unaudited pro forma earnings per share for the six months ended June 30, 2016 is provided as a basis for comparison of current period earnings.



2Weighted average number of common shares outstanding for the six months ended June 30, 2016 is based off of the resulting shares from the initial public offering that was completed in March 2017 and are used to calculate the pro forma earnings per share for the six months ended June 30, 2016.



See accompanying notes to consolidated financial statements.





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ICC Holdings, Inc and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)







 

 

 

 

 



 

 

 

 

 



Six-Month Periods Ended June 30,



2017

 

2016

Cash flows from operating activities:

 

 

 

 

 

Net earnings

$

613,921 

 

$

890,568 

Adjustments to reconcile net earnings to net cash provided

 

 

 

 

 

by (used in) operating activities

 

 

 

 

 

Net realized investment gains

 

(444,778)

 

 

(138,218)

Other-than-temporary impairment losses

 

57,316 

 

 

 —

Depreciation

 

428,161 

 

 

385,482 

Deferred income tax

 

190,257 

 

 

71,355 

Amortization of bond premium and discount

 

135,265 

 

 

108,231 

Change in:

 

 

 

 

 

Accrued investment income

 

(122,970)

 

 

75,445 

Premiums and reinsurance balances receivable (net)

 

(361,761)

 

 

(1,615,924)

Reinsurance balances payable

 

20,431 

 

 

233,285 

Ceded unearned premiums

 

(25,457)

 

 

(212,916)

Reinsurance balances recoverable

 

2,364,744 

 

 

3,977,646 

Deferred policy acquisition costs

 

(139,961)

 

 

(231,691)

Accrued expenses

 

(1,645,086)

 

 

(832,888)

Unpaid losses and settlement expenses

 

(3,125,882)

 

 

(3,668,703)

Unearned premiums

 

1,022,675 

 

 

1,314,329 

Current federal income tax

 

(483,608)

 

 

473,794 

Other

 

102,915 

 

 

(277,439)

Net cash (used in) provided by operating activities

 

(1,413,818)

 

 

552,356 

Cash flows from investing activities:

 

 

 

 

 

Purchases of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

(22,821,724)

 

 

(4,570,653)

Common stocks, available-for-sale

 

(5,216,872)

 

 

(388,740)

Preferred stock, available-for-sale

 

(638,922)

 

 

 —

Property and equipment

 

(333,887)

 

 

(584,052)

Property held for investment

 

(677,714)

 

 

(1,626,245)

Proceeds from sales, maturities and calls of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

4,414,597 

 

 

7,495,759 

Common stocks, available-for-sale

 

1,955,715 

 

 

 —

Property and equipment

 

967 

 

 

19,300 

Net cash (used in) provided by investing activities

 

(23,317,840)

 

 

345,369 

Cash flows from financing activities:

 

 

 

 

 

Net proceeds received from issuance of shares of common stock and ESOP expense

 

29,253,588 

 

 

 —

Proceeds from loan

 

3,499,149 

 

 

 —

Proceeds from sale leaseback

 

 —

 

 

777,643 

Repayments of borrowed funds

 

(2,294,961)

 

 

(307,883)

Demutualization costs

 

 —

 

 

(161,020)

Net cash provided by financing activities

 

30,457,776 

 

 

308,740 

Net increase in cash and cash equivalents

 

5,726,118 

 

 

1,206,465 

Cash and cash equivalents at beginning of year

 

4,376,847 

 

 

2,179,511 

Cash and cash equivalents at end of period

$

10,102,965 

 

$

3,385,976 

Supplemental information:

 

 

 

 

 

Federal income tax paid

$

600,000 

 

$

 —

Interest paid

 

109,451 

 

 

93,198 



See accompanying notes to consolidated financial statements. 

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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 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., an operating insurance company, Illinois Casualty Company (ICC), and ICC’s three wholly-owned subsidiaries, Beverage Insurance Agency, Inc., an inactive insurance agency, Estrella Innovative Solutions, Inc., an outsourcing company, and ICC Realty, LLC, a real estate services and holding 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. In order to complete the purchase of common shares, the ESOP borrowed money from ICC. ICC Holdings, Inc. secured a loan with American Bank & Trust in March 2017 and used the proceeds to repay ICC for the money borrowed by the ESOP. On March 28, 2017, the Company’s stocks 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 $29.1 million.



