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Dynamic quotes 
OFFON

ICC HOLDINGS, INC.

(ICCH)
  Report
Delayed Quote. Delayed Nasdaq - 07/27 12:30:14 pm
16.1 USD   +2.22%
06/22ICC : Emerging growth company ☒ (Form 8-K)
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06/22ICC HOLDINGS, INC. : Other Events (form 8-K)
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06/22AM BEST : Upgrades Credit Ratings of Illinois Casualty Company
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ICC : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/14/2021 | 12:47pm EDT
The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides
a safe harbor for forward-looking statements made by or on behalf of ICC
Holdings, Inc. ICC Holdings, Inc. and its representatives may, from time to
time, make written or verbal forward-looking statements, including statements
contained in ICC Holdings, Inc.'s filings with the Securities and Exchange
Commission (SEC) and its reports to shareholders. Generally, the inclusion of
the words "anticipates," "believe," "estimate," "expect," "future," "intend,"
"estimate," "may," "plans," "seek", "will," or the negative of such terms and
similar expressions identify statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and that are intended to come
within the safe harbor protection provided by those sections. All statements
addressing operating performance, events, or developments that ICC Holdings,
Inc. expects or anticipates will occur in the future, including statements
relating to sales growth, earnings or earnings per share growth, and market
share, as well as statements expressing optimism or pessimism about future
operating results, are forward-looking statements within the meaning of the
Reform Act. The forward-looking statements are and will be based on management's
then-current beliefs and assumptions regarding future events and operating
performance and on information currently available to management, and are
applicable only as of the dates of such statements.



Forward-looking statements involve risks, uncertainties and assumptions,
including, among other things, the factors discussed under the heading "Item 1A.
Risk Factors" of ICC Holdings, Inc.'s Annual Report on Form 10-K and those
listed below. Although we do not make forward-looking statements unless we
believe we have a reasonable basis for doing so, we cannot guarantee their
accuracy. Actual results may differ materially from those expressed in these
forward-looking statements due to several uncertainties and risks, including the
risks described in this Quarterly Report on Form 10-Q and other unforeseen
risks. Readers should not put undue reliance on any forward-looking statements.
These statements speak only as of the date of this Quarterly Report on Form
10-Q, even if subsequently made available by us on our website or otherwise, and
we undertake no obligation to update or revise these statements to reflect
events or circumstances occurring after the date of this Quarterly Report on
Form 10-Q.



All of these factors are difficult to predict and many are beyond our control.
These important factors include those discussed under "Item 1A. Risk Factors" of
ICC Holdings, Inc.'s 2020 Annual Report on Form 10-K and those listed below:



· the potential impact of fraud, operational errors, systems malfunctions, or

cybersecurity incidents;

· future economic conditions in the markets in which we compete that are less

favorable than expected;

· our ability to expand geographically;

· the effects of weather-related and other catastrophic events, including those

related to health emergencies and the spread of infectious diseases and

pandemics;

· the effect of legislative, judicial, economic, demographic and regulatory

events in the jurisdictions where we do business, especially changes with

respect to laws, regulations and judicial decisions relating to liquor

liability;

· our ability to enter new markets successfully and capitalize on growth

opportunities either through acquisitions or the expansion of our producer

network;

· financial market conditions, including, but not limited to, changes in interest

rates and the stock markets causing a reduction of investment income or

investment gains and a reduction in the value of our investment portfolio;

· heightened competition, including specifically the intensification of price

competition, the entry of new competitors and the development of new products

by new or existing competitors, resulting in a reduction in the demand for our

products;

· actual claims may exceed our best estimate of ultimate insurance losses

incurred through March 31, 2021 resulting directly from the COVID19 pandemic

and consequent economic crises;

· our reserves at March 31, 2021 could change including as a result of, among

other things, the impact of legislative or regulatory actions taken in response

to COVID-19;

· the continued impact of COVID-19 and related risks, including from

shelter-in-place orders, unemployment, and the financial market volatility,

could continue to adversely impact our results, including premiums written and

investment income;

· infection rates, severity of pandemics, including COVID-19, civil unrest and

their effects on our business operations and claims activity, and any adverse

impact to our insureds, brokers, agents, and employees;

· the impact of acts of terrorism and acts of war;

· the effects of terrorist related insurance legislation and laws;

· changes in general economic conditions, including inflation, unemployment,

interest rates and other factors;

· the cost, availability and collectability of reinsurance;

· estimates and adequacy of loss reserves and trends in loss and settlement

expenses;

· changes in the coverage terms selected by insurance customers, including higher

limits;

· our inability to obtain regulatory approval of, or to implement, premium rate

increases;

· our ability to obtain reinsurance coverage at reasonable prices or on terms

    that adequately protect us;


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· the potential impact on our reported net income that could result from the

adoption of future auditing or accounting standards issued by the Public

Company Accounting Oversight Board or the Financial Accounting Standards Board

or other standard-setting bodies;

· unanticipated changes in industry trends and ratings assigned by nationally

recognized rating organizations;

· adverse litigation or arbitration results;

· litigation tactics and developments, including those related to business

interruption claims; and

· adverse changes in applicable laws, regulations or rules governing insurance

holding companies and insurance companies, and environmental, tax or accounting

matters including limitations on premium levels, increases in minimum capital

and reserves, and other financial viability requirements, and changes that

    affect the cost of, or demand for our products.



Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from that expressed or implied by the forward-looking information.




All subsequent written and oral forward-looking information attributable to ICC
Holdings, Inc. or any person acting on our behalf is expressly qualified in its
entirety by the cautionary statement contained or referred to in this section.



Overview


ICC is a regional property and casualty insurance company incorporated in Illinois and focused exclusively on the food and beverage industry. On the effective date of the mutual-to-public company conversion, ICC became a wholly owned subsidiary of ICC Holdings, Inc.




For the three months ended March 31, 2021, we had direct written premiums of
$15,172,000, net premiums earned of $12,049,000, and net earnings of $1,162,000.
For the three months ended March 31, 2020, we had direct premiums written of
$14,795,000, net premiums earned of $13,014,000, and net loss of $1,973,000. At
March 31, 2021, we had total assets of $182,744,000 and equity of $71,781,000.
At December 31, 2020, we had total assets of $183,939,000 and equity of
$72,743,000.  In response to the ongoing novel coronavirus (COVID-19) pandemic,
in March 2020, we temporarily suspended all insurance premium billing for at
least 30 days, and, by August 2020, normal billing resumed in all states in
which we operate.



We are an "emerging growth company" as defined in the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not "emerging growth companies"
including, but not limited to: not required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced
disclosure obligations regarding executive compensation in our periodic reports
and proxy statements; exemptions from the requirements of holding an annual
non-binding advisory vote on executive compensation and nonbinding stockholder
approval of any golden parachute payments not previously approved.



In addition, Section 107 of the JOBS Act also provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. In other words, an "emerging growth company" can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. 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.



Principal Revenue and Expense Items

We derive our revenue primarily from premiums earned, net investment income and net realized and unrealized gains (losses) from investments.

Gross and net premiums written

Gross premiums written is equal to direct and assumed premiums before the effect of ceded reinsurance. Net premiums written is the difference between gross premiums written and premiums ceded or paid to reinsurers (ceded premiums written).




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Net premiums earned



Premiums earned is the earned portion of our net premiums written. Gross
premiums written include all premiums recorded by an insurance company during a
specified policy period. Insurance premiums on property and casualty insurance
contracts are recognized in proportion to the underlying risk insured and are
earned ratably over the duration of the policies. At the end of each accounting
period, the portion of the premiums that is not yet earned is included in
unearned premiums and is realized as revenue in subsequent periods over the
remaining term of the policy. Our policies typically have a term of twelve
months. Thus, for example, for a policy that is written on July 1, 2021,
one-half of the premiums would be earned in 2021 and the other half would be
earned in 2022.


Net investment income and net realized gains (losses) on investments




We invest our surplus and the funds supporting our insurance liabilities
(including unearned premiums and unpaid loss and loss adjustment expenses) in
cash, cash equivalents, equities, fixed securities and real estate. Investment
income includes interest and dividends earned on invested assets as well as
rental income on investment properties. Net realized gains and losses on
invested assets are reported separately from net investment income. We recognize
realized gains when invested assets are sold for an amount greater than their
cost or amortized cost (in the case of fixed securities) and recognize realized
losses when investment securities are written down as a result of an other than
temporary impairment or sold for an amount less than their cost or amortized
cost, as applicable. We recognize in earnings the change in unrealized gains and
losses on equity securities when our equity securities are trading at an amount
greater than or less than their cost, respectively. Unrealized gains (losses) on
equity securities for the three months ended March 31, 2021 and March 31,
2020 were $876,000 and $(3,689,000), respectively. Our portfolio of investment
securities is managed by two independent third parties with managers
specializing in the insurance industry.



ICC's expenses consist primarily of:

Losses and settlement expenses




Losses and settlement expenses represent the largest expense item and include:
(1) claim payments made, (2) estimates for future claim payments and changes in
those estimates for prior periods, and (3) costs associated with investigating,
defending and adjusting claims.



Amortization of deferred policy acquisition costs and other operating expenses




Expenses incurred to underwrite risks are referred to as policy acquisition
expenses. Variable policy acquisition costs consist of commission expenses,
premium taxes and certain other underwriting expenses that vary with and are
primarily related to the writing and acquisition of new and renewal business.
These policy acquisition costs are deferred and amortized over the effective
period of the related insurance policies. Fixed policy acquisition costs are
expensed as incurred. These costs include salaries, rent, office supplies, and
depreciation. Other operating expenses consist primarily of information
technology costs, accounting and internal control salaries, as well as audit and
legal expenses.



Income taxes



We use the asset and liability method of accounting for income taxes. Deferred
income taxes arise from the recognition of temporary differences between
financial statement carrying amounts and the tax bases of our assets and
liabilities. A valuation allowance is provided when it is more likely than not
that some portion of the deferred tax asset will not be realized. The effect of
a change in tax rates is recognized in the period of the enactment date.



Key Financial Measures



We evaluate our insurance operations by monitoring certain key measures of
growth and profitability. In addition to reviewing our financial performance
based on results determined in accordance with generally accepted accounting
principles in the United States (GAAP), we utilize certain operational financial
measures that we believe are valuable in managing our business and for
comparison to our peers. These operational measures are combined ratio, written
premiums, underwriting income, the losses and settlement expense ratio, the
expense ratio, the ratio of net written premiums to statutory surplus and return
on average equity.



