ICC Holdings, Inc. (ICCH) is a Pennsylvania-based regional property and casualty insurance company that has carved out a unique niche by exclusively serving the food and beverage industry. With a focus on commercial multi-peril, liquor liability, workers' compensation, and umbrella liability coverages, the company has steadily grown its presence across 15 states, including its home state of Illinois.
Company Background
Founded in 2016, ICC Holdings has showcased its resilience and adaptability in the face of industry headwinds. The company's roots trace back to 1950 when Illinois Casualty Company (ICC) was established, providing over 70 years of experience in the insurance industry. Initially focused on serving the food and beverage industry in Illinois, ICC has since expanded its geographic footprint to include Arizona, Colorado, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, Tennessee, Utah, and Wisconsin. As of 2023, approximately 23.5% of ICC's premium was written in Illinois, demonstrating the company's successful expansion beyond its home state.
Recent Performance
In 2020, ICC Holdings navigated the challenging pandemic environment, posting a net income of $3.53 million despite the economic disruptions. The company also faced a one-time special charge of $1.64 million related to the discontinuation of a segment of its business during this period. The following year, ICC Holdings reported a net loss of $581,662, reflecting the continued impact of the pandemic on its customer base. However, the company's fortitude shone through in 2023, as it bounced back with a net income of $4.26 million, demonstrating its ability to weather the storm and emerge stronger.
Financials
Despite the volatility of recent years, ICC Holdings has maintained a strong financial position, with a healthy balance sheet and ample liquidity. As of December 31, 2023, the company reported total assets of $211.02 million and stockholders' equity of $67.00 million, translating to a book value per share of $21.35. The company's cash and cash equivalents position stood at $1.48 million, providing a solid foundation for future growth and operational flexibility.
For the fiscal year 2023, ICC Holdings reported annual revenue of $82.94 million, annual net income of $4.26 million, annual operating cash flow of $8.52 million, and annual free cash flow of $7.90 million. These figures demonstrate the company's ability to generate consistent cash flows and maintain profitability.
The most recent quarter (Q3 2024) showed significant improvement, with revenue of $24.38 million and net income of $2.05 million. Year-over-year growth was impressive, with revenue increasing 23.4% from $19.76 million in Q3 2023 to $24.38 million in Q3 2024. Net income also saw a dramatic turnaround, from a loss of $769,000 in Q3 2023 to a gain of $2.05 million in Q3 2024.
The increase in revenue and net income was primarily driven by higher direct premiums written, which increased 12.9% in Q3 2024 compared to Q3 2023. This growth was attributed to the expansion of the company's core food and beverage industry business.
Geographic Performance
ICC Holdings operates primarily in the United States, with a significant focus on Illinois. For the three months ended September 30, 2024, approximately 23.0% of premiums were written in Illinois, compared to 23.1% for the same period in 2023. For the nine months ended September 30, 2024, and 2023, approximately 21.9% and 23.5% of premiums were written in Illinois, respectively. This data indicates a slight decrease in the company's reliance on its home state, suggesting successful geographic diversification efforts.
Liquidity
ICC Holdings maintains a strong liquidity position, which is crucial for its ability to meet policyholder obligations and fund growth initiatives. As of September 30, 2024, the company reported $11.01 million in cash and cash equivalents. Additionally, ICC Holdings has a borrowing capacity of $53.1 million with the Federal Home Loan Bank of Chicago, of which $15 million was drawn as of September 30, 2024. The company also maintains a $4 million revolving line of credit, which remained undrawn as of the same date.
The company's debt-to-equity ratio stands at 0, with $15 million in total debt and $73.1 million in total equity as of September 30, 2024. This conservative capital structure provides financial flexibility and reduces interest expense burden. Furthermore, ICC Holdings boasts a current ratio of 1.49 and a quick ratio of 1.49 as of September 30, 2024, indicating strong short-term liquidity and the ability to meet its near-term obligations.
