123119 ICC 10K AMENDED

Table of Contents

 

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-K/A

Amendment No. 1

_______________________________



(Mark One)



 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

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)

Securities registered pursuant to Section 12(b) of the Act:

 



 

 

Common Stock, par value $0.01 per share

Title of each class

 

The NASDAQ Stock Market, LLC

Name of exchange on which registered



Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    No 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes    No 

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 every Interactive Data File required to be submitted 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 such files). Yes    No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10‑K. 

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 aggregate market value of the registrant’s common stock held by non-affiliates as of June 28, 2019, based upon the closing sale price of the Common Stock  on June 28, 2019 as reported on the NASDAQ Stock Market, LLC, was $31,435,159. Shares of Common Stock held directly or indirectly by each reporting officer and director along with shares held by the Company ESOP have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. 

The number of shares of the registrant’s common stock outstanding as of March 06, 2020 was 3,296,189.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement for our 2019 Annual Meeting of Shareholders which is to be filed within 120 days after the end of the fiscal year ended December 31, 2019, are incorporated by reference into Part III of this Form 10-K, to the extent described in Part III.



 



 

 


 

Table of Contents

 

Explanatory Note

This Amendment No. 1 (this “Amendment”) to the Annual Report on Form 10-K of ICC Holdings, Inc. (the “Company”) for the fiscal year ended December 31, 2019, originally filed on March 30, 2020 (the “Original Filing”), is being filed solely to include the report of BKD, LLP, the Company’s independent accounting firm for the year ended December 31, 2018, in Item 8 and its consent as Exhibit 23.1.  These were inadvertently omitted in the Original Filing.

Except as described above, no other changes have been made to the Original Filing, and this Amendment does not modify, amend or update in any way any of the financial or other information contained in the Original Filing. This Amendment does not reflect events that may have occurred subsequent to the filing date of the Original Filing. 

 

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Table of Contents

 

Item 8. Financial Statements and Supplementary Data



Index to Financial Statements





 

Reports of Independent Accounting Firms

Financial Statements

 

Consolidated Balance Sheets (As of December 31, 2019 and 2018)

Consolidated Statements of Earnings and Comprehensive Earnings (Loss) (Years ended December 31, 2019 and 2018)

Consolidated Statements of Stockholders’ Equity (Years ended December 31, 2019 and 2018)

Consolidated Statements of Cash Flows (Years ended December  31, 2019 and 2018)

Notes to Consolidated Financial Statements

10 

Schedules to Consolidated Financial Statements 

34 









 

 

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Table of Contents

 

Report of Independent Registered Public Accounting Firm



To the shareholders, board of directors, and audit committee of ICC Holdings, Inc. and Subsidiaries



Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of ICC Holdings, Inc. and Subsidiaries (the Company) as of December 31, 2019, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity, and cash flows, for the year then ended and the related notes and the financial statement schedules listed in Item 15 of the Company’s Form 10-K (collectively referred to as the financial statements).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.



Basis for Opinion

These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s financial statements based on our audit.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCOAB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audit in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.



Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audit provides a reasonable basis for our opinion.

https://cdn.kscope.io/1b367c6aca51e1936d1ec3c83dd3e656-Johnson Lambert LLP electronic sig.bmp

We have served as the Company’s auditor since 2019.



Park Ridge, IL

March 30, 2020









 

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Table of Contents

 

Report of Independent Registered Public Accounting Firm



To the Shareholders, Board of Directors and Audit Committee

ICC Holdings, Inc. and Subsidiaries

Rock Island, Illinois

 

 

Opinion on the Financial Statements 

 

We have audited the accompanying consolidated balance sheet of ICC Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2018, and the related consolidated statements of earnings and comprehensive earnings (loss), stockholders’ equity and cash flows for the year then ended and the related notes to the consolidated financial statements and schedules (collectively referred to as the “financial statements”).  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion 

 

These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the Company's financial statements based on our audit. 

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audit provides a reasonable basis for our opinion.

 

 

 

 

BKD, LLP  

/s/ BKD, LLP

 

We served as the Company’s auditor from 2016 to 2018.

 

Cincinnati, Ohio

April 1, 2019















 

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Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets







 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

December 31,

 

December 31,



 

2019

 

2018

Assets

 

 

 

 

 

 

Investments and cash:

 

 

 

 

 

 

Fixed maturity securities (amortized cost - $88,348,415 at

 

 

 

 

 

 

12/31/2019 and $89,252,906 at 12/31/2018)

 

$

92,087,572 

 

$

88,981,159 

Common stocks at fair value

 

 

14,448,773 

 

 

11,843,223 

Other invested assets

 

 

877,900 

 

 

154,200 

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

 

 

 

 

 

 

$332,218 at 12/31/2019 and $222,825 at 12/31/2018

 

 

4,353,713 

 

 

3,586,273 

Cash and cash equivalents

 

 

6,626,585 

 

 

4,644,784 

Total investments and cash

 

 

118,394,543 

 

 

109,209,639 

Accrued investment income

 

 

646,504 

 

 

648,321 

Premiums and reinsurance balances receivable, net of allowances for

 

 

 

 

 

 

uncollectible amounts of $100,000 at 12/31/2019 and $50,000 at 12/31/2018

 

 

22,368,526 

 

 