We measure growth by monitoring changes in gross premiums written and net
premiums written. We measure underwriting profitability by examining losses and
settlement expense, underwriting expense and combined ratios. We also measure
profitability by examining underwriting income (loss) and net earnings (loss).



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Losses and settlement expense ratio




The losses and settlement expense ratio is the ratio (expressed as a percentage)
of losses and settlement expenses incurred to net premiums earned. We measure
the losses and settlement expense ratio on an accident year and calendar year
loss basis to measure underwriting profitability. An accident year loss ratio
measures losses and settlement expenses for insured events occurring in a
particular year, regardless of when they are reported, as a percentage of
premiums earned during that year. A calendar year loss ratio measures loss and
settlement expense for insured events occurring during a particular year and the
change in loss reserves from prior accident years as a percentage of premiums
earned during that year.



Expense ratio


The underwriting expense ratio is the ratio (expressed as a percentage) of amortization of deferred policy acquisition costs and other operating expenses to premiums earned, and measures our operational efficiency in producing, underwriting and administering our insurance business.



GAAP combined ratio



Our GAAP combined ratio is the sum of the losses and settlement expense ratio
and the expense ratio and measures our overall underwriting profit. If the GAAP
combined ratio is below 100%, we are making an underwriting profit. If our
combined ratio is at or above 100%, we are not profitable without investment
income and may not be profitable if investment income is insufficient.



Net premiums written to statutory surplus ratio




The net premiums written to statutory surplus ratio represents the ratio of net
premiums written, after reinsurance ceded, to statutory surplus. This ratio
measures our exposure to pricing errors in our current book of business. The
higher the ratio, the greater the impact on surplus should pricing prove
inadequate.



Underwriting income (loss)


Underwriting income (loss) measures the pre-tax profitability of our insurance operations. It is derived by subtracting losses and settlement expense, amortization of deferred policy acquisition costs, and underwriting and administrative expenses from net earned premiums. Each of these items is presented as a caption in our statements of earnings.

Net earnings (loss) and return on average equity




We use net earnings (loss) to measure our profit and return on average equity to
measure our effectiveness in utilizing equity to generate net earnings. In
determining return on average equity for a given year, net earnings (loss) is
divided by the average of the beginning and ending equity for that year.



Critical Accounting Policies




The accounting policies and estimates considered by management to be critically
important in the preparation and understanding of the Company's financial
statements and related disclosures are presented in the Management's Discussion
and Analysis of Financial Condition and Results of Operations section of the
Company's Annual Report on Form 10-K for the year ended December 31, 2020.



Results of Operations



Our results of operations are influenced by factors affecting the property and
casualty insurance industry in general. The operating results of the United
States property and casualty insurance industry are subject to significant
variations due to competition, weather, catastrophic events, regulation, general
economic conditions, judicial trends, fluctuations in interest rates and other
changes in the investment environment. In response to the ongoing novel
coronavirus (COVID-19) pandemic, in March 2020, we announced a  temporary
suspense of all insurance premium billing for 30 days, and, by August 2020
normal billing had resumed in all states in which we operate.



Our premium and underwriting results have been, and continue to be, influenced
by market conditions. Pricing in the property and casualty insurance industry
historically has been cyclical. During a soft market cycle, price competition is
more significant than during a hard market cycle and makes it difficult to
attract and retain properly priced commercial business. A hard market typically
has a positive effect on premium growth.



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The following summarizes our results for the three months ended March 31, 2021 and 2020:




Premiums



Direct premiums written grew by $377,000, or 2.5%, to $15,172,000 for the three
months ended March 31, 2021 from $14,795,000 for the same period of 2020. Net
written premium increased by $272,000, or 2.2%, to $12,727,000 for the three
months ended March 31, 2021 from $12,455,000 for the same period in 2020. Net
premiums earned decreased by $965,000, or 7.4%, in the three months ended March
31, 2021 as compared to the three months ended March 31, 2020, primarily due to
2020's policy exposure decreases resulting from state mandated shutdowns of
restaurants and taverns.



For the three months ended March 31, 2021, we ceded to reinsurers $2,472,000 of
earned premiums, compared to $2,394,000 of earned premiums for the three months
ended March 31, 2020. Ceded earned premiums as a percent of direct premiums
written increased to 16.3% from 16.2% for the three months ended March 31, 2020
in comparison to March 31, 2020.



Premiums are earned ratably over the term of the policy whereas written premiums are reflected on the effective date of the policy.



Investment Income



Net investment income decreased by $34,000, or 4.1%, to $801,000 for the March
31, 2021, as compared to $835,000 for the same period in 2020 as a result of a
decrease in our bond portfolio's investment income which is sensitive to the
changes in interest rates.



Other Income



Other income is derived from policies we write and represents additional charges
to policyholders for services outside of the premium charge, such as installment
billing or policy issuance costs. Other income decreased by $3,000 or 6.0%
during the three months ended March 31, 2021 as a result of fewer premium write
offs as compared to the same period in 2020.



Unpaid Losses and Settlement Expenses

The following table details our unpaid losses and settlement expenses.







