63020 ICCH 10Q1

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, 2020

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)

_______________________________

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 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.





 

 



Large accelerated filer   

Accelerated filer   



Non-accelerated filer       

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 

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





 

 

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ICCH

The NASDAQ Stock Market LLC



The number of shares of the registrant’s common stock outstanding as of August 7, 2020 was 3,297,608.

 



 

 


 

Table of Contents

 

Table of Contents





 

 



 

Page 

PART I

 

 

Item 1.

Financial Statements

 



Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019



Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three-Month Periods Ended June 30, 2020 and 2019 (unaudited)



Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)



Condensed Consolidated Statements of Stockholders Equity for the Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)



Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)



Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

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

20 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38 

Item 4.

Controls and Procedures

40 



 

 

PART II

 

 

Item 1.

Legal Proceedings

40 

Item 1A.

Risk Factors

40 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41 

Item 3.

Default Upon Senior Securities

41 

Item 4.

Mine Safety Disclosures

41 

Item 5.

Other Information

41 

Item 6.

Exhibits

42 



 

 

Signatures 

43 



 

~  2  ~


 

Table of Contents

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets





 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2020

 

2019



 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments and cash:

 

 

 

 

 

 

Fixed maturity securities (cost or amortized cost - $91,837,051 at

 

 

 

 

 

 

6/30/2020 and $88,348,415 at 12/31/2019)

 

$

97,872,904 

 

$

92,087,572 

Common stocks at fair value

 

 

11,702,141 

 

 

14,448,773 

Preferred stocks at fair value

 

 

1,555,041 

 

 

 —

Other invested assets

 

 

1,779,572 

 

 

877,900 

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

 

 

 

 

 

 

$400,755 at 6/30/2020 and $332,218 at 12/31/2019

 

 

5,547,594 

 

 

4,353,713 

Cash and cash equivalents

 

 

13,028,212 

 

 

6,626,585 

Total investments and cash

 

 

131,485,464 

 

 

118,394,543 

Accrued investment income

 

 

680,468 

 

 

646,504 

Premiums and reinsurance balances receivable, net of allowances for

 

 

 

 

 

 

uncollectible amounts of $100,000 at 6/30/2020 and 12/31/2019

 

 

25,071,888 

 

 

22,368,526 

Ceded unearned premiums

 

 

855,067 

 

 

822,818 

Reinsurance balances recoverable on unpaid losses and settlement expenses,

 

 

 

 

 

 

net of allowances for uncollectible amounts of $0 at 6/30/2020 and 12/31/2019

 

 

19,462,599 

 

 

11,036,170 

Federal income taxes

 

 

378,058 

 

 

192,559 

Deferred policy acquisition costs, net

 

 

5,486,019 

 

 

5,269,256 

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

 

 

 

 

 

 

$5,818,924 at 6/30/2020 and $5,619,706 at 12/31/2019

 

 

2,928,196 

 

 

3,033,348 

Other assets

 

 

2,079,915 

 

 

1,239,794 

Total assets

 

$

188,427,674 

 

$

163,003,518 

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

66,415,119 

 

$

56,838,307 

Unearned premiums

 

 

30,213,110 

 

 

30,392,817 

Reinsurance balances payable

 

 

1,399,861 

 

 

374,998 

Corporate debt

 

 

15,100,173 

 

 

3,475,088 

Accrued expenses

 

 

3,117,682 

 

 

4,216,988 

Income taxes - deferred

 

 

375,766 

 

 

39,213 

Other liabilities

 

 

4,637,178 

 

 

1,324,273 

Total liabilities

 

 

121,258,889 

 

 

96,661,684 

Equity:

 

 

 

 

 

 

Common stock1  

 

 

35,000 

 

 

35,000 

Treasury stock, at cost2

 

 

(3,019,154)

 

 

(3,146,576)

Additional paid-in capital

 

 

32,663,641 

 

 

32,703,209 

Accumulated other comprehensive earnings, net of tax

 

 

4,767,819 

 

 

2,953,936 

Retained earnings

 

 

35,417,419 

 

 

36,608,750 

Less: Unearned Employee Stock Ownership Plan shares at cost3

 

 

(2,695,940)

 

 

(2,812,485)

Total equity

 

 

67,168,785 

 

 

66,341,834 

Total liabilities and equity

 

$

188,427,674 

 

$

163,003,518 



1Par value $0.01; authorized: 2020 - 10,000,000 shares and 2019 – 10,000,000 shares; issued: 2020 – 3,500,000 shares and 2019 – 3,500,000 shares; outstanding: 2020 –  3,032,686 and 2019 - 3,014,941 shares.

