ICC Holdings, Inc. (ICCH) is a regional property and casualty insurance company that has established its niche in the food and beverage industry. With a history spanning over two decades, the company has weathered various industry challenges and emerged as a resilient player, catering to the unique insurance needs of its specialized clientele.
Business Overview and History ICC Holdings, Inc. is the parent company of Illinois Casualty Company (ICC), which was founded in 1950. For over 70 years, ICC has been providing insurance products to the food and beverage industry, demonstrating a long-standing commitment to this specialized market. The company’s focus on this sector has allowed it to develop a deep understanding of the unique risks and requirements of its clients, ranging from restaurants and breweries to distilleries and food manufacturers.
In the early 2000s, ICC faced a period of declining profitability due to increased competition and rising claims costs. The company responded proactively by implementing strict underwriting guidelines and investing in technology to improve operational efficiency. These strategic moves helped ICC navigate the challenges and maintain its market position.
ICC Holdings, Inc. was organized in 2016 as part of a conversion and public offering process, marking a significant milestone in the company’s history. This transition provided the organization with access to additional capital and resources to support future growth. Following the conversion, ICC Holdings continued to strengthen its market position, expanding its geographic footprint and diversifying its product offerings to meet the evolving needs of the food and beverage industry.
Over the past decade, ICC Holdings has faced several challenges, including the economic downturn in 2020 and the impacts of the COVID-19 pandemic. The company successfully navigated these turbulent times by maintaining a disciplined underwriting approach, focusing on operational excellence, and leveraging its strong relationships with independent agents and brokers. Throughout these obstacles, ICC Holdings remained a reliable partner for its policyholders, delivering consistent financial performance and building a reputation for exceptional customer service.
Financial Performance and Ratios ICC Holdings’ financial performance has shown improvement in recent years. The company reported net earnings of $4.26 million in 2023, a significant improvement from the net loss of $581,662 recorded in 2022. This turnaround can be attributed to the company’s efforts to optimize its underwriting practices and manage its investment portfolio more effectively.
For the most recent fiscal year (2023), ICC Holdings reported revenue of $82.94 million, net income of $4.26 million, operating cash flow of $8.52 million, and free cash flow of $7.90 million. In the most recent quarter (Q3 2024), the company’s performance continued to improve, with revenue of $24.37 million, net income of $2.05 million, operating cash flow of $8.14 million, and free cash flow of $8.06 million. Year-over-year revenue growth in Q3 2024 was 12.9% compared to Q3 2023, consistent with the company’s increased premium writings in 2024.
Financials The company’s liquidity position remains strong, with a current ratio of 7.99 and a quick ratio of 7.99 as of September 30, 2024. ICC Holdings’ debt-to-equity ratio stands at 0.21, indicating a relatively low reliance on leverage, which is in line with the industry average.
The company’s return on equity (ROE) has hovered around 9.29% over the past three years, showcasing its ability to generate solid returns for its shareholders. Similarly, the company’s return on assets (ROA) has been 2.76%, demonstrating its efficiency in utilizing its asset base.
Liquidity As of September 30, 2024, ICC Holdings reported cash and cash equivalents of $11.01 million. The company has $53.1 million in borrowing capacity with the Federal Home Loan Bank of Chicago, of which $15.0 million was drawn as of September 30, 2024. Additionally, ICC Holdings has a $4.0 million revolving line of credit, which was undrawn as of the same date. These financial resources provide the company with significant flexibility to manage its operations and pursue growth opportunities.
Product Segments and Overview ICC Holdings operates as a single segment, offering a range of insurance products tailored to businesses in the food and beverage sector. The company’s primary insurance offerings include commercial multi-peril, liquor liability, workers’ compensation, and umbrella liability coverages. These products are designed to meet the unique risk management needs of clients in the food and beverage industry, such as bars, restaurants, breweries, wineries, and other related businesses.
For the nine months ended September 30, 2024, ICC reported direct written premiums of $76.79 million, an increase of 11.4% compared to the same period in 2023. Net premiums earned grew 12.3% year-over-year to $62.33 million. The company’s net earnings for the nine-month period were $3.56 million, up from $1.40 million in the prior year period.