                                                            For the Three-Months Ended
                                                                    March 31,
(In thousands)                                                2021              2020
Unpaid losses and settlement expense - beginning of
the period:
Gross                                                    $      61,576     $      56,838
Less: Ceded                                                     13,020            11,036
Net                                                             48,556            45,802
Increase in incurred losses and settlement expense:
Current year                                                     7,142             6,245
Prior years                                                        661             1,597
Total incurred                                                   7,803             7,842
Deduct: Loss and settlement expense payments for
claims incurred:
Current year                                                     1,288             1,204
Prior years                                                      7,274             5,484
Total paid                                                       8,562             6,688

Net unpaid losses and settlement expense - end of the period

                                                          47,797      

46,956

Plus: Reinsurance recoverable on unpaid losses                  14,011      

11,318

Gross unpaid losses and settlement expense - end of
the period                                               $      61,808     $      58,274




Net unpaid losses and settlement expense increased by $841,000, or 1.8%, in the
three months ended March 31, 2021 as compared to the same period in 2020. For
the three months ended March 31, 2021 and 2020, we experienced unfavorable
development of $661,000 and $1,597,000, respectively. The 2021 decrease in
unfavorable development was primarily driven by the Workers' Compensation line
of business. Business Owners Liability and Business Owners Property lines of
business were the primary drivers of adverse development for the three months
ended March 31, 2020.



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Losses and Settlement Expenses




Losses and settlement expenses decreased by $39,000, or 0.5%, to $7,803,000 for
the three months ended March 31, 2021, from $7,842,000 for the same period in
2020. Losses and settlement expenses decreased slightly for the three months
ended March 31, 2021,  which we believe indicates a return to pre-COVID-19
claims experience with restaurants and taverns re-opening their doors for
business.



Policy Acquisition Costs and Other Operating Expenses and the Expense Ratio




Policy acquisition costs are costs we incur to issue policies, which include
commissions, premium taxes, underwriting reports, and underwriter compensation
costs. The Company offsets the direct commissions it pays with ceded commissions
it receives from reinsurers. Other operating expenses consist primarily of
information technology costs, accounting and internal control salaries, as well
as audit and legal expenses. Policy acquisition costs and other operating
expenses decreased by $297,000, or 6.2%, to $4,468,000 for the three months
ended March 31, 2021 from $4,765,000 for the same period in 2020.



Our expense ratio is calculated by dividing the sum of policy acquisition costs
and operating expenses by net earned premiums. We use the expense ratio to
evaluate the operating efficiency of our consolidated operations. Costs that
cannot be readily identifiable as a direct cost of a product line remain in
Corporate and Other.



Our expense ratio increased by 46 basis points from 36.61% to 37.07% for the
three months ended March 31, 2021 as compared to the same period in 2020. The
primary driver for this change was the $965,000 decrease in net earned premium.



General Corporate Expenses



General corporate expenses consist primarily of occupancy costs, such as rent
and utilities. These costs are largely fixed and, therefore, do not vary
significantly with premium volume but do vary with the Company's changes in
properties held for investment. Our general corporate expenses decreased by
$12,000, or 6.9%, in the three months ended March 31, 2021 as compared to the
same period in 2020.



Interest Expense



Interest expense increased to $54,000 for the three months ended March 31, 2021
from $35,000 for the same period during 2020 and reflects a full three months of
interest for the $6.0 million FHLB borrowing agreement entered into in March
2020.



Income Tax Expense



We reported income tax expense of $310,000 and income tax benefit of $538,000
for the three months ended March 31, 2021 and 2020, respectively. The increase
in income tax expense in 2021 relates to pretax earnings for the three months
ended March 31, 2021 compared to a  pretax loss for the same period in 2020. Our
effective tax rate for the three months ended March 31, 2021 was 21.1%, compared
to 21.4% for the same period in 2020. Effective rates are dependent upon
components of pretax (loss) or earnings and the related tax effects.



The Company has not established a valuation allowance against any of the net deferred tax assets.



Financial Position


The following summarizes our financial position as of March 31, 2021 and December 31, 2020:

Unpaid Losses and Settlement Expense

Our reserves for unpaid loss and settlement expense are summarized below:






                                                As of March 31,     As of December 31,
(In thousands)                                       2021                  2020
Case reserves                                  $         27,071    $            27,901
IBNR reserves                                            20,726                 20,655
Net unpaid losses and settlement expense                 47,797             

48,556

Reinsurance recoverable on unpaid loss and
settlement expense                                       14,011             

13,020

Reserves for unpaid loss and settlement        $                   $
expense                                                  61,808                 61,576




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As of March 31, 2021, the Company had received 1,296 claims for business
interruption related to COVID-19. Based on policy language, the Company does not
anticipate that coverage will be triggered for these property claims requiring
loss payment.



Actuarial Ranges



The selection of the ultimate loss is based on information unique to each line
of business and accident year and the judgment and expertise of our actuary and
management.


The following table provides case and IBNR reserves for losses and loss adjustment expenses as of March 31, 2021 and December 31, 2020.