21,404,344 

Ceded unearned premiums

 

 

822,818 

 

 

796,065 

Reinsurance balances recoverable on unpaid losses and settlement expenses,

 

 

 

 

 

 

net of allowances for uncollectible amounts of $0 at 12/31/2019 and 12/31/2018

 

 

11,036,170 

 

 

6,735,964 

Income taxes - current

 

 

192,559 

 

 

847,271 

Income taxes - deferred

 

 

 —

 

 

1,021,398 

Deferred policy acquisition costs, net

 

 

5,269,256 

 

 

5,247,188 

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

 

 

 

 

 

 

$5,619,706 at 12/31/2019 and $5,099,090 at 12/31/2018

 

 

3,033,348 

 

 

3,332,810 

Other assets

 

 

1,239,794 

 

 

1,040,193 

Total assets

 

$

163,003,518 

 

$

150,283,193 

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

56,838,307 

 

$

51,447,440 

Unearned premiums

 

 

30,392,817 

 

 

29,972,623 

Reinsurance balances payable

 

 

374,998 

 

 

993,004 

Corporate debt

 

 

3,475,088 

 

 

3,484,606 

Accrued expenses

 

 

4,216,988 

 

 

4,536,218 

Income taxes - deferred

 

 

39,213 

 

 

 —

Other liabilities

 

 

1,324,273 

 

 

1,256,003 

Total liabilities

 

 

96,661,684 

 

 

91,689,894 

Equity:

 

 

 

 

 

 

Common stock1  

 

 

35,000 

 

 

35,000 

Treasury stock, at cost2

 

 

(3,146,576)

 

 

(2,999,995)

Additional paid-in capital

 

 

32,703,209 

 

 

32,505,423 

Accumulated other comprehensive earnings (loss), net of tax

 

 

2,953,936 

 

 

(1,580,976)

Retained earnings

 

 

36,608,750 

 

 

33,680,702 

Less: Unearned Employee Stock Ownership Plan shares at cost3

 

 

(2,812,485)

 

 

(3,046,855)

Total equity

 

 

66,341,834 

 

 

58,593,299 

Total liabilities and equity

 

$

163,003,518 

 

$

150,283,193 



1    Par value $0.01;  authorized: 2019  10,000,000 shares and 201810,000,000 shares; issued: 2019  3,500,000 and 20183,500,000 shares; outstanding: 2019  3,014,941 and 2018  – 2,992,734 shares.

2 2019203,811 shares and 2018196,721 shares

3 2019  – 281,248 shares and 2018  – 304,685 shares



See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings and Comprehensive Earnings (Loss)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Twelve-Months Ended



 

December 31,



 

2019

 

2018

Net premiums earned

 

$

52,841,766 

 

$

47,116,961 

Net investment income

 

 

3,185,153 

 

 

2,890,266 

Net realized investment gains

 

 

1,200,765 

 

 

975,993 

Other-than-temporary impairment losses

 

 

 —

 

 

(16,178)

Net unrealized gains on equity securities

 

 

2,350,513 

 

 

 —

Other (loss) income

 

 

(53,297)

 

 

196,649 

Consolidated revenues

 

 

59,524,900 

 

 

51,163,691 

Losses and settlement expenses

 

 

33,714,837 

 

 

31,262,462 

Policy acquisition costs and other operating expenses

 

 

20,020,005 

 

 

18,214,983 

Interest expense on debt

 

 

128,790 

 

 

140,877 

General corporate expenses

 

 

579,708 

 

 

545,986 

Total expenses

 

 

54,443,340 

 

 

50,164,308 

Earnings before income taxes

 

 

5,081,560 

 

 

999,383 

Income tax expense (benefit):

 

 

 

 

 

 

Current

 

 

568,893 

 

 

(234,037)

Deferred

 

 

218,322 

 

 

340,124 

Total income tax expense

 

 

787,215 

 

 

106,087 

Net earnings

 

$

4,294,345 

 

$

893,296 



 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net earnings per share

 

$

1.43 

 

$

0.29 

Diluted:

 

 

 

 

 

 

Diluted net earnings per share

 

$

1.42 

 

$

0.29 



 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

3,008,564 

 

 

3,119,968 

Diluted

 

 

3,013,867 

 

 

3,121,140 



 

 

 

 

 

 

Net earnings

 

$

4,294,345 

 

$

893,296 

Other comprehensive earnings (loss), net of tax

 

 

 

 

 

 

Unrealized gains and losses on investments:

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period,

 

 

 

 

 

 

net of income tax expense (benefit) of $617,319 in 2019

 

 

 

 

 

 

and $(810,701) in 2018

 

 

3,393,585 

 

 

(3,049,791)

Reclassification adjustment for (gains) included in net

 

 

 

 

 

 

income, net of income tax expense of $59,802 in 2019

 

 

 

 

 

 

and $201,561 in 2018

 

 

(224,970)

 

 

(758,254)

Total other comprehensive earnings (loss)

 

 

3,168,615 

 

 

(3,808,045)

Comprehensive earnings (loss)

 

$

7,462,960 

 

$

(2,914,749)



See accompanying notes to consolidated financial statements.