Prior to the conversion on March 24, 2017, ICC Holdings, Inc did not engage in any operations. After the conversion, ICC Holdings, Inc’s primary assets are the outstanding capital stock of ICC 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. The condensed consolidated financial statements as of and for the three and six months ended June 30, 2017, include ICC Holdings and subsidiaries. The financial statements as of December 31, 2016, as of June 30, 2016, and for the three and six months ended June 30, 2016, represent the financial position and results of operations of ICC and its subsidiaries only, as the conversion to stock form was completed on March 24, 2017.



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, Iowa, Indiana, Kansas, Minnesota, Missouri, Wisconsin, and Ohio and markets through independent agents. Approximately 36.5% and 39.3% of the premium is written in Illinois for the three months ended June 30, 2017 and 2016, respectively. For the six months ended June 30, 2017 and 2016, respectively, approximately 36.2% and 39.3% of the premium is written in Illinois. ICC has three wholly owned subsidiaries, Beverage Insurance Agency, Estrella Innovative Solutions, Inc., and ICC Realty, LLC.; however 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 December 31, 2016 Annual Report on Form 10-K. The condensed consolidated balance sheet at December 31, 2016, was derived from the audited consolidated balance sheet of ICC as of that date. 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, 2017, 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.



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C.     SIGNIFICANT ACCOUNTING POLICIES



The Company reported significant accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2016. The following are new or revised disclosures.



EMPLOYEE STOCK OWNERSHIP PLAN



The Company recognizes compensation expense related to its employee stock ownership plan (ESOP) ratably during each year for the shares committed to be allocated to participants that year, determined with reference to the fair market value of our stock at the time the commitment to allocate the shares is accrued and recognized. For purposes of calculating earnings per share, the Company includes the weighted average ESOP shares committed to be released for the period. The ESOP covers all employees.



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.  The unaudited pro forma earnings per share for the three and six months ended June 30, 2016 are provided to be used as a basis for comparison of current period earnings. The weighted average number of common shares outstanding are computed as if the resulting shares from the initial public offering, which was completed in March 2017, were outstanding for the three and six month periods ended June 30, 2016.



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 Company’s 2016 Form 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, 2017 and 2016, the Company recognized no impairments.  Property and equipment are summarized as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2017

 

2016

Automobiles

 

$

744,211 

 

$

668,794 

Furniture and fixtures

 

 

405,494 

 

 

516,318 

Computer equipment and software

 

 

3,349,190 

 

 

3,151,676 

Home office

 

 

3,729,936 

 

 

3,690,994 

Total cost

 

 

8,228,831 

 

 

8,027,782 

Accumulated depreciation

 

 

(4,571,613)

 

 

(4,308,247)

Net property and equipment

 

$

3,657,217 

 

$

3,719,535 



F.     COMPREHENSIVE EARNINGS



Comprehensive earnings include net earnings plus 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 34 percent tax rate.



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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,



 

2017

 

2016



 

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

 

$

764,541 

 

$

(259,944)

 

$

504,597 

 

$

1,241,870 

 

$

(422,236)

 

$

819,634 

Reclassification adjustment for

  (gains) losses included in net earnings

 

 

57,319 

 

 

(19,489)

 

 

37,830 

 

 

(13,970)

 

 

4,750 

 

 

(9,220)

Total other comprehensive (loss)

  earnings

 

$

821,860 

 

$

(279,433)

 

$

542,427 

 

$

1,227,900 

 

$

(417,486)

 

$

810,414 











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six-Month Periods Ended June 30,



 

2017

 

2016



 

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 gains (losses)
  arising during the period

 

$

1,291,868 

 

$

(439,235)

 

$

852,633 

 

$

2,894,933 

 

$

(984,277)

 