As of March 31, 2021







(In thousands)              Case Reserves     IBNR Reserves     Total Reserves
Commercial liability       $       18,861    $       17,617    $        36,478
Property                            3,801                84              3,885
Other                               4,409             3,025              7,434
Total net reserves                 27,071            20,726             47,797
Reinsurance recoverables            3,852            10,159             14,011
Gross reserves             $       30,923    $       30,885    $        61,808




As of December 31, 2020






                                                                                       Actuarially Determined
                                                                                         Range of Estimates
(In thousands)                 Case Reserves     IBNR Reserves     Total Reserves         Low            High
Commercial liability          $       19,019    $       17,661    $        36,680
Property                               4,075               (39)             4,036
Other                                  4,807             3,033              7,840
Total net reserves                    27,901            20,655             48,556    $     42,860     $  50,780
Reinsurance recoverables               5,281             7,739             13,020          10,962        14,742
Gross reserves                $       33,182    $       28,394    $        61,576    $     53,822     $  65,522




Our actuary determined a range of reasonable reserve estimates which reflect the
uncertainty inherent in the loss reserve process. This range does not represent
the range of all possible outcomes. We believe that the actuarially determined
ranges represent reasonably likely changes in the loss and settlement expense
estimates, however actual results could differ significantly from these
estimates. The range was determined by line of business and accident year after
a review of the output generated by the various actuarial methods utilized. The
actuary reviewed the variance around the select loss reserve estimates for each
of the actuarial methods and selected reasonable low and high estimates based on
his knowledge and judgment. In making these judgments the actuary typically
assumed, based on his experience, that the larger the reserve the less
volatility and that property reserves would exhibit less volatility than
casualty reserves. In addition, when selecting these low and high estimates, the
actuary considered:

 ·  historical industry development experience in our business line;


 ·  historical company development experience;

· the impact of court decisions on insurance coverage issues, which can impact

the ultimate cost of settling claims;

· changes in our internal claims processing policies and procedures; and

· trends and risks in claim costs, such as risk that medical cost inflation could

    increase.




Our actuary is required to exercise a considerable degree of judgment in the
evaluation of all of these and other factors in the analysis of our loss and
settlement expense reserves, and related range of anticipated losses. Because of
the level of uncertainty impacting the estimation process, it is reasonably
possible that different actuaries would arrive at different conclusions. The
method of determining the reserve range has not changed and the reserve range
generated by our actuary is consistent with the observed development of our loss
reserves over the last few years.



The width of the range in reserves arises primarily because specific losses may
not be known and reported for some period and the ultimate losses paid and loss
adjustment expenses incurred with respect to known losses may be larger than
currently estimated. The ultimate frequency or severity of these claims can be
very different than the assumptions we used in our estimation of ultimate
reserves for these exposures.

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Specifically, the following factors could impact the frequency and severity of claims, and therefore, the ultimate amount of loss and settlement expense paid:

· the rate of increase in labor costs, medical costs, and material costs that

underlie insured risks;

· development of risk associated with our expanding producer relationships and

our growth in new states or states where we currently have small market share;

and

· impact of changes in laws or regulations.





The estimation process for determining the liability for unpaid loss and
settlement expense inherently results in adjustments each year for claims
incurred (but not paid) in preceding years. Negative amounts reported for claims
incurred related to prior years are a result of claims being settled for amounts
less than originally estimated (favorable development). Positive amounts
reported for claims incurred related to prior years are a result of claims being
settled for amounts greater than originally estimated (unfavorable development).
For the three months ended March 31, 2021 and 2020, we experienced unfavorable
development of $661,000 and $1,597,000, respectively.



Potential for variability in our reserves is evidenced by this development. As
further illustration of reserve variability, we initially estimated unpaid loss
and settlement expense net of reinsurance at the end of 2020 at $48,556,000. As
of March 31, 2021, that reserve was re-estimated at $49,217,000, which is
$661,000, or 1.4%,  higher than the initial estimate.



The estimation of our reserves is based on several actuarial methods, each of
which incorporates many quantitative assumptions. The judgment of the actuary
plays an important role in selecting among various loss development factors and
selecting the appropriate method, or combination of methods, to use for a given
accident year. The ranges presented above represent the expected variability
around the actuarially determined central estimate. The total range around our
actuarially determined estimate varies from (10.3)% to 6.2%. As shown in the
table below, since 2016, the variance in our originally estimated accident year
selections range from (3.7)% deficient to 5.4% redundant as of March 31, 2021.



     Recent Variabilities of Incurred Losses and Settlement Expense, Net of
                                  Reinsurance




                                                    Accident Year Data
(In thousands)                   2016         2017         2018         2019         2020
As originally estimated       $  25,619    $  29,801    $  29,762    $  33,563    $  31,356
As estimated at March 31,        26,148       30,918       28,383       34,619       29,659
2021
Net cumulative (deficiency)   $    (529)   $  (1,117)   $   1,379    $  (1,055)   $   1,698
redundancy
% (deficiency) redundancy         (2.1)%       (3.7)%        4.6%        (3.1)%        5.4%



The table below summarizes the impact on equity, net of tax, from changes in estimates of net unpaid loss and settlement expense:






                                                          December 31, 2020
                                                  Aggregate Loss        Percentage
                                                  and Settlement        Change in
(In thousands)                                       Reserve              Equity
Reserve Range for Unpaid Losses and
Settlement Expense
Low End                                        $         42,860                6.2%
Recorded                                                 48,556                0.0%
High End                                                 50,780               (2.4)%




If the net loss and settlement expense reserves were recorded at the high end of
the actuarially determined range as of December 31, 2020, the loss and
settlement expense reserves would increase by $2,224,000 before taxes. This
increase in reserves would have the effect of decreasing net earnings and equity
as of December 31, 2020 by $1,757,000. If the loss and settlement expense
reserves were recorded at the low end of the actuarially-determined range as of
December 31, 2020, the net loss and settlement expense reserves at December 31,
2020 would be reduced by $5,696,000 with corresponding increases in net earnings
and equity of $4,500,000.