22020 – 197,720 shares and 2019 – 203,811 shares

32020 – 269,594 shares and 2019 – 281,248 shares





See accompanying notes to consolidated financial statements. 

~  3  ~


 

Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited)









 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three-Months Ended



 

June 30,



 

2020

 

2019

Net premiums earned

 

$

11,374,746 

 

$

13,094,222 

Net investment income

 

 

908,550 

 

 

800,130 

Net realized investment (losses) gains

 

 

(438,619)

 

 

647,068 

Net unrealized gains (losses) on equity securities

 

 

2,709,763 

 

 

(116,691)

Other income

 

 

69,069 

 

 

122,812 

Consolidated revenues

 

 

14,623,509 

 

 

14,547,541 

Losses and settlement expenses

 

 

9,208,484 

 

 

8,900,732 

Policy acquisition costs and other operating expenses

 

 

4,254,266 

 

 

4,958,594 

Interest expense on debt

 

 

56,721 

 

 

31,881 

General corporate expenses

 

 

125,335 

 

 

137,290 

Total expenses

 

 

13,644,806 

 

 

14,028,497 

Earnings before income taxes

 

 

978,703 

 

 

519,044 

Total income tax expense

 

 

196,738 

 

 

76,953 

Net earnings

 

$

781,965 

 

$

442,091 



 

 

 

 

 

 

Other comprehensive earnings, net of tax

 

 

3,524,729 

 

 

1,245,804 

Comprehensive earnings

 

$

4,306,694 

 

$

1,687,895 



 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net earnings per share

 

$

0.26 

 

$

0.15 

Diluted:

 

 

 

 

 

 

Diluted net earnings per share

 

$

0.26 

 

$

0.15 



 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

3,029,693 

 

 

3,007,685 

Diluted

 

 

3,036,116 

 

 

3,010,712 







See accompanying notes to consolidated financial statements 

~  4  ~


 

Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings (Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended



 

June 30,



 

2020

 

2019

Net premiums earned

 

$

24,388,735 

 

$

25,540,136 

Net investment income

 

 

1,743,950 

 

 

1,595,503 

Net realized investment (losses) gains

 

 

(342,987)

 

 

599,642 

Net unrealized (losses) gains on equity securities

 

 

(979,584)

 

 

1,723,727 

Other income

 

 

119,267 

 

 

68,925 

Consolidated revenues

 

 

24,929,381 

 

 

29,527,933 

Losses and settlement expenses

 

 

17,050,566 

 

 

18,508,022 

Policy acquisition costs and other operating expenses

 

 

9,019,240 

 

 

9,808,780 

Interest expense on debt

 

 

92,049 

 

 

63,895 

General corporate expenses

 

 

299,756 

 

 

280,451 

Total expenses

 

 

26,461,611 

 

 

28,661,148 

(Loss) earnings before income taxes

 

 

(1,532,230)

 

 

866,785 

Total income tax (benefit) expense

 

 

(340,899)

 

 

135,946 

Net (loss) earnings

 

$

(1,191,331)

 

$

730,839 



 

 

 

 

 

 

Other comprehensive earnings, net of tax

 

 

1,813,883 

 

 

2,720,013 

Comprehensive earnings

 

$

622,552 

 

$

3,450,852 



 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Basic net (loss) earnings per share

 

$

(0.39)

 

$

0.24 

Diluted:

 

 

 

 

 

 

Diluted net (loss) earnings per share

 

$

(0.39)

 

$

0.24 



 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

3,019,788 

 

 

3,001,713 

Diluted

 

 

3,026,210 

 

 

3,004,739 















See accompanying notes to consolidated financial statements.