 

 

 

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Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common Stock

 

Treasury Stock

 

Unearned ESOP

 

Additional paid-in capital

 

Retained
earnings

 

Accumulated
other
comprehensive
earnings (loss)

 

Total equity

Balance, January 1, 2018

 

$

35,000 

 

$

 —

 

$

(3,281,220)

 

$

32,333,290 

 

$

32,787,406 

 

$

2,227,069 

 

$

64,101,545 

Purchase of common stock

 

 

 —

 

 

(2,999,995)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,999,995)

Net earnings

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

893,296 

 

 

 —

 

 

893,296 

Other comprehensive (loss), net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,808,045)

 

 

(3,808,045)

Restricted stock unit expense

 

 

 —

 

 

 —

 

 

 —

 

 

50,662 

 

 

 —

 

 

 —

 

 

50,662 

ESOP shares released

 

 

 —

 

 

 —

 

 

234,365 

 

 

121,471 

 

 

 —

 

 

 —

 

 

355,836 

Balance, December 31, 2018

 

$

35,000 

 

$

(2,999,995)

 

$

(3,046,855)

 

$

32,505,423 

 

$

33,680,702 

 

$

(1,580,976)

 

$

58,593,299 

Cumulative-effect adjustment from ASU 2016-011  

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,366,297)

 

 

1,366,297 

 

 

 —

Purchase of common stock

 

 

 —

 

 

(146,581)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(146,581)

Net earnings

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,294,345 

 

 

 —

 

 

4,294,345 

Other comprehensive earnings, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,168,615 

 

 

3,168,615 

Restricted stock unit expense

 

 

 —

 

 

 —

 

 

 —

 

 

108,115 

 

 

 —

 

 

 —

 

 

108,115 

ESOP shares released

 

 

 —

 

 

 —

 

 

234,370 

 

 

89,671 

 

 

 —

 

 

 —

 

 

324,041 

Balance, December 31, 2019

 

$

35,000 

 

$

(3,146,576)

 

$

(2,812,485)

 

$

32,703,209 

 

$

36,608,750 

 

$

2,953,936 

 

$

66,341,834 



1See discussion of Accounting Standards Update 2016-01 adoption in Note 1 - Summary of Significant Accounting Policies



See accompanying notes to consolidated financial statements.

 

 

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Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows





 

 

 

 

 



 

 

 

 

 



Twelve-Month Periods Ended December 31,



2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

Net earnings

$

4,294,345 

 

$

893,296 

Adjustments to reconcile net earnings to net cash

 

 

 

 

 

provided by operating activities

 

 

 

 

 

Net realized investment gains

 

(1,200,765)

 

 

(975,993)

Other-than-temporary impairment losses

 

 —

 

 

16,178 

Net unrealized gains on equity securities

 

(2,350,513)

 

 

 —

Depreciation

 

794,506 

 

 

733,493 

Deferred income tax

 

218,322 

 

 

340,124 

Amortization of bond premium and discount

 

257,685 

 

 

296,050 

Stock-based compensation expense

 

432,156 

 

 

406,498 

Change in:

 

 

 

 

 

Accrued investment income

 

1,817 

 

 

39,132 

Premiums and reinsurance balances receivable

 

(964,182)

 

 

(2,391,082)

Ceded unearned premiums

 

(26,753)

 

 

(521,093)

Reinsurance balances payable

 

(618,006)

 

 

665,521 

Reinsurance balances recoverable

 

(4,300,206)

 

 

3,293,870 

Deferred policy acquisition costs

 

(22,068)

 

 

(654,773)

Unpaid losses and settlement expenses

 

5,390,867 

 

 

373,314 

Unearned premiums

 

420,194 

 

 

3,417,041 

Accrued expenses

 

(319,230)

 

 

262,216 

Current federal income tax

 

654,712 

 

 

(274,124)

Other

 

(131,331)

 

 

(146,185)

Net cash provided by operating activities

 

2,531,550 

 

 

5,773,483 

Cash flows from investing activities:

 

 

 

 

 

Purchases of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

(26,101,621)

 

 

(18,697,057)

Common stocks

 

(7,563,198)

 

 

(16,974,453)

Preferred stocks

 

 —

 

 

(140,925)

Other invested assets

 

(738,300)

 

 

(54,200)

Property held for investment

 

(876,833)

 

 

(555,371)

Property and equipment

 

(444,430)

 

 

(497,011)

Proceeds from sales, maturities and calls of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

27,033,200 

 

 

16,966,599 

Common stocks

 

8,238,753 

 

 

11,843,798 

Preferred stocks

 

 —

 

 

3,927,722 

Property and equipment

 

58,779 

 

 

30,277 

Net cash used in investing activities

 

(393,650)

 

 

(4,150,621)

Cash flows from financing activities:

 

 

 

 

 

Repayments of borrowed funds

 

(9,518)

 

 

(854,602)

Purchase of common stock

 

(146,581)

 

 

(2,999,995)

Net cash used in financing activities

 

(156,099)

 

 

(3,854,597)

Net increase (decrease) in cash and cash equivalents

 

1,981,801 

 

 

(2,231,735)

Cash and cash equivalents at beginning of year

 

4,644,784 

 

 

6,876,519 

Cash and cash equivalents at end of period

$

6,626,585 

 

$

4,644,784 

Supplemental information:

 

 

 

 

 

Federal income tax recovered

$

164,543 

 

$

 —

Interest paid

 

128,800 

 

 

173,053 



See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

Notes to 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-K, 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 26.1% and 29.7% of the premium was written in Illinois for the years ended December 31, 2019 and December 31, 2018, respectively. The Company operates as a single segment.