Investments



Our investments are primarily composed of fixed maturity debt securities, and
both common and preferred stock equity securities. We categorize all our debt
securities as available-for-sale (AFS), which are carried at fair as determined
by management based upon quoted market prices when available. 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. Changes in unrealized
investment gains or losses on our AFS securities, net of applicable income
taxes, are reflected directly in equity as a component of comprehensive earnings
(loss) and, accordingly, have no effect on net earnings (loss). Equity
securities are carried at fair value with

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subsequent changes in fair value recorded in net earnings (loss). Investment
income is recognized when earned, and capital gains and losses are recognized
when investments are sold, or other-than-temporarily impaired.



The fair value and unrealized losses for our securities that were temporarily
impaired are as follows:






                                                                      March 31, 2021
                                    Less than 12 Months             12 Months or Longer                   Total
                                                Unrealized                      Unrealized                     Unrealized
(In thousands)                  Fair Value        Losses        Fair Value        Losses        Fair Value       Losses
U.S. Treasury                  $       689     $        (11)   $          -    $           -   $       689    $        (11)
MBS/ABS/CMBS                         7,513             (199)         1,821             (116)         9,334            (315)
Corporate                            6,201             (189)           233              (16)         6,434            (205)
Municipal                            3,458             (107)           245               (4)         3,703            (111)
Total temporarily impaired
fixed maturity securities      $    17,861     $       (506)   $     2,299     $       (135)   $    20,160    $       (641)









                                                                       December 31, 2020
                                    Less than 12 Months                12 Months or Longer                      Total
                                                Unrealized                                                           Unrealized
(In thousands)                  Fair Value        Losses        Fair Value      Unrealized Losses     Fair Value       Losses
U.S. Treasury                  $       299     $         (1)   $          -    $                 -   $       299    $         (1)
MBS/ABS/CMBS                         7,120             (116)         2,010                    (17)         9,130            (133)
Corporate                            1,740              (35)              -                      -         1,740             (35)
Municipal                              757              (16)              -                      -           757             (16)
Total temporarily impaired
fixed maturity securities      $     9,916     $       (168)   $     2,010     $              (17)   $    11,926    $       (185)




Corporate Bonds



The net unrealized gain in the Corporate bond portfolio decreased by about $1.8
million from a gain of $4,394,000 at the end of 2020 to a gain of $2,631,000 as
of March 31, 2021. The decrease in unrealized gains was driven by an increase in
Treasury rates. Treasury rates moved higher across the curve during the first
quarter, with the five year maturity up 58 basis points and the ten year
maturity up 82 basis points. This increase in the risk free rate caused prices
on bonds to drop meaningfully.



Municipal Bonds



The net unrealized gain in the Municipal portfolio decreased by about $0.5
million from $1,300,000 at the end of 2020 to $845,000 at the end of March 31,
2021.  Like Corporates, Municipal gains were negatively impacted by higher
Treasury rates. However, the decline in unrealized gains was muted by spread
tightening in the sector due to tailwinds from the $350 billion allocation to
states from the $1.9 trillion fiscal stimulus package and concerns about higher
future tax rates.



We monitor our investment portfolio and review securities that have experienced
a decline in fair value below cost to evaluate whether the decline is other than
temporary. When assessing whether the amortized cost basis of the security will
be recovered, we compare the present value of the cash flows likely to be
collected, based on an evaluation of all available information relevant to the
collectability of the security, to the amortized cost basis of the security. The
shortfall of the present value of the cash flows expected to be collected in
relation to the amortized cost basis is referred to as the "credit loss." If
there is a credit loss, the impairment is other-than-temporary. If we identify
that an other-than-temporary impairment loss has occurred, we then determine
whether we intend to sell the security, or if it is more likely than not that we
will be required to sell the security prior to recovering the amortized cost
basis less any current-period credit losses. If we determine that we do not
intend to sell, and it is not more likely than not that we will be required to
sell the security, the amount of the impairment loss related to the credit loss
will be recorded in earnings, and the remaining portion of the
other-than-temporary impairment loss will be recognized in other comprehensive
income (loss), net of tax. If we determine that we intend to sell the security,
or that it is more likely than not that we will be required to sell the security
prior to recovering its amortized cost basis less any current-period credit
losses, the full amount of the other-than-temporary impairment (OTTI) will be
recognized in earnings.



For the three months ended March 31, 2021 and for the year ended December 31,
2020, the Company did not take an impairment charge on any of its security
holdings. Adverse investment market conditions, or poor operating results of
underlying investments, could result in impairment charges in the future.



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We use quoted values and other data provided by independent pricing services in
our process for determining fair values of our investments. The evaluations of
such pricing services represent an exit price and a good faith opinion as to
what a buyer in the marketplace would pay for a security in a current sale. This
pricing service provides us with one quote per instrument. For fixed maturity
securities that have quoted prices in active markets, market quotations are
provided. For fixed maturity securities that do not trade daily, the independent
pricing service prepares estimates of fair value using a wide array of
observable inputs including relevant market information, benchmark curves,
benchmarking of like securities, sector groupings, and matrix pricing. The
observable market inputs that our independent pricing service utilizes may
include (listed in order of priority for use) benchmark yields, reported trades,
broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities,
market bids/offers, and other reference data on markets, industry, and the
economy. Additionally, the independent pricing service uses an option adjusted
spread model to develop prepayment and interest rate scenarios. The pricing
service did not use broker quotes in determining fair values of our investments.