~  5  ~


 

Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common stock

 

Treasury stock

 

Unearned ESOP

 

Additional paid-in capital

 

Retained
earnings

 

Accumulated
other
comprehensive
earnings (loss)

 

Total equity

Balance, January 1, 2019

 

$

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

 

 

 —

 

 

(49,130)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(49,130)

Net earnings

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

730,839 

 

 

 —

 

 

730,839 

Other comprehensive earnings, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,720,013 

 

 

2,720,013 

Restricted stock unit expense

 

 

 —

 

 

 —

 

 

 —

 

 

48,337 

 

 

 —

 

 

 —

 

 

48,337 

ESOP compensation expense

 

 

 —

 

 

 —

 

 

116,222 

 

 

45,613 

 

 

 —

 

 

 —

 

 

161,835 

Balance, June 30, 2019

 

$

35,000 

 

$

(3,049,125)

 

$

(2,930,633)

 

$

32,599,373 

 

$

33,045,244 

 

$

2,505,334 

 

$

62,205,193 



1See discussion of Accounting Standards Update 2016-01 adoption in 2019 10-K, Note 1 - Summary of Significant Accounting Policies









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common stock

 

Treasury stock

 

Unearned ESOP

 

Additional paid-in capital

 

Retained
earnings

 

Accumulated
other
comprehensive
earnings (loss)

 

Total equity

Balance, January 1, 2020

 

$

35,000 

 

$

(3,146,576)

 

$

(2,812,485)

 

$

32,703,209 

 

$

36,608,750 

 

$

2,953,936 

 

$

66,341,834 

Purchase of common stock

 

 

 —

 

 

(15,958)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(15,958)

Net (loss)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,191,331)

 

 

 —

 

 

(1,191,331)

Other comprehensive earnings, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,813,883 

 

 

1,813,883 

Restricted stock unit expense

 

 

 —

 

 

143,380 

 

 

 —

 

 

(61,959)

 

 

 —

 

 

 —

 

 

81,421 

ESOP compensation expense

 

 

 —

 

 

 —

 

 

116,545 

 

 

22,391 

 

 

 —

 

 

 —

 

 

138,936 

Balance, June 30, 2020

 

$

35,000 

 

$

(3,019,154)

 

$

(2,695,940)

 

$

32,663,641 

 

$

35,417,419 

 

$

4,767,819 

 

$

67,168,785 











See accompanying notes to consolidated financial statements.

~  6  ~


 

Table of Contents

 

ICC Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)







 

 

 

 

 



 

 

 

 

 



Six-Month Periods Ended June 30,



2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

Net (loss) earnings

$

(1,191,331)

 

$

730,839 

Adjustments to reconcile net (loss) earnings to net cash provided by operating activities

 

 

 

 

 

Net realized investment losses (gains)

 

342,987 

 

 

(599,642)

Net unrealized losses (gains) on equity securities

 

979,584 

 

 

(1,723,727)

Depreciation

 

338,409 

 

 

401,419 

Deferred income tax

 

(145,619)

 

 

406,991 

Amortization of bond premium and discount

 

100,619 

 

 

113,242 

Stock-based compensation expense

 

220,357 

 

 

210,172 

Change in:

 

 

 

 

 

Accrued investment income

 

(33,964)

 

 

20,634 

Premiums and reinsurance balances receivable

 

(2,703,362)

 

 

(998,495)

Ceded unearned premiums

 

(32,249)

 

 

(47,584)

Reinsurance balances payable

 

1,024,863 

 

 

(560,369)

Reinsurance balances recoverable

 

(8,426,429)

 

 

(7,238,050)

Deferred policy acquisition costs

 

(216,763)

 

 

(245,200)

Unpaid losses and settlement expenses

 

9,576,812 

 

 

9,816,461 

Unearned premiums

 

(179,707)

 

 

1,339,650 

Accrued expenses

 

(1,099,306)

 

 

(1,277,407)

Current federal income tax

 

(185,499)

 

 

(51,929)

Other

 

2,404,746 

 

 

(281,986)

Net cash provided by operating activities

 

774,148 

 

 

15,019 

Cash flows from investing activities:

 

 

 

 

 

Purchases of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

(12,628,366)

 

 

(12,689,731)

Common stocks

 