B.     PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION



The accompanying consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (GAAP), which differ in some respects from those followed in reports to insurance regulatory authorities. The consolidated financial statements include the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated.



In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, revenues and expenses for the periods then ended, and the accompanying notes to the consolidated financial statements. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. The most significant of these amounts is the liability for unpaid losses and settlement expenses. Other estimates include investment valuation and other-than-temporary impairments (OTTIs), the collectibility of reinsurance balances, recoverability of deferred tax assets, and deferred policy acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Although recorded estimates are supported by actuarial computations and other supportive data, the estimates are ultimately based on expectations of future events. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.



C.     INVESTMENTS



AVAILABLE-FOR-SALE SECURITIES



Debt securities are classified as available-for-sale (AFS) and reported at fair value. Unrealized gains and losses on these securities are excluded from net earnings but are recorded as a separate component of comprehensive earnings and shareholders’ equity, net of deferred income taxes.



EQUITY SECURITIES



Equity securities include common stock, mutual funds, and non-redeemable preferred stock. Equity securities are carried at fair value with subsequent changes in fair value recorded in net earnings effective January 1, 2019. Prior to January 1, 2019, the accounting for subsequent changes in fair value of equity securities was consistent with the treatment of AFS unrealized gains and losses.



 

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OTHER-THAN-TEMPORARY IMPAIRMENT



Under current accounting standards, an OTTI write-down of fixed maturity securities, where fair value is below amortized cost, is triggered by circumstances where (1) an entity has the intent to sell a security, (2) it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis or (3) the entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security in a loss position or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the difference between the security’s amortized cost and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors is recognized in other comprehensive income. Impairment losses result in a reduction of the underlying investment’s cost basis.



The Company regularly evaluates its fixed maturity securities using both quantitative and qualitative criteria to determine impairment losses for other-than-temporary declines in the fair value of the investments. The following are the key factors for determining if a security is other-than-temporarily impaired:

·

The extent to which the fair value is less than cost, 

·

The assessment of significant adverse changes to the cash flows on a fixed maturity investment, 

·

The occurrence of a discrete credit event resulting in the issuer defaulting on a material obligation, the issuer seeking protection from creditors under the bankruptcy laws, the issuer proposing a voluntary reorganization under which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than par value, 

·

The probability that the Company will recover the entire amortized cost basis of the fixed income securities prior to maturity, or 

·

The ability and intent to hold fixed maturity securities until maturity.    



Quantitative and qualitative criteria are considered to varying degrees depending on the sector the analysis is being performed. The sectors are as follows:



Corporates



The Company performs a qualitative evaluation of holdings that fall below the price threshold. The analysis begins with an opinion of industry and competitive position. This includes an assessment of factors that enable the profit structure of the business (e.g., reserve profile for exploration and production companies), competitive advantage (e.g., distribution system), management strategy, and an analysis of trends in return on invested capital. Analysts may also review other factors to determine whether an impairment exists including liquidity, asset value cash flow generation, and industry multiples.



Municipals



The Company analyzes the screened impairment candidates on a quantitative and qualitative basis. This includes an assessment of the factors that may be contributing to the unrealized loss and whether the recovery value is greater or less than current market value.



Structured Securities



The “stated assumptions” analytic approach relies on actual 6-month average collateral performance measures (voluntary prepayment rate, gross default rate, and loss severity) sourced through third party data providers or remittance reports. The analysis applies the stated assumptions throughout the remaining term of the transaction using forecasted cashflows, which are then applied through the transaction structure (reflecting the priority of payments and performance triggers) to determine whether there is a loss to the security (“Loss to Tranche”). For securities or sectors for which no actual loss or minimal loss has been observed (certain Prime Residential Mortgage Backed Securities (RMBS) and Commercial Mortgage Backed Securities (CMBS), for example), sector-based assumptions are applied or an alternative quantitative or qualitative analysis is performed.



Investment Income



Interest on fixed maturities and short-term investments is credited to earnings on an accrual basis. Premiums and discounts are amortized or accreted over the lives of the related fixed maturities. Dividends on equity securities are credited to earnings on the ex-dividend date. 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

 

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D.     OTHER INVESTED ASSETS



Other invested assets include privately held investments and a promissory note. Other invested assets are carried at face  value and given that there is no readily available market for these to trade in, management believes face value accurately reflects fair value.



E.     PROPERTY HELD FOR INVESTMENT



Property held for investment purposes is initially recorded at the purchase price, which is generally fair value, and is subsequently reported at cost less accumulated depreciation. Buildings are depreciated on a straight-line basis over the estimated useful life of the building, which we estimate to be 39 years. Income from property held for investment is reported as net investment income.



F.     CASH AND CASH EQUIVALENTS



Cash consists of uninvested balances in bank accounts. Cash equivalents consist of investments with original maturities of 90 days or less, primarily AAA-rated prime and government money market funds. Cash equivalents are carried at cost, which approximates fair value. The Company has not experienced losses on these instruments. We maintain cash balances primarily at one bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. During the normal course of business, balances are maintained above the FDIC insurance limit.