Should the independent pricing service be unable to provide a fair value
estimate, we would attempt to obtain a non-binding fair value estimate from a
number of broker-dealers and review this estimate in conjunction with a fair
value estimate reported by an independent business news service or other
sources. In instances where only one broker-dealer provides a fair value for a
fixed maturity security, we use that estimate. In instances where can obtain
fair value estimates from more than one broker-dealer, we would review the range
of estimates and would select the most appropriate value based on the facts and
circumstances. Should neither the independent pricing service nor a
broker-dealer provide a fair value estimate, we would develop a fair value
estimate based on cash flow analyses and other valuation techniques that utilize
certain unobservable inputs. Accordingly, we would classify such a security as a
Level 3 investment.



The fair value estimates of our investments provided by the independent pricing
service at March 31, 2021 and December 31, 2020, respectively, were utilized,
among other resources, in reaching a conclusion as to the fair value of our
investments.



Management reviews the reasonableness of the pricing provided by the independent
pricing service by employing various analytical procedures. We review all
securities to identify recent downgrades, significant changes in pricing, and
pricing anomalies on individual securities relative to other similar securities.
This will include looking for relative consistency across securities in common
sectors, durations, and credit ratings. This review will also include all fixed
maturity securities rated lower than "A" by Moody's or S&P. If, after this
review, management does not believe the pricing for any security is a reasonable
estimate of fair value, then it will seek to resolve the discrepancy through
discussions with the pricing service. In our review, we did not identify any
such discrepancies for the three months ended March 31, 2021 and 2020 and for
the year ended December 31, 2020, and no adjustments were made to the estimates
provided by the pricing service. The classification within the fair value
hierarchy of Accounting Standards Codification (ASC) Topic 820, Fair Value
Measurement, is then confirmed based on the final conclusions from the pricing
review.


Deferred Policy Acquisition Costs




Certain acquisition costs consisting of direct and ceded commissions, premium
taxes and certain other direct underwriting expenses that vary with and are
primarily related to the production of business are deferred and amortized over
the effective period of the related insurance policies as the underlying policy
premiums are earned. At March 31, 2021 and December 31, 2020, deferred
acquisition costs and the related unearned premium reserves were as follows:






(In thousands)              March 31, 2021     December 31, 2020
Deferred acquisition costs $         5,721    $            5,430
Unearned premium reserves           30,468                29,789




The method followed in computing deferred acquisition costs limits the amount of
deferred costs to their estimated realizable value, which gives effect to the
premium to be earned, related investment income, loss and loss adjustment
expenses, and certain other costs expected to be incurred as the premium is
earned. Future changes in estimates, the most significant of which is expected
loss and loss adjustment expenses, may require adjustments to deferred policy
acquisition costs. If the estimation of net realizable value indicates that the
deferred acquisition costs are not recoverable, they would be written off.



Income Taxes


We use the asset and liability method of accounting for income taxes. Deferred income taxes arise from the recognition of

temporary differences between financial statement carrying amounts and the tax bases of our assets and liabilities. A valuation


allowance is provided when it is more likely than not that some portion of the
deferred tax asset will not be realized. The effect of a change in tax rates is
recognized in the period of the enactment date.



We exercise significant judgment in evaluating the amount and timing of
recognition of the resulting tax liabilities and assets. These judgments require
us to make projections of future taxable income. The judgments and estimates we
make in determining our deferred tax assets, which are inherently subjective,
are reviewed on a continual basis as regulatory and

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business factors change. Any reduction in estimated future taxable income may
require us to record an additional valuation allowance against our deferred tax
assets.


As of March 31, 2021 and December 31, 2020, we had no material unrecognized tax benefits or accrued interest and penalties. Federal tax years 2017 through current year are open for examination.



Other Assets



As of March 31, 2021 and December 31, 2020, other assets totaled $1,289,000 and
$1,307,000, respectively. The decrease in other assets primarily relates to
decreases in Corporate Owned Life Insurance asset values as well as prepaid
fees. The Company owns life insurance policies on Arron K. Sutherland, President
and Chief Executive Officer, and Norman D. Schmeichel, Vice President - Chief
Information Officer.

Outstanding Debt



As of March 31, 2021 and December 31, 2020, outstanding debt balances totaled
$13,463,000 and $13,466,000, respectively. The average rate on remaining debt
was 1.6% and 2.2% as of March 31, 2021 and December 31, 2020, respectively.



Debt Obligation



ICC Holdings, Inc. secured a loan with a commercial bank in March 2017 in the
amount of $3,500,000 and used the proceeds to repay ICC for the money borrowed
by the ESOP. The term of the loan is five years bearing interest at 3.65%. The
Company pledged stock and $1.0 million of marketable assets as collateral for
the loan.



In response to COVID-19, the Company obtained in March 2020 and May 2020 a $6.0
million and $4.0 million loan, respectively, from the FHLBC as a precautionary
measure to increase its cash position,  to provide increased liquidity, and to
compensate for potential reductions in premium receivable collections.