$

1,910,656 

Reclassification adjustment for
  (gains) losses included in net earnings

 

 

(387,462)

 

 

131,737 

 

 

(255,725)

 

 

(138,218)

 

 

46,994 

 

 

(91,224)

Total other comprehensive earnings (loss)

 

$

904,406 

 

$

(307,498)

 

$

596,908 

 

$

2,756,715 

 

$

(937,283)

 

$

1,819,432 



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







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Reclassified from

Accumulated Other Comprehensive Earnings

Details about Accumulated Other

 

Three-Months Ended June 30,

 

Six-Month Periods Ended June 30,

 

Affected Line Item in the Statement

Comprehensive Earnings Component

 

2017

 

2016

 

2017

 

2016

 

where Net Earnings is Presented

Unrealized gains (losses) on AFS investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

$

 

$

(13,970)

 

$

(444,778)

 

$

(138,218)

 

Net realized investment gains



 

 

57,316 

 

 

 —

 

 

57,316 

 

 

 —

 

Other-than-temporary impairment losses



 

 

(19,489)

 

 

4,750 

 

 

131,737 

 

 

46,994 

 

Income tax expense

Total reclassification adjustment, net of tax

 

$

37,830 

 

$

(9,220)

 

$

(255,725)

 

$

(91,224)

 

 

 

2.     INVESTMENTS 



The Company’s investments include fixed income debt securities and common and preferred stock equity securities. All of the Company’s 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  ~


 

Table of Contents

 

The following is 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 six-months ended June 30, 2017 and 2016.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended Ended June 30,



 

 

 

 

 

 

 

 

 

 

Net realized



 

Proceeds

 

Gains

 

Losses

 

gain

2017

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

4,414,597 

 

$

29,328 

 

$

(21)

 

$

29,307 

Common stocks

 

 

1,955,715 

 

 

415,471 

 

 

 —

 

 

415,471 

2016

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

7,495,759 

 

$

148,842 

 

$

(10,624)

 

$

138,218 







The amortized cost and estimated fair value of fixed income securities at June 30, 2017, by contractual maturity, are shown as follows: 







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized Cost

 

Fair Value

Due in one year or less

 

$

2,252,559 

 

$

2,258,033 

Due after one year through five years

 

 

18,973,053 

 

 

19,521,392 

Due after five years through 10 years

 

 

15,001,686 

 

 

15,712,972 

Due after 10 years

 

 

18,458,796 

 

 

18,985,877 

Asset and mortgage backed securities without a specific due date

 

 

26,547,073 

 

 

26,527,701 

Total fixed maturity securities

 

$

81,233,167 

 

$

83,005,975 



Expected maturities may differ from contractual maturities due to call provisions on some existing securities.

~  10  ~


 

Table of Contents

 



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, 2017 and December 31, 2016:  









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2017

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury

 

$

1,345,794 

 

$

1,344,461 

 

$

2,526 

 

$

(3,859)

MBS/ABS/CMBS

 

 

26,547,073 

 

 

26,527,701 

 

 

199,808 

 

 

(219,180)

Corporate

 

 

30,452,133 

 

 

31,455,183 

 

 

1,041,383 

 

 

(38,333)

Municipal

 

 

22,888,167 

 

 

23,678,630 

 

 

845,066 

 

 

(54,603)

Total fixed maturity securities

 

 

81,233,167 

 

 

83,005,975 

 

 

2,088,783 

 

 

(315,975)

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

9,823,126 

 

 

10,590,764 

 

 

799,138 

 

 

(31,500)

Preferred stocks

 

 

3,669,342 

 

 

3,782,049 

 

 

122,402 

 

 

(9,695)

Total equity securities

 

 

13,492,468 

 

 

14,372,813 

 

 

921,540 

 

 

(41,195)

Total AFS securities

 

$

94,725,635 

 

$

97,378,788 

 

$

3,010,323 

 

$

(357,170)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2016

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury

 

$

1,244,542 

 

$

1,241,125 

 

$

2,527 

 

$

(5,944)

MBS/ABS/CMBS

 

 

19,751,138 

 