G.     REINSURANCE



Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets instead of being netted with the related liabilities, since reinsurance does not relieve us of our legal liability to our policyholders.



Quarterly, the Company monitors the financial condition of its reinsurers. The Company’s monitoring efforts include, but are not limited to, the review of annual summarized reinsurer financial data and analysis of the credit risk associated with reinsurance balances recoverable by monitoring the A.M. Best and Standard & Poor’s (S&P) ratings. In addition, the Company subjects its reinsurance recoverables to detailed recoverable tests, including an analysis based on average default by A.M. Best rating. Based upon the review and testing, the Company’s policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that the Company may be unable to recover.



H.     POLICY ACQUISITION COSTS



The Company defers commissions, premium taxes, and certain other costs that are incrementally or directly related to the successful acquisition of new or renewal insurance contracts. Acquisition-related costs may be deemed ineligible for deferral when they are based on contingent or performance criteria beyond the basic acquisition of the insurance contract or when efforts to obtain or renew the insurance contract are unsuccessful. All eligible costs are capitalized and charged to expense in proportion to premium revenue recognized. The method followed in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value. This deferral methodology applies to both gross and ceded premiums and acquisition costs.



 

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I.     PROPERTY AND EQUIPMENT



Property and equipment are presented at cost, less accumulated depreciation, and are depreciated using accelerated methods for financial statement purposes for a period based on their economic life. Computer equipment is depreciated over 3 years and equipment over a range of 5 to 7 years. Buildings are depreciated over 39 years and related improvements over 15 years. Annually, the Company reviews the major asset classes held for impairment. For the years ended December 31, 2019 and 2018, the Company recognized no impairments. Property and equipment are summarized as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

December 31,

 

December 31,



 

2019

 

2018

Automobiles

 

$

505,788 

 

$

603,046 

Furniture and fixtures

 

 

457,218 

 

 

436,568 

Computer equipment and software

 

 

3,823,416 

 

 

3,542,339 

Home office

 

 

3,866,632 

 

 

3,849,947 

Total cost

 

 

8,653,054 

 

 

8,431,900 

Accumulated depreciation

 

 

(5,619,706)

 

 

(5,099,090)

Net property and equipment

 

$

3,033,348 

 

$

3,332,810 



J.     UNPAID LOSSES AND SETTLEMENT EXPENSES



The liability for unpaid losses and settlement expenses represents estimates of both reported and unreported claims and related expenses. The estimates are based on certain actuarial and other assumptions related to the ultimate cost to settle such claims. Such assumptions are subject to occasional changes due to evolving economic, social, and political conditions. All estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the results of operations in the period in which they are determined. Due to the inherent uncertainty in estimating reserves for losses and settlement expenses, there can be no assurance that the ultimate liability will not exceed recorded amounts. If actual liabilities do exceed recorded amounts, there will be an adverse effect. Based on the current assumptions used in estimating reserves, we believe that our overall reserve levels at December 31, 2019, make a reasonable provision to meet our future obligations. See Note 7 – Unpaid Losses and Settlement Expenses for further discussion.



K.     PREMIUMS



Premiums are recognized ratably over the term of the contracts, net of ceded reinsurance. Unearned premiums represent the portion of premiums written relative to the unexpired terms of coverage. Unearned premiums are calculated on a daily pro rata basis. A premium deficiency reserve should be recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, unamortized acquisition costs, and maintenance costs exceeds related unearned premiums. The Company utilizes anticipated investment income as a factor in its premium deficiency calculation.  The Company concluded that no premium deficiency adjustments were necessary in either of the years ended December 31, 2019 and 2018.





L.     GENERAL CORPORATE EXPENSES



General corporate expenses consist primarily of real estate and occupancy costs, such as utilities and maintenance. These costs do not vary significantly with premium volume but rather with square footage of real estate owned.



M.     INCOME TAXES



The Company files a consolidated federal income tax return. Federal income taxes are accounted for using the asset and liability method under which deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, operating losses and tax credit carry forwards. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not all or some of the deferred tax assets will not be realized.



 

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The Company considers uncertainties in income taxes and recognizes those in its consolidated financial statements as required. As it relates to uncertainties in income taxes, unrecognized tax benefits, including interest and penalty accruals, are not considered material to the consolidated financial statements. Also, no tax uncertainties are expected to result in significant increases or decreases to unrecognized tax benefits within the next 12-month period. Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred.



ICC is subject to minimal state income tax liabilities. On a state basis, since the majority of income is from insurance operations, the Company pays premium taxes in lieu of state income tax. Premium taxes are a component of policy acquisition costs and calculated as a percentage of gross premiums written.



N.    EMPLOYEE STOCK OWNERSHIP PLAN



The Company recognizes employee stock ownership plan (ESOP) compensation expense ratably during each year for the shares committed to be allocated to participants that year. This expense is determined by the fair market value of our stock at the time the commitment to allocate the shares is accrued and recognized. For purposes of balance sheet disclosures of shares outstanding, the Company includes only the number of ESOP shares that have been committed to be released for the period. 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 who have worked a minimum of 1,000 hours in the plan year.