Revolving Line of Credit



We maintain a revolving line of credit with a commercial bank, which permits
borrowing up to an aggregate principal amount of $2.0 million. This facility was
initially entered into in August 2020 and is priced at Prime plus 0.5%. The
Company pledged $2.0 million in business assets in the event the Company draws
down on the line of credit. There are no financial covenants governing this
agreement.



There were no borrowings outstanding and there was no interest paid on the line of credit during the three months ended March 31, 2021.



Other Liabilities



As of March 31, 2021 and December 31, 2020, other liabilities totaled $944,000
and $1,291,000, respectively. The decrease in other liabilities relates to
$210,000 of investment purchases that were pending settlement as of year-end
December 31, 2020 and subsequently settled in the first quarter of 2021.



ESOP



In connection with our conversion and public offering, the ESOP financed the
purchase of 10.0% of the common stock issued in the offering for $3,500,000 with
the proceeds of a loan from ICC prior to the expiration of the offering. ICC
makes annual contributions to the ESOP sufficient to repay that loan. See Note 8
- Employee Benefits of this Form 10-Q as well as the "Management - Benefit Plans
and Employment Agreements -Employee Stock Ownership Plan" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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Stock-based Incentive Plan



Under the ICC Holdings, Inc. 2016 Equity Incentive Plan, we reserved for
issuance a total of 490,000 shares of common stock. Of this amount, 350,000
shares of common stock may be granted in the form of restricted stock and
stock-settled restricted stock unit awards, and 140,000 shares of common stock
may be granted in the form of stock options under the stock-based incentive
plan. The grant-date fair value of any common stock used for restricted stock
and restricted stock unit awards will represent unearned compensation. As we
accrue compensation expense to reflect the vesting of such shares, unearned
compensation will be reduced accordingly. We compute compensation expense at the
time stock units are awarded based on the fair value of such options on the date
they are granted. This compensation expense is recognized over the appropriate
service period. Restricted stock units (RSUs) were granted for the first time in
February 2018 with additional RSUs granted in March 2019 and April 2020. The
RSUs vest 1/3 over three years from the date of grant. See Note 8 - Employee
Benefits of this Form 10-Q as well as the "Management - Benefit Plans and
Employment Agreements" section of the Company's 2020 Annual Report on Form 10-K.



Liquidity and Capital Resources




We generate sufficient funds from our operations and maintain a high degree of
liquidity in our investment portfolio to meet the demands of claim settlements
and operating expenses. The primary sources of funds are premium collections,
investment earnings and maturing investments. The decrease in cash used in
investing activities during the three months ended March 31, 2021 compared to
the same period in 2020 relates primarily to purchases of fixed maturity
securities and preferred stocks. The decrease in cash provided by financing
activities during the three months ended March 31, 2021 compared to the same
period in 2020 relates to a  $6.0 million loan obtained from FHLBC during the
first three months of 2020. See Note 4 - Debt of this Form 10-Q for more
information.



We maintain investment and reinsurance programs that are intended to provide
sufficient funds to meet our obligations without forced sales of investments. We
maintain a portion of our investment portfolio in relatively short-term and
highly liquid assets to ensure the availability of funds.



Cash flows from continuing operations for the three months ended March 31, 2021
and 2020 were as follows:






                                                   Three-Months Ended March 31,
(In thousands)                                       2021                 2020
Net cash provided by operating activities     $             483     $       

163

Net cash used in investing activities                    (1,503)            

(3,781)

Net cash (used in) provided by financing
activities                                                  (22)            

5,997

Net (decrease) increase in cash and cash
equivalents                                   $          (1,042)    $          2,379




ICC Holdings, Inc.'s principal source of liquidity is dividend payments and
other fees received from ICC, Beverage Insurance Agency Inc., and ICC Realty,
LLC. ICC is restricted by the insurance laws of Illinois as to the amount of
dividends or other distributions it may pay to us. Under Illinois law, there is
a maximum amount that may be paid by ICC during any twelve-month period. ICC may
pay dividends to us after notice to, but without prior approval of the Illinois
Department of Insurance in an amount "not to exceed" the greater of (i) 10% of
the surplus as regards policyholders of ICC as reported on its most recent
annual statement filed with the Illinois Department of Insurance, or (ii) the
statutory net income of ICC for the period covered by such annual statement.
Dividends in excess of this amount are considered "extraordinary" and are
subject to the approval of the Illinois Department of Insurance.



The amount available for payment of dividends from ICC in 2021 without the prior
approval of the Illinois Department of Insurance is approximately $5.9 million
based upon the insurance company's 2020 annual statement. Prior to its payment
of any dividend, ICC is required to provide notice of the dividend to the
Illinois Department of Insurance. This notice must be provided to the Illinois
Department of Insurance 30 days prior to the payment of an extraordinary
dividend and 10 days prior to the payment of an ordinary dividend. The Illinois
Department of Insurance has the power to limit or prohibit dividend payments if
ICC is in violation of any law or regulation. These restrictions or any
subsequently imposed restrictions may affect our future liquidity. In March
2020, ICC paid a $500,000 dividend to ICC Holdings, Inc.



As of March 31, 2021, the Company had received 1,296 claims for business
interruption related to COVID-19. Based on policy language, the Company does not
anticipate that coverage will be triggered for these property claims requiring
loss payment.


The actual timing of gross loss and loss adjustment expense payments is unknown and therefore timing estimates are based on historical experience and the expectations of future payment patterns.

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