One of the key drivers of ICC Holdings' success has been its disciplined underwriting approach and prudent risk management strategies. The company's loss and settlement expense ratio, a critical metric in the insurance industry, has remained relatively stable, fluctuating between 66.10% and 65.80% over the past three years. This reflects the company's ability to price its products appropriately and effectively manage its claims processes.
Innovation and Technology
In addition to its solid financial performance, ICC Holdings has also demonstrated a commitment to innovation and technological advancement. The company has invested in data analytics and advanced pricing models to enhance its underwriting capabilities, while also leveraging digital platforms to streamline its operations and improve customer experience. This focus on technology has been crucial in helping the company adapt to the evolving landscape of the insurance industry and overcome challenges posed by larger competitors.
Strategic Initiatives
To support its growth and diversification efforts, ICC Holdings conducted a conversion and public offering in 2016, which raised $35 million in new capital. This strategic move provided the company with additional resources to expand its operations and invest in new technologies. Furthermore, ICC Holdings established an Employee Stock Ownership Plan (ESOP) to align the interests of its employees with those of its shareholders, fostering a culture of ownership and commitment within the organization.
Challenges and Risks
However, the company is not without its challenges. The highly competitive nature of the insurance industry, coupled with the potential for increased regulatory scrutiny and the impact of macroeconomic factors, such as rising interest rates and inflationary pressures, could pose risks to ICC Holdings' future performance.
Future Outlook
Despite these headwinds, the company remains well-positioned to navigate the evolving landscape. On June 8, 2024, ICC Holdings announced a definitive merger agreement with Mutual Capital Holdings, Inc. (MCH), a transaction that is expected to provide significant value to its shareholders. The all-cash deal, valued at $23.50 per share, represents a total equity value of approximately $73.8 million and is expected to close in the coming months, subject to regulatory approvals and shareholder approval.
Business Overview
ICC Holdings operates as a specialty insurance carrier primarily underwriting commercial multi-peril, liquor liability, workers' compensation, and umbrella liability coverages for the food and beverage industry through its subsidiary insurance company, Illinois Casualty Company (ICC). The company's main insurance product segments include:
1. Commercial Multi-Peril: This segment covers a wide range of commercial property and liability risks for food and beverage businesses, including protection against property damage, business interruption, general liability, and other commercial exposures. It is ICC's largest insurance line, contributing the majority of the company's direct written premiums.
2. Liquor Liability: This coverage protects food and beverage establishments, such as restaurants, bars, and liquor stores, against liability claims arising from the sale or service of alcoholic beverages. It is an important specialized product within ICC's portfolio, helping the company serve its core food and beverage clientele.
3. Workers' Compensation: ICC provides workers' compensation insurance to cover medical expenses and lost wages for employees injured on the job at food and beverage businesses. This coverage is required in most states and helps these companies meet their legal and financial obligations to their workers.
4. Umbrella Liability: The umbrella liability segment offers higher limits of liability coverage that sits excess of the underlying commercial multi-peril and liquor liability policies. This additional layer of protection is valuable for food and beverage businesses that want enhanced coverage against catastrophic liability claims.
For the nine months ended September 30, 2024, ICC reported direct written premiums of $76.79 million, an increase of 11.4% from the same period in 2023. Net premiums earned grew 12.3% year-over-year to $62.33 million. These financial results demonstrate ICC's ability to grow its premium volume within its specialized food and beverage insurance niche.
Looking ahead, ICC Holdings is poised to leverage the resources and expertise of its new parent company to further strengthen its market position and drive long-term growth. The company's management team has demonstrated a consistent ability to adapt and innovate, positioning ICC Holdings as a resilient and forward-thinking player in the insurance industry.
Conclusion
In conclusion, ICC Holdings, Inc. (ICCH) has proven its mettle as a niche insurance provider, weathering industry challenges and emerging as a stronger, more versatile company. With a solid financial foundation, a focus on technology and innovation, and the upcoming merger with Mutual Capital Holdings, the company appears well-equipped to capitalize on future opportunities and deliver value to its shareholders. The company's strong liquidity position, conservative capital structure, and consistent growth in its core business segments provide a stable platform for future success in the competitive insurance landscape.