O.      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.



P.     COMPREHENSIVE EARNINGS



Comprehensive earnings include net earnings plus unrealized (gains)  losses on AFS investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the consolidated statement of earnings, the Company used a  21% tax rate for the years ended December 31, 2019, and 2018. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $677,121 and $(609,140) for 2019 and 2018, respectively.



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







 

 

 

 

 

 



 

 

Year Ended December 31,



 

 

2019 

 

2018 

Beginning balance

 

$

(1,580,976)

 

$

2,227,069 

Cumulative effect of adoption of ASU 2016-01

 

 

1,366,297 

 

 

 -

Adjusted beginning balance

 

 

(214,679)

 

 

2,227,069 

Oher comprehensive earnings (loss) before reclassifications

 

 

3,393,585 

 

 

(3,049,791)

Amount reclassified from accumulated other comprehensive earnings

 

 

(224,970)

 

 

(758,254)

Net current period other comprehensive earnings (loss)

 

 

3,168,615 

 

 

(3,808,045)

Ending balance

 

$

2,953,936 

 

$

(1,580,976)



 

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







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Amounts Reclassified from

Accumulated Other Comprehensive Earnings



 

Twelve-Month Period Ended

 

 

Details about Accumulated Other

 

December 31,

 

Affected Line Item in the Statement

Comprehensive Earnings Component

 

2019

 

2018

 

where Net Earnings is Presented

Unrealized (gains) on AFS investments:

 

 

 

 

 

 

 

 



 

$

(284,772)

 

$

(975,993)

 

Net realized investment (gains)



 

 

 —

 

 

16,178 

 

Other-than-temporary impairment losses



 

 

59,802 

 

 

201,561 

 

Income tax expense

Total reclassification adjustment, net of tax

 

$

(224,970)

 

$

(758,254)

 

 











Q.      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 earnings, 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).



R.PROSPECTIVE ACCOUNTING STANDARDS



The dates presented below represent the implementation dates for the Company. The Company’s status as an Emerging Growth Company could delay the required adoption of each of these standards.



 

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Financial Instruments Credit Losses (ASU 2018-19 and ASU 2016-13) – This update is designed to reduce complexity by limiting the number of credit impairment models used for different assets. The model will result in accelerated credit loss recognition on assets held at amortized cost, which includes our commercial and residential mortgage investments and reinsurance balances recoverable. The identification of credit-deteriorated securities will include all assets that have experienced a more-than-insignificant deterioration in credit since origination. Additionally, any changes in the expected cash flows of credit-deteriorated securities will be recognized immediately in the income statement. AFS fixed maturity securities are not in scope of the new credit loss model, but will undergo targeted improvements to the current reporting model including the establishment of a valuation allowance for credit losses versus the current direct write down approach. We will be required to adopt this update effective January 1, 2023. We are currently evaluating the impact of this guidance on our consolidated financial statements.



Leases (ASU 2018-20, ASU 2018-11, ASU 2018-10, ASU 2018-01, ASU 2017-13 and ASU 2016-02) – These updates are intended to increase transparency and comparability for lease transactions. ASU 2016-02 requires a lessee to recognize a right-of-use asset and lease liability on the balance sheet for all leases with an original term longer than twelve months and disclose key information about leasing arrangements. Lessor accounting is largely unchanged.



The updates are effective for the Company’s year-end December 31, 2021 and quarters beginning January 1, 2022. ASU 2016-02 required the adoption on a modified retrospective basis. However, with the issuance of ASU 2018-11, we have the option to recognize the cumulative effect as an adjustment to the opening balance of retained earnings in the year of adoption, while continuing to present all prior periods under the previous lease guidance. These updates provide optional practical expedients in transition. The effect of applying the new lease guidance on the consolidated financial statements is expected to be minimal due to current and future lease obligations being immaterial.



Fair Value Measurement – Disclosure Requirements (ASU 2018-13) – The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. We will be required to adopt this update on January 1, 2020, and depending on the specific amendment will be required to adopt prospectively or retrospectively. We early adopted the removal and modification of certain disclosures as permitted. We are currently evaluating the impact of the remaining guidance on our consolidated financial statements.



S.     RISKS AND UNCERTAINTIES



Certain risks and uncertainties are inherent to day-to-day operations and to the process of preparing the Company’s consolidated financial statements. The more significant risks and uncertainties, as well as the Company’s attempt to mitigate, quantify, and minimize such risks, are presented below and throughout the notes to the consolidated financial statements.



Catastrophe Exposures



The Company’s insurance coverages include exposure to catastrophic events. All catastrophe exposures are monitored by quantifying exposed policy limits in each region and by using computer-assisted modeling techniques. Additionally, the Company limits its risk to such catastrophes through restraining the total policy limits written in each region and by purchasing reinsurance. The Company’s major catastrophe exposure is to losses caused by tornado/hail and freeze to commercial properties throughout the Midwest.



The Company had protection of $14.5 million and $9.5 million in excess of $500,000 first-dollar retention for the years ended December 31, 2019 and 2018, respectively. The catastrophe program is actively managed to keep net retention in line with risk tolerances and to optimize the risk/return trade off. The catastrophe reinsurance treaty renewed on January 1, 2020.



