ICC HOLDINGS, INC. – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and
accompanying notes included elsewhere in this Form 10-K. Some of the information
contained in this discussion and analysis or set forth elsewhere in this Form
10-K constitutes forward-looking information that involves risks and
uncertainties. Please see Item 3A. Forward-Looking Information and Item 1A. Risk
Factors for more information. Please see Item 1A. Risk Factors for a discussion
of important factors that could cause actual results to differ materially from
the results described, or implied by, the forward-looking statements contained
herein.
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 conversion, ICC became a wholly owned subsidiary of ICC
Holdings, Inc.
For the year ended December 31, 2021, we had direct written premiums of $71.1
million, net premiums earned of $53.9 million, and net earnings of $4.1 million.
For the year ended December 31, 2020, we had direct premiums written of $59.0
million, net premiums earned of $49.7 million, and net earnings of $3.5 million.
At December 31, 2021, we had total assets of $200.0 million and equity of $74.7
million. At December 31, 2020, we had total assets of $183.9 million and equity
of $72.7 million.
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 at a later date 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 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).
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.

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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 settlement expenses) in cash,
cash equivalents, equities, fixed maturity securities and real estate.
Investment income includes interest and dividends earned on invested assets. 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
maturity 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. 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:
Loss and settlement expenses
Loss 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 from 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,
referred to herein as underwriting and administrative expenses 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 non-GAAP financial
measures that we believe are valuable in managing our business and for
comparison to our peers. These non-GAAP measures are combined ratio, written
premiums, underwriting income, the loss 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 expenses, underwriting expenses and combined ratios. We also measure
profitability by examining underwriting income (loss) and net earnings (loss).
Loss and settlement expense ratio
The loss and settlement expense ratio is the ratio (expressed as a percentage)
of loss and settlement expenses incurred to premiums earned. We measure the loss
ratio on an accident year and calendar year loss basis to monitor underwriting
profitability. An accident year loss ratio measures loss 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.

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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 net 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 loss 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 loss and settlement expense,
amortization of deferred policy acquisition costs, and underwriting and
administrative expenses from 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
General
The preparation of financial statements in accordance with GAAP requires both
the use of estimates and judgment relative to the application of appropriate
accounting policies. We are required to make estimates and assumptions in
certain circumstances that affect amounts reported in our financial statements
and related footnotes. We evaluate these estimates and assumptions on an
on-going basis based on historical developments, market conditions, industry
trends and other information that we believe to be reasonable under the
circumstances. There can be no assurance that actual results will conform to our
estimates and assumptions and that reported results of operations will not be
materially adversely affected by the need to make accounting adjustments to
reflect changes in these estimates and assumptions from time to time. We believe
the following policies are the most sensitive to estimates and judgments.
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 policyholders' 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.
Other-Than-Temporary Impairment-Under current accounting standards, an OTTI
write-down of debt 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 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

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factors, which 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 income 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
income 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 income securities until maturity.
Quantitative and qualitative criteria are considered during this process to
varying degrees depending on the sector the analysis is being performed:
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 cash flows,
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.
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 bases over the estimated useful lives of the
building, which we estimate to be 39 years. Income from property held for
investment is reported as net investment income
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.
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.