 

19,677,200 

 

 

183,175 

 

 

(257,113)

Corporate

 

 

27,593,568 

 

 

28,344,907 

 

 

842,782 

 

 

(91,443)

Municipal

 

 

14,339,843 

 

 

14,870,791 

 

 

665,790 

 

 

(134,842)

Total fixed maturity securities

 

 

62,929,091 

 

 

64,134,023 

 

 

1,694,274 

 

 

(489,342)

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

6,311,708 

 

 

6,982,547 

 

 

704,768 

 

 

(33,929)

Preferred stocks

 

 

2,925,434 

 

 

2,798,413 

 

 

5,425 

 

 

(132,446)

Total equity securities

 

 

9,237,142 

 

 

9,780,960 

 

 

710,193 

 

 

(166,375)

Total AFS securities

 

$

72,166,233 

 

$

73,914,983 

 

$

2,404,467 

 

$

(655,717)



Included within MBS/ABS/CMBS, as defined in Note 3 – Fair Value Disclosures, are residential mortgage backed securities with fair values of  14,636,934 and $10,288,405 and commercial mortgage backed securities of $7,555,799 and $7,600,109 at June 30, 2017 and December 31, 2016, respectively.

~  11  ~


 

Table of Contents

 

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, 2017, and December 31, 2016. 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, 2017

 

December 31, 2016



 

 

 

 

12 Mos

 

 

 

 

 

 

 

12 Mos

 

 

 



 

< 12 Mos.

 

& Greater

 

Total

 

< 12 Mos.

 

& Greater

 

Total

U.S. Treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

995,793 

 

$

 —

 

$

995,793 

 

$

993,576 

 

$

 —

 

$

993,576 

Cost or Amortized cost

 

 

999,652 

 

 

 —

 

 

999,652 

 

 

999,520 

 

 

 —

 

 

999,520 

Unrealized Loss

 

 

(3,859)

 

 

 —

 

 

(3,859)

 

 

(5,944)

 

 

 —

 

 

(5,944)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MBS/ABS/CMBS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

12,082,093 

 

 

157,116 

 

 

12,239,209 

 

 

10,712,987 

 

 

322,641 

 

 

11,035,628 

Cost or Amortized cost

 

 

12,300,773 

 

 

157,616 

 

 

12,458,389 

 

 

10,968,840 

 

 

323,901 

 

 

11,292,741 

Unrealized Loss

 

 

(218,680)

 

 

(500)

 

 

(219,180)

 

 

(255,853)

 

 

(1,260)

 

 

(257,113)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

3,588,228 

 

 

989,820 

 

 

4,578,048 

 

 

5,476,442 

 

 

984,115 

 

 

6,460,557 

Cost or Amortized cost

 

 

3,616,936 

 

 

999,445 

 

 

4,616,381 

 

 

5,552,624 

 

 

999,376 

 

 

6,552,000 

Unrealized Loss

 

 

(28,708)

 

 

(9,625)

 

 

(38,333)

 

 

(76,182)

 

 

(15,261)

 

 

(91,443)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

2,532,093 

 

 

 —

 

 

2,532,093 

 

 

2,995,362 

 

 

 —

 

 

2,995,362 

Cost or Amortized cost

 

 

2,586,696 

 

 

 —

 

 

2,586,696 

 

 

3,130,204 

 

 

 —

 

 

3,130,204 

Unrealized Loss

 

 

(54,603)

 

 

 —

 

 

(54,603)

 

 

(134,842)

 

 

 —

 

 

(134,842)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal, fixed income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

19,198,207 

 

 

1,146,936 

 

 

20,345,143 

 

 

20,178,367 

 

 

1,306,756 

 

 

21,485,123 

Cost or Amortized cost

 

 

19,504,057 

 

 

1,157,061 

 

 

20,661,118 

 

 

20,651,188 

 

 

1,323,277 

 

 

21,974,465 

Unrealized Loss

 

 

(305,850)

 

 

(10,125)

 

 

(315,975)

 

 

(472,821)

 

 

(16,521)

 

 

(489,342)