(2,173,439)

 

 

(3,822,354)

Preferred stocks

 

(1,641,922)

 

 

 —

Other invested assets

 

(901,500)

 

 

(113,300)

Property held for investment

 

(1,262,417)

 

 

(167,850)

Property and equipment

 

(175,151)

 

 

(202,250)

Proceeds from sales, maturities and calls of:

 

 

 

 

 

Fixed maturity securities, available-for-sale

 

9,384,229 

 

 

13,750,473 

Common stocks

 

3,260,997 

 

 

4,677,473 

Preferred stocks

 

145,490 

 

 

 —

Property and equipment

 

10,430 

 

 

5,268 

Net cash (used in) provided by investing activities

 

(5,981,649)

 

 

1,437,729 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from loans

 

11,629,800 

 

 

 —

Repayments of borrowed funds

 

(4,714)

 

 

(2,787)

Purchase of treasury stock

 

(15,958)

 

 

(49,130)

Net cash provided by (used in) financing activities

 

11,609,128 

 

 

(51,917)

Net increase in cash and cash equivalents

 

6,401,627 

 

 

1,400,831 

Cash and cash equivalents at beginning of year

 

6,626,585 

 

 

4,644,784 

Cash and cash equivalents at end of period

$

13,028,212 

 

$

6,045,615 

Supplemental information:

 

 

 

 

 

Federal income tax recovered

$

 —

 

$

164,543 

Interest paid

 

82,000 

 

 

31,800 





See accompanying notes to consolidated financial statements. 

~  7  ~


 

Table of Contents

 

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. On a stand-alone basis ICC Holdings, Inc. is referred to as the “Parent Company.” The consolidated group consists of the holding company, ICC Holdings, Inc.; ICC Realty, LLC, a real estate services and holding company; Beverage Insurance Agency, Inc., a non-insurance subsidiary; Estrella Innovative Solutions, Inc., an outsourcing company; and Illinois Casualty Company (ICC), an operating insurance company. ICC is an Illinois domiciled company.



We are a specialty insurance carrier primarily underwriting commercial multi-peril, liquor liability, workers’ compensation, and umbrella liability coverages for the food and beverage industry through our subsidiary insurance company, ICC. ICC writes business in Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Wisconsin and markets through independent agents. Approximately 25.7% and 25.6% of the premium is written in Illinois for the three months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019, approximately 26.1% and 27.5% of the premium is written in Illinois, respectively. The Company operates as a single segment.



B.     PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION



The unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form 10-Q.  Accordingly, they do not include all the disclosures required by GAAP for complete financial statements.  As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, for the year ended December 31, 2019 (the “2019 10-K”). Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at June 30, 2020, and the results of operations of the Company and its subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year.



The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These amounts are inherently subject to change and actual results could differ significantly from these estimates.



C.     SIGNIFICANT ACCOUNTING POLICIES



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





D.     PROSPECTIVE ACCOUNTING STANDARDS



For information regarding accounting standards that the Company has not yet adopted, see the “Prospective Accounting Standards” in Note 1 – Summary of Significant Accounting Policies in the 2019 10-K. The Company maintains its status as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We have taken advantage of the extended transition period provided by Section 107 of the JOBS Act. We decided to comply with the effective dates for financial accounting standards applicable to emerging growth companies later in compliance with the requirements in Sections 107(b)(2) and (3) of the JOBS Act. Such decision is irrevocable. 



~  8  ~


 

Table of Contents

 

E.     PROPERTY AND EQUIPMENT



Annually, the Company reviews the major asset classes of property and equipment held for impairment. For the periods ended June 30, 2020 and 2019, the Company recognized no impairments.  Property and equipment are summarized as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2020

 

2019

Automobiles

 

$

530,722 

 

$

505,788 

Furniture and fixtures

 

 

469,659 

 

 

457,218 

Computer equipment and software

 

 

3,875,559 

 

 

3,823,416 

Home office

 

 

3,871,179 

 

 

3,866,632 

Total cost

 

 

8,747,120 

 

 

8,653,054 

Accumulated depreciation

 

 

(5,818,924)

 

 

(5,619,706)

Net property and equipment

 

$

2,928,196 

 

$

3,033,348 



F.     COMPREHENSIVE EARNINGS



Comprehensive earnings (loss) include net (loss) earnings plus unrealized (gains) losses on available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, the Company used a 21% tax rate. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense of $271,932 and $636,537 for the six months ended June 30, 2020 and 2019, respectively.