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Loss and Settlement Expense Reserves
We maintain reserves for the payment of claims (incurred losses) and expenses
related to adjusting those claims (loss settlement expenses). Our loss reserves
consist of case reserves, which are reserves for claims that have been reported
to us, loss settlement expense reserve, which includes all defense and
litigation-related expenses, whether internal or external to us, and reserves
for claims that have been incurred but have not yet been reported or for case
reserve deficiencies or redundancies (IBNR).
When a claim is reported to us, our claims personnel establish a case reserve
for the estimated amount of the ultimate payment. The amount of the loss reserve
for the reported claim is based primarily upon a claim-by-claim evaluation of
coverage, liability, injury severity or scope of property damage, and any other
information considered pertinent to estimating the exposure presented by the
claim. Each claim is settled individually based upon its merits, and some claims
may take years to settle, especially if legal action is involved. Case reserves
are reviewed on a regular basis and are updated as new data becomes available.
In addition to case reserves, we maintain an estimate of reserves for loss and
settlement expenses incurred but not reported. Some claims may not be reported
for several years. As a result, the liability for unpaid loss and settlement
expense reserves includes significant estimates for IBNR.
We utilize an independent actuary to assist with the estimation of our loss and
settlement expense reserves bi-annually. This actuary prepares estimates of the
ultimate liability for unpaid losses and settlement expenses based on
established actuarial methods described below. Our management reviews these
estimates and supplements the actuarial analysis with information not fully
incorporated into the actuarially based estimate, such as changes in the
external business environment and changes in internal company processes and
strategy. We may adjust the actuarial estimates based on this supplemental
information in order to arrive at the amount recorded in the financial
statements.
Reserving Methods
In developing our loss and settlement expense reserve estimates, we relied upon
widely used and accepted loss reserving methods (described below). Based on the
deemed predictive qualities of each of the applied methods, we selected
estimated ultimates by year in order to determine our reserve estimates. Our
estimates can be considered actuarial central estimates, which means that they
represent an expected value over the range of reasonably possible outcomes.
Loss Development Methods (Paid and Incurred Loss and Settlement Expense) - Loss
development ultimates are determined by multiplying current reported values by
cumulative loss development factors. Incremental loss development factors are
determined by analyzing historical development of losses and assuming that
future development will mimic historical. Cumulative development factors are
calculated from the selection of incremental factors.
This method is also applied to incurred settlement expense to incurred loss
ratios and paid settlement expense to paid loss ratios to estimate ultimate
settlement expense.
Loss development methods are particularly appropriate when historical loss
development patterns have been relatively stable and can be predicted with
reasonable accuracy.
Expected Loss Ratio Method - The expected loss ratio method applies a selected
ultimate loss ratio to premium to determine ultimate losses and settlement
expenses. Expected loss ratios for 2007 and prior were selected based on the
results of the loss development methods discussed above, industry experience,
actual loss experience of ICC to date and general industry conditions. Beginning
with 2008, expected loss ratios have been calculated based on the prior expected
loss ratios, rate changes and loss trend.
Bornhuetter-Ferguson (B-F) Methods (Paid and Incurred Loss) - The Loss
Development Methods rely heavily on data as of the most recent evaluation date,
and a relatively small swing in early reported (or paid) losses may result in a
large swing in the ultimate loss projections. Therefore, other methods may also
be considered.
The B-F Methods offer a blend of stability and responsiveness by estimating
ultimate losses as a weighted combination of an expected loss estimate and
current loss data. The weight applied to the expected loss estimate is based on
the appropriate cumulative loss development factor from the Loss Development
Methods. This percentage is multiplied by expected losses to determine expected
future development. This estimate of future loss development is then added to
losses as of the current evaluation date to project ultimate losses.

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A&OE Method - In 2012, we implemented a new approach to reserving for unpaid
Adjusting & Other Expenses (A&OE). This method is referred to as the "Wendy
Johnson Method" where historical A&OE payments are measured against certain
claim units to develop an average rate for projecting into future years. These
claim units are defined as a means of measuring the overall level of claim
activity in a year as follows:
Units =
2 x (Newly Reported Claims in Year X) +
(Number of Claims Open at Start of Year X)
Future A&OE costs are projected by inflating the selected average A&OE per unit
rate, 1.0% annually, against future units calculated by claims runoff patterns.
Range of Estimates
In addition to our actuarial central estimate, we have also developed a range of
estimates. This range is not designed to represent minimum or maximum possible
outcomes. It is developed to represent low and high ends for a reasonable range
of expected outcomes given the selection of alternative, but reasonable
assumptions. Actual results may fall outside of this range.
High and low net reserve estimates were developed by stressing our expected loss
ratio and loss development factor selections. By applying a factor to increase
(and decrease) these assumptions, we developed high (and low) ultimate loss and
settlement expense estimates. These estimates, along with paid and incurred loss
information, result in a range of reserves. The gross reserve range is based on
selected percentages which produce a range which is slightly wider than the net
range.
We estimate IBNR reserves by first deriving an actuarially based estimate of the
ultimate cost of total loss and settlement expenses incurred by line of business
as of the financial statement date. We then reduce the estimated ultimate loss
and settlement expenses by loss and settlement expense payments and case
reserves carried as of the financial statement date. The actuarially determined
estimate is based upon indications from one of the above actuarial methodologies
or uses a weighted average of these results. The specific method used to
estimate the ultimate losses for individual lines of business, or individual
accident years within a line of business, will vary depending on the judgment of
the actuary as to what is the most appropriate method for a line of business'
unique characteristics. Finally, we consider other factors that impact reserves
that are not fully incorporated in the actuarially based estimate, such as
changes in the external business environment and changes in internal company
processes and strategy.
The process of estimating loss reserves involves a high degree of judgment and
is subject to a number of variables. These variables can be affected by both
internal and external events, such as changes in claims handling procedures,
economic inflation, legal trends, and legislative changes, among others. The
impact of many of these items on ultimate costs for claims and claim adjustment
expenses is difficult to estimate. Loss reserve estimation difficulties also
differ significantly by line of business due to differences in claim complexity,
the volume of claims, the potential severity of individual claims, the
determination of occurrence date for a claim, and reporting lags (the time
between the occurrence of the policyholder event and when it is actually
reported to the insurer). Informed judgment is applied throughout the process,
including the application of various individual experiences and expertise to
multiple sets of data and analyses. We continually refine our loss reserve
estimates in a regular ongoing process as historical loss experience develops
and additional claims are reported and settled. We consider all significant
facts and circumstances known at the time loss reserves are established.
Due to the inherent uncertainty underlying loss reserve estimates, final
resolution of the estimated liability for loss and settlement expenses may be
higher or lower than the related loss reserves at the reporting date. Therefore,
actual paid losses, as claims are settled in the future, may be materially
higher or lower in amount than current loss reserves. We reflect adjustments to
loss reserves in the results of operations in the period the estimates are
changed.
We accrue liabilities for unpaid loss and settlement expenses based upon
estimates of the ultimate amount payable.
Policy Acquisition Costs and Other Operating Expenses
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.
Other operating expenses consist primarily of information technology costs,
accounting and internal control salaries, as well as audit and legal expenses.

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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.
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 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.
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.
The Company considers uncertainties in income taxes and recognizes those in its
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.
As an insurance company, the Company 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.
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 statement of earnings, the Company
used a 21% tax rate for 2021 and 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.
Our premium growth 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 year ended December 31, 2021
compared to the year ended December 31, 2020.
Premiums
Direct premiums written grew by $12,110,000, or 20.5%, primarily due to our
insureds' businesses being open substantially all year long in 2021 in contrast
to business closures brought on by COVID-19 in 2020, and net written premium
increased by $11,163,000, or 22.8%, during the same period. Net premiums earned
grew by $4,204,000, or 8.5%.
For the years ended December 31, 2021 and 2020, we ceded to reinsurers
$10,854,000 and $10,080,000 of earned premiums, respectively. Ceded earned
premiums as a percent of direct premiums written were 15.3% in 2021, and 17.1%
in 2020.
Premiums are earned ratably over the term of the policy whereas written premiums
are reflected on the effective date of the policy.
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. Another component of other income is
attributable to sales made by the Company's subsidiary, Katkin. Other income
increased by $580,000, or 251.1%, in 2021 as compared to 2020 primarily as a
result of a decrease in premiums written off and the addition of Katkin in the
fourth quarter of 2021.
Unpaid Losses and Settlement Expenses
The following table details our unpaid losses and settlement expenses.
(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                                                         33,968    31,356
Prior years                                                             732     1,206
Total incurred                                                       34,700    32,562
Deduct: Loss and settlement expense payments for claims incurred:
Current year                                                         14,740    13,054
Prior years                                                          21,203    16,754
Total paid                                                           35,943    29,808

Net unpaid losses and settlement expense - end of the period 47,314

48,556

Plus: Reinsurance recoverable on unpaid losses                       14,521 

13,020

Gross unpaid losses and settlement expense - end of the period $ 61,835

$ 61,576

Differences from the initial reserve estimates emerged as changes in the
ultimate loss estimates were updated through the reserve analysis process. The
recognition of the changes in initial reserve estimates occurred over time as
claims were reported, initial case reserves were established, initial reserves
were reviewed in light of additional information and ultimate payments were made
on the collective set of claims incurred as of that evaluation date. The new
information on the ultimate settlement value of claims is updated until all
claims in a defined set are settled. As a small specialty insurer with a niche
product portfolio, our experience will ordinarily exhibit fluctuations from
period to period. While management attempts to identify and react to systematic
changes in the loss environment, management must also consider the volume of
experience directly available to the Company and interpret any particular
period's indications with a realistic technical understanding of the reliability
of those observations.

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For calendar year 2021, the Company experienced unfavorable development relative
to prior years' reserve estimates in both its property and liability lines of
business relating to Businessowners Property 2020 accident year claims and
Businessowners Liability 2017 accident year claims, respectively. These adverse
developments were largely offset by favorable development in Workers'
Compensation 2020 accident year claims.
For calendar year 2020, the Company experienced unfavorable development relative
to prior years' reserve estimates in both its property and liability lines of
business relating to Businessowners Property 2019 accident year claims and
Businessowners Liability 2016 accident year claims, respectively. These adverse
developments were largely offset by favorable development in Liquor Liability.
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 increased by $2,295,000, or 12.4%. The primary drivers for this change
were an increase in commissions along with positive earned premium growth.
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 expenses.
Our expense ratio increased 135 basis points from 37.29% to 38.64% for the year
ended December 31, 2021 as compared to 2020.
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 increased by
$82,000, or 12.9%, in 2021 as compared to 2020.
Investment Income
Our investment portfolio consisted of 80.0% and 86.6% of readily marketable,
investment-grade fixed-maturity securities as of December 31, 2021 and 2020,
respectively. The remainder of the portfolio is comprised of rental real estate,
perpetual preferred stock and common stock. Net investment income is primarily
comprised of interest earned and dividends paid on these securities and rental
income on investment real estate, net of related investment expenses, and
excludes realized gains and losses.
Net investment income decreased by $84,000 for the year ended December 31, 2021
as compared to 2020. The slight decline in net investment income for the twelve
months ended December 31, 2021, was driven primarily by a reduction in equity
security dividend income. Average invested assets for 2021 were $140,677,000
compared to $127,158,000 for 2020, an increase of $13,519,000, or 10.6%.
For additional information, see Item 1. Business - Investments above.
Interest Expense
Interest expense increased to $235,000 for the year ended December 31, 2021 from
$208,000 for the year ended December 31, 2020, reflecting the cost of the new
$5.0 million FLHB loan agreement entered into in 2021.
Income Tax Expense
We reported income tax expense of $815,000 in 2021, as compared to $1,047,000 in
2020. Total income tax expense decreased in 2021 primarily due to a favorable
prior year tax true-up offset in part by an increase in taxes from 2021's higher
taxable earnings.
The Company has not established a valuation allowance against any of the net
deferred tax assets.


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Financial Position
The following summarizes our financial position as of December 31, 2021 and
December 31, 2020.
Unpaid Losses and Settlement Expense
Our reserves for unpaid loss and settlement expense are summarized below:
                                                As of December 31,     As of December 31,
(In thousands)                                         2021                   2020
Case reserves                                  $             26,309   $             27,901
IBNR reserves                                                21,005                 20,655
Net unpaid losses and settlement expense                     47,314         

48,556

Reinsurance recoverable on unpaid loss and
settlement expense                                           14,521         

13,020

Reserves for unpaid loss and settlement        $                      $
expense                                                      61,835                 61,576


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 settlement
expenses as of December 31, 2021 and 2020.
As of December 31, 2021
                                                                                         Actuarially Determined
                                                                                           ?Range of Estimates
(In thousands)                 Case Reserves     IBNR Reserves     Total Reserves         Low                High
Commercial liability          $       19,223    $       18,540    $        37,763
Property                               3,018              (558)             2,460
Other                                  4,068             3,023              7,091
Total net reserves                    26,309            21,005             47,314    $     41,980         $  49,737
Reinsurance recoverables               4,002            10,519             14,521          12,932            17,112
Gross reserves                $       30,311    $       31,524    $        61,835    $     54,912         $  66,849



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

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?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
settlement 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.
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 years ended December 31, 2021 and 2020, we experienced adverse
development of $732,000 and $1,206,000, 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 December 31, 2021, that amount was re-estimated at $49,288,000, which is
$732,000, or 1.5%, higher than the initial estimate.
As discussed earlier, 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 (11.3)% to
5.1%. As shown in the table below, since 2016 the variance in our originally
estimated accident year loss reserves has ranged from (4.4)% deficient to 7.0%
redundant as of December 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  $ 33,564  $ 31,356
As estimated at December 31, 2021          26,741    30,689    27,955    34,551    29,162
Net cumulative (deficiency) redundancy  $ (1,121)  $  (888)  $  1,807  $  (987)  $  2,194
% (deficiency) redundancy                  (4.4)%    (3.0)%      6.1%    (2.9)%      7.0%




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

                                                              December 31,
                                                2021                                2020
                                   Aggregate Loss      Percentage      Aggregate Loss      Percentage
                                   and Settlement      Change in       and Settlement      Change in
(In thousands)                        Reserve            Equity           Reserve            Equity
Reserve Range for Unpaid Losses
and Settlement Expense
Low End                           $         41,980             5.6%   $         42,860             6.2%
Recorded                                    47,314             0.0%             48,556             0.0%
High End                                    49,737           (2.6)%             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, 2021, the loss and
settlement expense reserves would increase by $2,423,000 before taxes. This
increase in reserves would have the effect of decreasing net earnings and equity
as of December 31, 2021 by $1,914,000. If the loss and settlement expense
reserves were recorded at the low end of the actuarially-determined range as of
December 31, 2021, the net loss and settlement expense reserves at December 31,
2021 would be reduced by $5,334,000 with corresponding increases in net earnings
and equity of $4,214,000.
Investments
Debt securities are classified as available-for-sale (AFS) and reported at fair
value as determined by management based upon quoted market prices or a
recognized pricing service at the reporting date for those or similar
investments. Changes in unrealized investment gains or losses on our AFS
investments, 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 subsequent
changes in fair value recorded in net earnings. Investment income is recognized
when earned, and capital gains and losses are recognized when investments are
sold, or other-than-temporarily impaired.
Corporate Bonds
The net unrealized gain in the Corporate bond portfolio decreased about $2.1
million from a gain of $4,394,000 at the end of 2020 to a gain of $2,247,000 at
the end of 2021. This sharp decrease in unrealized gains was driven by an
increase in Treasury rates. In 2021, 5 year Treasury rates increased 90 bps and
10 year Treasury rates increased 60 bps. As a result of this rate move,
Corporate bond prices dropped causing the unrealized gain position to worsen.
Municipal Bonds
The net unrealized gain in the Municipal portfolio decreased from $1,300,000 at
the end of 2020 to $1,127,000 at the end of 2021, a decrease of $0.17
million. This stability in the unrealized position was driven by two factors.
Treasury rates rose during the year, which had a negative impact on Municipal
prices. However, this was mostly offset by spread tightening in the Municipal
sector throughout the year. This spread tightening was driven by a number of
factors, most notably investor concerns about the potential for higher tax rates
and an influx of cash into Municipal coffers from the fiscal stimulus package.

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

                                                                      December 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                  $        391        $         (9)   $        292   $         (8)   $        683   $        (17)
MBS/ABS/CMBS                         20,404                (244)          1,124            (52)         21,528           (296)
Corporate                             6,428                (162)            995            (26)          7,423           (188)
Municipal                             2,676                 (19)            269             (4)          2,945            (23)
Total temporarily impaired
fixed maturity securities      $     29,899        $       (434)   $      2,680   $        (90)   $     32,579   $       (524)



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                                                                   December 31, 2020
                                   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                  $       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)


The unrealized losses as of December 31, 2021 and 2020 were primarily related to
changes in the interest rate environment. Fair values of interest rate sensitive
instruments may be affected by increases and decreases in prevailing interest
rates which generally translate, respectively, into decreases and increases in
fair values of fixed maturity investments. The fair values of interest rate
sensitive instruments also may be affected by the credit worthiness of the
issuer, prepayment options, relative values of other investments, the liquidity
of the instrument, and other general market conditions.
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 considered to be 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.
There were no other-than-temporary impairment losses recognized in net earnings
during the years ended December 31, 2021 and 2020. Adverse investment market
conditions, or poor operating results of underlying investments, could result in
impairment charges in the future.
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 on a daily basis, 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 we are able to
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 December 31, 2021 and December 31, 2020, respectively, were utilized,
among other resources, in reaching a conclusion as to the fair value of our
investments.

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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 years ended December 31, 2021 and 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 December 31, 2021 and December 31, 2020, deferred
acquisition costs and the related unearned premium reserves were as follows:
(In thousands)              December 31, 2021    December 31, 2020
Deferred acquisition costs $             6,539  $             5,430
Unearned premium reserves               36,212               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 settlement 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
settlement 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 had a net deferred tax liability of $955,000 and $1,231,000 at December 31,
2021 and 2020, respectively. A valuation allowance is required to be established
for any portion of a deferred tax asset for which we believe it is more likely
than not that it will not be realized. At December 31, 2021 and 2020, we had no
valuation allowance with respect to a deferred tax asset.
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 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 December 31, 2021 and 2020, we had no material unrecognized tax benefits
or accrued interest and penalties. Periods still subject to Internal Revenue
Service (IRS) audit include 2018 through the current year. There are currently
no open tax exams. The tax return related to the year ended December 31, 2021
has not yet been filed.
Other Assets
As of December 31, 2021 and 2020, other assets totaled $1,344,000 and
$1,308,000, respectively. These balances include Corporate Owned 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 December 31, 2021 and 2020, outstanding debt balances totaled $18,455,000
and $13,466,000, respectively. The average rate on remaining debt was 1.3% and
1.6% as of December 31, 2021 and 2020, respectively.

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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. The Company's $4.0 million loan matured on May 3, 2021 and, on this
date, a new $4.0 million FHLBC loan became effective. In addition, the Company
entered into a one year, $5.0 million FHLBC loan on May 28, 2021. See Note 5 -
Debt of this Form 10-K for more information.
Revolving Line of Credit
We maintained a revolving line of credit with a commercial bank, which permitted
borrowing up to an aggregate principal amount of $1.75 million. This facility
was entered into during 2013 and expired August 2020. The line of credit was
priced at 30-day LIBOR plus 2% with a floor of 3.5%. In order to secure the
lowest rate possible, the Company pledged marketable securities not to exceed
$5.0 million in the event the Company would draw down on the line of credit.
There were no financial covenants governing this agreement.
Effective August 3, 2020, the Company replaced its expired line of credit with a
$2.0 million revolving line of credit with another commercial bank, which renews
annually and has a current expiration date of July 2022. This new line of credit
is priced at Prime plus 0.5%. The Company pledged $2.0 million of business
assets in the event the Company draws down on the line of credit. There are no
financial covenants governing this agreement.
There was no interest paid on these lines of credit during the years ended
December 31, 2021 and December 31, 2020.
Other Liabilities
As of December 31, 2021 and December 31, 2020, other liabilities totaled
$1,031,000 and $1,291,000, respectively. The decrease in other liabilities
relates primarily to $210,000 of investment purchases that were pending
settlement as of year-end December 31, 2020.
For information regarding our reinsurance program, investment portfolio, unpaid
losses and settlement information, see Item 1. Business.

ESOP

In connection with our conversion and public offering, we established an ESOP.
The ESOP borrowed from the Company to purchase 350,000 shares in the offering.
The issuance of the shares to the ESOP resulted in a contra account established
in the shareholder's equity section of the balance sheet for the unallocated
shares at an amount equal to their $10.00 per share purchase price.

The Company may make discretionary contributions to the ESOP and pay dividends
on unallocated shares to the ESOP. The ESOP uses funds it receives to repay the
loan. When loan payments are made, ESOP shares are allocated to participants
based on relative compensation and expense is recorded. The Company contributed
$294,000 and $295,000 to the ESOP during the twelve months ended December 31,
2021 and 2020.

A compensation expense charge is booked monthly during each year for the shares
committed to be allocated to participants that year, determined with reference
to the fair market value of our stock at the time the commitment to allocate the
shares is accrued and recognized. For the year ended December 31, 2021, we
recognized compensation expense of $270,000 related to 23,437 shares of our
common stock that were committed to be released to participants' accounts for
the year ended December 31, 2021. Of the 23,437 shares committed to be released,
1,926 shares were committed on December 31, 2021 and had no impact on the
weighted average common shares outstanding for the year ended December 31, 2021.
For the year ended December 31, 2020, we recognized compensation expense of
$283,000 related to 23,437 shares of our common stock that were committed to be
released to participants' accounts for the year ended December 31, 2020. Of the
23,437 shares committed to be released, 1,985 shares were committed on December
31, 2020 and had no impact on the weighted average common shares outstanding for
the year ended December 31, 2020. The fair value of the unearned ESOP shares as
of December 31, 2021 and December 31, 2020 was $3,926,000 and $3,687,000,
respectively.

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Restricted Stock Units
RSUs were granted for the first time in February 2018 with additional RSUs
granted in March 2019, April 2020 and April 2021. RSUs have a grant date value
equal to the closing price of the Company's stock on the dates the shares are
granted. The RSUs vest 1/3 over three years from the date of grant.

As of December 31, 2021, 11,700, 13,071, 18,040 and 15,000 RSUs have been
granted at a fair market value of $15.10, $13.70, $11.03 and $14.78,
respectively. As of December 31, 2020, 11,700, 13,071 and 18,040 RSUs have been
granted at a fair market value of $15.10, $13.70 and $11.03 per share,
respectively. We recognized $187,000 and $172,000 of expense on these units in
the twelve months ended December 31, 2021 and 2020, respectively. Total
unrecognized compensation expense relating to outstanding and unvested RSUs was
$255,000 and $224,000 as of December 31, 2021 and 2020, respectively, which is
recognized over the remainder of the three year vesting periods.

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.
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 years ended December 31, 2021 and
2020 were as follows:
                                              Year Ended December 31,
(In thousands)                                 2021               2020

Net cash provided by operating activities $ 5,312 $ 1,613
Net cash used in investing activities

           (12,155)         (13,111)
Net cash provided by financing activities          4,851           11,470

Net decrease in cash and cash equivalents $ (1,992) $ (28)

The Parent Company's principal source of liquidity is dividend payments and
other fees received from ICC, Beverage Insurance Agency Inc., Katkin 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 2022 without the prior
approval of the Illinois Department of Insurance is approximately $6.3 million
based upon the insurance company's 2021 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. ICC paid
dividends of $800,000 and $500,000 to ICC Holdings, Inc. in April 2021 and March
2020, respectively.
As of December 31, 2021, the Company has received 1,296 claims for business
interruption related to COVID-19. This count has not changed since the period
ended March 31, 2021. 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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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or are reasonably likely to
have, a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital reserves.
Recently Issued Accounting Pronouncements
For a discussion of new accounting pronouncements affecting us, see Note 1 -
Summary of Significant Accounting Policies to the consolidated financial
statements.

                                     ~ 57 ~

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