Reinsurance



Reinsurance does not discharge the Company from its primary liability to policyholders, and to the extent that a reinsurer is unable to meet its obligations, the Company would be liable. On a quarterly basis, the financial condition of prospective and existing reinsurers is monitored. As a result, the Company purchases reinsurance from a number of financially strong reinsurers. Accordingly, no allowance for reinsurance balances deemed uncollectible has been made. See Note 6 –Reinsurance for further discussion.



 

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Investment Risk



The investment portfolio is subject to market, credit, and interest rate risks. The equity portfolio will fluctuate with movements in the overall stock market. While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is sensitive to movements in the market. The bond portfolio is affected by interest rate changes and movement in credit spreads. The Company attempts to mitigate its interest rate and credit risks by constructing a well-diversified portfolio with high-quality securities with varied maturities. Downturns in the financial markets could have a negative effect on the portfolio. However, the Company attempts to manage this risk through asset allocation, duration, and security selection.



Liquidity Risk



Liquidity is essential to the Company’s business and a key component of the concept of asset-liability matching. The Company’s liquidity may be impaired by an inability to collect premium receivable or reinsurance recoverable balances in a timely manner, an inability to sell assets or redeem investments, unforeseen outflows of cash or large claim payments, or an inability to access debt. Liquidity risk may arise due to circumstances that the Company may be unable to control, such as a general market disruption, an operational problem that affects third parties or the Company, or even by the perception among market participants that the Company, or other market participants, are experiencing greater liquidity risk.



The Company’s A.M. Best rating is important to its liquidity. A reduction in credit ratings could adversely affect the Company’s liquidity and competitive position by increasing borrowing costs or limiting access to the capital markets.



External Factors



The Company is highly regulated by the state of Illinois and by the states in which it underwrites business. Such regulations, among other things, limit the amount of dividends, impose restrictions on the amount and types of investments, and regulate rates insurers may charge for various coverages. The Company is also subject to insolvency and guarantee fund assessments for various programs designed to ensure policyholder indemnification. Assessments are generally accrued during the period in which it becomes probable that a liability has been incurred from an insolvency and the amount of the related assessment can be reasonably estimated.



The National Association of Insurance Commissioners (NAIC) has developed Property/Casualty Risk-Based Capital (RBC) standards that relate an insurer’s reported statutory surplus to the risks inherent in its overall operations. The RBC formula uses the statutory annual statement to calculate the minimum indicated capital level to support asset (investment and credit) risk and underwriting (loss reserves, premiums written and unearned premium) risk. The NAIC model law calls for various levels of regulatory action based on the magnitude of an indicated RBC capital deficiency, if any. As of December 31, 2019, the Company determined that its capital levels are well in excess of the minimum capital requirements for all RBC action levels and that its capital levels are sufficient to support the level of risk inherent in its operations. See Note 10 – Statutory Information and Dividend Restrictions for further discussion of statutory information and related insurance regulatory restrictions.



In addition, ratings are a critical factor in establishing the competitive position of insurance companies. The Company is rated by A.M. Best. This rating reflects their opinion of the insurance company’s financial strength, operating performance, strategic position, and ability to meet its obligations to policyholders.

 

 

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2.     INVESTMENTS



NET INVESTMENT INCOME 



A summary of net investment income for the years ended December 31, 2019 and 2018 is as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

2019

 

2018

AFS, fixed maturity securities

 

$

2,998,342 

 

$

2,943,083 

Investment property

 

 

610,642 

 

 

555,350 

Equity securities

 

 

300,584 

 

 

266,530 

Cash and short-term investments

 

 

75,585 

 

 

25,303 

Investment revenue

 

 

3,985,153 

 

 

3,790,266 

Less investment expenses

 

 

(800,000)

 

 

(900,000)

Net investment income

 

$

3,185,153 

 

$

2,890,266 



INVESTMENT RELATED GAINS (LOSSES)



The following is a summary of the proceeds from sales, maturities, and calls of fixed maturity and equity securities and the related gross realized gains and losses for the years ended December 31, 2019 and 2018.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Net Realized



 

Proceeds

 

Gains

 

Losses

 

Gains

2019

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

27,033,200 

 

$

321,032 

 

$

(36,260)

 

$

284,772 

Common stocks

 

 

8,238,753 

 

 

1,443,507 

 

 

(527,514)

 

 

915,993 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

16,966,599 

 

$

122,900 

 

$

(78,194)

 

$

44,706 

Common stocks

 

 

11,843,798 

 

 

1,290,148 

 

 

(363,094)

 

 

927,054 

Preferred stocks

 

 

3,927,722 

 

 

86,862 

 

 

(82,629)

 

 

4,233 



The amortized cost and estimated fair value of fixed income securities at December 31, 2019, are shown as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized Cost

 

Fair Value

Due in one year or less

 

$

3,228,881 

 

$

3,244,534 

Due after one year through five years

 

 

18,956,885 

 

 

19,738,798 

Due after five years through 10 years

 

 

15,091,864 

 

 

16,340,507 

Due after 10 years

 

 

17,267,874 

 

 

18,472,738 

Asset and mortgage backed securities without a specific due date

 

 

33,802,911 

 

 

34,290,995 

Total fixed maturity securities

 

$

88,348,415 

 

$

92,087,572 



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



The following table is a schedule of cost or amortized cost and estimated fair values of investments in securities classified as available for sale at December 31, 2019 and 2018.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2019