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







 

 

 

 

 

 



 

Six-Month Periods Ended June 30,



 

 

2020

 

2019

Beginning balance

$

2,953,936 

 

$

(1,580,976)

 

Cumulative effect of adoption of ASU 2016-01

 

 -

 

 

1,366,297 

 

Adjusted beginning balance

 

2,953,936 

 

 

(214,679)

 

Other comprehensive earnings before reclassification

 

2,086,077 

 

 

2,837,836 

 

Amount reclassified from accumulated other comprehensive earnings

 

(272,194)

 

 

(117,823)

 

Net current period other comprehensive earnings

 

1,813,883 

 

 

2,720,013 

 

Ending balance

$

4,767,819 

 

$

2,505,334 

 



The following table illustrates the components of other comprehensive earnings for each period presented in the condensed consolidated interim financial statements.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three-Month Periods Ended June 30,



 

2020

 

2019



 

Pre-tax

 

Tax

 

After-tax

 

Pre-tax

 

Tax

 

After-tax

Other comprehensive earnings, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains and losses on investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

$

4,456,968 

 

$

(843,931)

 

$

3,613,037 

 

$

1,576,968 

 

$

(224,377)

 

$

1,352,591 

Reclassification adjustment for losses included in net earnings

 

 

(111,782)

 

 

23,474 

 

 

(88,308)

 

 

(135,173)

 

 

28,386 

 

 

(106,787)

Total other comprehensive earnings

 

$

4,345,186 

 

$

(820,457)

 

$

3,524,729 

 

$

1,441,795 

 

$

(195,991)

 

$

1,245,804 



~  9  ~


 

Table of Contents

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six-Month Periods Ended June 30,



 

2020

 

2019



 

Pre-tax

 

Tax

 

After-tax

 

Pre-tax

 

Tax

 

After-tax

Other comprehensive (loss) earnings,
  net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains and losses on AFS investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

$

2,285,654 

 

$

(199,577)

 

$

2,086,077 

 

$

3,443,053 

 

$

(605,217)

 

$

2,837,836 

Reclassification adjustment for (gains) included in net earnings

 

 

(344,549)

 

 

72,355 

 

 

(272,194)

 

 

(149,143)

 

 

31,320 

 

 

(117,823)

Total other comprehensive earnings

 

$

1,941,105 

 

$

(127,222)

 

$

1,813,883 

 

$

3,293,910 

 

$

(573,897)

 

$

2,720,013 



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







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Reclassified from

Accumulated Other Comprehensive Earnings



 

Three-Month Periods Ended

 

Six-Month Period Ended

 

 

Details about Accumulated Other

 

June 30,

 

June 30,

 

Affected Line Item in the Statement

Comprehensive Earnings Component

 

2020

 

2019

 

2020

 

2019

 

where Net Earnings is Presented

Unrealized (gains) losses on AFS investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

$

(111,782)

 

$

(135,173)

 

$

(344,549)

 

$

(149,143)

 

Net realized investment (gains)



 

 

23,474 

 

 

28,386 

 

 

72,355 

 

 

31,320 

 

Income tax expense (benefit)

Total reclassification adjustment, net of tax

 

$

(88,308)

 

$

(106,787)

 

$

(272,194)

 

$

(117,823)

 

 

 

G.     RISKS AND UNCERTAINTIES



Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-19 pandemic has resulted in, and is expected to continue to result in, significant disruptions in economic activity and financial markets. The cumulative effects of COVID-19 on the Company, and the effect of any other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, or reduce the market value of invested assets held by the Company.



2.     INVESTMENTS



The Company’s investments are primarily composed of fixed income debt securities and common and preferred stock equity securities. We carry our equity securities at fair value and categorize all our fixed maturity debt securities 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.