ICC’s underwriting performance is measured by its loss and settlement expense ratio, expense ratio, and combined ratio. For the nine months ended September 30, 2024, the loss and settlement expense ratio was 65.8%, compared to 66.1% in the same period of 2023. The expense ratio improved to 37.0% from 37.5% over the same comparative periods. The company’s combined ratio, a measure of overall underwriting profitability, was 102.8% for the first nine months of 2024, down from 103.6% in the prior year period.
Geographic Concentration and Market Expansion ICC Holdings primarily operates in the Midwest region of the United States, with a significant presence in Illinois. Approximately 21.9% of ICC’s direct written premiums for the nine months ended September 30, 2024, were generated in Illinois, its primary market. This represents a slight decrease from 23.5% in the same period of 2023, indicating some geographic diversification. The company also writes business in several other states, including Arizona, Colorado, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, Tennessee, Utah, and Wisconsin.
Reinsurance Program and Risk Management ICC utilizes reinsurance to manage its exposure to large or catastrophic losses. For the nine months ended September 30, 2024, the company ceded $10.52 million of earned premiums to reinsurers, compared to $8.07 million in the same period of 2023. Reinsurance recoverables on unpaid losses, net of credit loss allowances, were $12.52 million as of September 30, 2024. This reinsurance strategy helps protect the company’s balance sheet and maintain financial stability in the face of potential large claims.
Investment Portfolio ICC’s investment portfolio, which supports its insurance liabilities and surplus, was valued at $163.01 million as of September 30, 2024. The portfolio consists primarily of fixed maturity securities, common stocks, and other invested assets. Net investment income for the nine-month period ended September 30, 2024, was $4.54 million, up from $3.80 million in the prior year period. This increase in investment income contributes to the company’s overall financial performance and stability.
Challenges and Opportunities Despite its impressive history and solid financial footing, ICC Holdings has faced its share of challenges in recent years. The COVID-19 pandemic, for instance, had a significant impact on the food and beverage industry, leading to disruptions in supply chains and changes in consumer behavior. ICC Holdings navigated these challenges by working closely with its clients, offering flexible payment plans and adjusting its underwriting practices to meet the evolving needs of the market.
Looking ahead, the company is well-positioned to capitalize on emerging opportunities in the food and beverage insurance segment. The growing demand for specialty insurance products, coupled with the industry’s focus on risk management, presents ICC Holdings with a chance to expand its market share and introduce innovative coverage solutions.
Furthermore, the company’s strong balance sheet and access to capital provide it with the resources necessary to explore potential acquisition targets, which could further strengthen its competitive position and geographic reach.
Regulatory Landscape and Risks As a property and casualty insurance provider, ICC Holdings operates in a highly regulated industry, with strict compliance requirements imposed by state insurance departments and other governing bodies. The company has established a robust compliance framework to ensure adherence to these regulations, which include maintaining adequate capital levels, adhering to solvency requirements, and providing timely financial reporting.
One of the key risks facing ICC Holdings is the potential for increased claims and loss expenses, particularly in the event of natural disasters or other catastrophic events that disproportionately impact the food and beverage industry. The company mitigates this risk through its comprehensive reinsurance program, which helps to protect its balance sheet and maintain its financial stability.
Additionally, the company’s reliance on a limited number of large customers, as well as its concentration in the Midwest region, exposes it to the potential for regional economic downturns or industry-specific challenges. ICC Holdings continuously monitors these risks and explores strategies to diversify its customer base and geographic footprint.
Recent Developments and Future Outlook On June 8, 2024, ICC Holdings entered into a definitive merger agreement to be acquired by Mutual Capital Holdings, Inc. for $23.50 per share in an all-cash transaction valued at approximately $73.8 million. This strategic move is expected to provide ICC Holdings with additional resources and support to further enhance its market position and drive growth in the specialized food and beverage insurance sector.
Conclusion Despite the challenges it has faced, ICC Holdings has demonstrated its resilience and adaptability, positioning itself as a trusted partner in the food and beverage insurance market. The company’s focus on specialized coverage, coupled with its strong financial position and commitment to innovation, suggests a promising outlook for the future.
As ICC Holdings navigates the evolving insurance landscape, it will need to continue to leverage its expertise, maintain a disciplined underwriting approach, and explore strategic opportunities to drive long-term growth and value creation for its shareholders. With a well-established track record, a clear vision for the future, and the pending acquisition by Mutual Capital Holdings, Inc., ICC Holdings appears poised to capitalize on the opportunities that lie ahead in the specialized food and beverage insurance market.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.