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

800,462 

 

$

800,219 

 

$

684 

 

$

(927)

MBS/ABS/CMBS

 

 

33,802,911 

 

 

34,290,995 

 

 

540,743 

 

 

(52,659)

Corporate

 

 

39,442,202 

 

 

41,915,103 

 

 

2,482,378 

 

 

(9,477)

Municipal

 

 

14,302,840 

 

 

15,081,255 

 

 

808,081 

 

 

(29,666)

Total AFS securities

 

$

88,348,415 

 

$

92,087,572 

 

$

3,831,886 

 

$

(92,729)





 

~  18  ~


 

Table of Contents

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2018

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,348,575 

 

$

1,328,925 

 

$

 —

 

$

(19,650)

MBS/ABS/CMBS

 

 

34,372,133 

 

 

33,799,024 

 

 

33,955 

 

 

(607,064)

Corporate

 

 

37,383,903 

 

 

37,366,690 

 

 

376,029 

 

 

(393,242)

Municipal

 

 

16,148,295 

 

 

16,486,520 

 

 

398,569 

 

 

(60,344)

Total fixed maturity securities

 

 

89,252,906 

 

 

88,981,159 

 

 

808,553 

 

 

(1,080,300)

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

13,572,713 

 

 

11,843,223 

 

 

406,812 

 

 

(2,136,302)

Total equity securities1

 

 

13,572,713 

 

 

11,843,223 

 

 

406,812 

 

 

(2,136,302)

Total AFS securities

 

$

102,825,619 

 

$

100,824,382 

 

$

1,215,365 

 

$

(3,216,602)



1Effective January 1, 2019, the Company adopted ASU No. 2016-01. As a result, equity securities are no longer classified as available-for-sale. Prior periods have not been recast to conform to the current presentation.



MORTGAGE-BACKED, COMMERCIAL MORTGAGE-BACKED AND ASSET-BACKED SECURITIES



All of the Company’s collateralized 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 are residential mortgage backed securities with fair values of $9,909,462 and $13,696,585 and commercial mortgage backed securities of $13,408,898 and $10,126,352 at December 31, 2019 and 2018, respectively.





UNREALIZED LOSSES ON AFS SECURITIES



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 December 31, 2019 and 2018. 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.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2019



 

 

 

 

12 Months

 

 

 



 

< 12 Months

 

& Greater

 

Total

Fixed Maturity Securities:

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

 

 

 

 

 

 

 

 

Fair value

 

$

 —

 

$

699,391 

 

$

699,391 

Amortized cost

 

 

 —

 

 

700,318 

 

 

700,318 

Unrealized loss

 

 

 —

 

 

(927)

 

 

(927)

MBS/ABS/CMBS

 

 

 

 

 

 

 

 

 

Fair value

 

 

6,398,581 

 

 

5,056,732 

 

 

11,455,313 

Amortized cost

 

 

6,420,488 

 

 

5,087,484 

 

 

11,507,972 

Unrealized loss

 

 

(21,907)

 

 

(30,752)

 

 

(52,659)

Corporate

 

 

 

 

 

 

 

 

 

Fair value

 

 

1,396,706 

 

 

 —

 

 

1,396,706 

Amortized cost

 

 

1,406,183 

 

 

 —

 

 

1,406,183 

Unrealized loss

 

 

(9,477)

 

 

 —

 

 

(9,477)

Municipal

 

 

 

 

 

 

 

 

 

Fair value

 

 

1,969,468 

 

 

 —

 

 

1,969,468 

Amortized cost

 

 

1,999,134 

 

 

 —

 

 

1,999,134 

Unrealized loss

 

 

(29,666)

 

 

 —

 

 

(29,666)

Total debt securities available for sale

 

 

 

 

 

 

 

 

 

Fair value

 

 

9,764,755 

 

 

5,756,123 

 

 

15,520,878 

Amortized cost

 

 

9,825,805 

 

 

5,787,802 

 

 

15,613,607 

Unrealized loss

 

$

(61,050)

 

$

(31,679)

 

$

(92,729)



 

~  19  ~


 

Table of Contents

 







 

 

 

 

 

 

 

 

 



 

December 31, 2018



 

 

 

 

12 Months

 

 

 



 

< 12 Months

 

& Greater

 

Total

U.S. Treasury

 

 

 

 

 

 

 

 

 

Fair value

 

$

 —

 

$

1,328,925 

 

$

1,328,925 

Cost or amortized cost

 

 

 —

 

 

1,348,575 

 

 

1,348,575 

Unrealized loss

 

 

 —

 

 

(19,650)

 

 

(19,650)

MBS/ABS/CMBS

 

 

 

 

 

 

 

 

 

Fair value

 

 

16,890,857 

 

 

11,956,493 

 

 

28,847,350 

Cost or amortized cost

 

 

17,039,357 

 

 

12,415,057 

 

 

29,454,414 

Unrealized loss

 

 

(148,500)

 

 

(458,564)

 

 

(607,064)

Corporate

 

 

 

 

 

 

 

 

 

Fair value

 

 

14,304,322 

 

 

5,745,289 

 

 

20,049,611 

Cost or amortized cost

 

 

14,550,153 

 

 

5,892,700 

 

 

20,442,853 

Unrealized loss