Available-for-Sale Fixed Maturity and Equity Securities



The following tables are a summary of the proceeds from sales, maturities, and calls of AFS fixed maturity and equity securities and the related gross realized gains and losses.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three-Months Ended June 30,



 

 

 

 

 

 

 

 

 

 

Net Realized



 

Proceeds

 

Gains

 

Losses

 

Gains (Losses)

2020

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

5,581,636 

 

$

111,782 

 

$

 —

 

$

111,782 

Common stocks

 

 

2,736,179 

 

 

329,296 

 

 

(882,526)

 

 

(553,230)

Preferred stocks

 

 

53,652 

 

 

2,829 

 

 

 —

 

 

2,829 

2019

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

7,971,580 

 

$

139,703 

 

$

(4,530)

 

$

135,173 

Common stocks

 

 

4,124,060 

 

 

711,524 

 

 

(199,629)

 

 

511,895 



~  10  ~


 

Table of Contents

 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six-Months Ended June 30,



 

 

 

 

 

 

 

 

 

 

Net Realized



 

Proceeds

 

Gains

 

Losses

 

Gains (Losses)

2020

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

9,384,229 

 

$

345,475 

 

$

(926)

 

$

344,549 

Common stocks

 

 

3,260,997 

 

 

376,422 

 

 

(1,056,025)

 

 

(679,603)

Preferred stocks

 

 

145,490 

 

 

2,829 

 

 

(10,762)

 

 

(7,933)

2019

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

13,750,473 

 

$

165,292 

 

$

(16,149)

 

$

149,143 

Common stocks

 

 

4,677,473 

 

 

775,101 

 

 

(324,602)

 

 

450,499 



The amortized cost and estimated fair value of fixed income securities at June 30, 2020, by contractual maturity, are shown as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized Cost

 

Fair Value

Due in one year or less

 

$

1,225,054 

 

$

1,229,164 

Due after one year through five years

 

 

17,358,664 

 

 

18,537,886 

Due after five years through 10 years

 

 

17,113,692 

 

 

19,116,349 

Due after 10 years

 

 

19,869,012 

 

 

21,827,971 

Asset and mortgage backed securities without a specific due date

 

 

36,054,824 

 

 

36,934,688 

Redeemable preferred stocks

 

 

215,805 

 

 

226,846 

Total fixed maturity securities

 

$

91,837,051 

 

$

97,872,904 



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 June 30, 2020 and December 31, 2019:









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Cost or

 

 

 

 

Gross Unrealized



 

Amortized Cost

 

Fair Value

 

Gains

 

Losses

2020

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

1,753,081 

 

$

1,792,641 

 

$

39,560 

 

$

 —

MBS/ABS/CMBS

 

 

36,054,824 

 

 

36,934,688 

 

 

1,155,282 

 

 

(275,418)

Corporate

 

 

37,012,131 

 

 

40,877,709 

 

 

3,951,611 

 

 

(86,033)

Municipal

 

 

16,801,210 

 

 

18,041,020 

 

 

1,253,021 

 

 

(13,211)

Redeemable preferred stock

 

 

215,805 

 

 

226,846 

 

 

11,041 

 

 

 —

Total fixed maturity securities

 

$

91,837,051 

 

$

97,872,904 

 

$

6,410,515 

 

$

(374,662)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

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 fixed maturity securities

 

$

88,348,415 

 

$

92,087,572 

 

$

3,831,886 

 

$

(92,729)



All the Company’s collateralized securities carry an average credit rating of AA+ by one or more major rating agencies and continue to pay according to contractual terms. Included within MBS/ABS/CMBS, as defined in Note 3 – Fair Value Disclosures, are residential mortgage backed securities with fair values of $11,790,074 and $9,909,462 and commercial mortgage backed securities of $13,679,490 and $13,408,898 at June 30, 2020 and December 31, 2019, respectively.

~  11  ~


 

Table of Contents

 

ANALYSIS



The following tables are 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, 2020 and December 31, 2019. The tables segregate 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, 2020

 

December 31, 2019



 

 

 

 

12 Months

 

 

 

 

 

 

 

12 Months

 

 

 



 

< 12 Months

 

& Greater

 

Total

 

< 12 Months

 

& Greater

 

Total

Fixed Maturity Securities: