Segment Information

The Company is engaged in the sale of property and casualty insurance products and has organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offers various insurance products and insurance agency services. Such insurance businesses are engaged in underwriting and marketing insurance coverages, and administering claims processing for such policies. The Company views the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provides non-risk bearing revenue through commissions and policy fees. The wholesale agency business increases the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers. This segment has expanded in 2019, resulting in its separate disclosure. Prior periods have been recast to reflect the separate disclosure of the wholesale agency segment.

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities. The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents. All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Florida, Michigan, Texas and Pennsylvania. For the six months ended June 30, 2019 and 2018, gross written premiums attributable to these four states were 54% and 59%, respectively, of the Company’s total gross written premiums.

The Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers. Certain acquisition costs incurred by the commercial and personal lines businesses are reflected as commission revenue for the Agency business and are eliminated in the Eliminations category.

In addition to the reportable operating segments, the Company maintains a Corporate category to reconcile segment results to the consolidated totals. The Corporate category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team and finance and information technology personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations; (iii) depreciation and amortization on property and equipment, and (iv) all investment income activity. All investment income activity is reported within net investment income, net realized investment gains, and change in fair value of equity securities on the consolidated statements of operations. The Company’s assets on the consolidated balance sheet are not allocated to the reportable segments.

The following tables present information by reportable operating segment (dollars in thousands):



Three Months Ended June 30, 2019	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	23,459		$	1,710		$	25,169		$	—	$	—		$	—		$	25,169
Net written premiums	$	20,178		$	1,256		$	21,434		$	—	$	—		$	—		$	21,434

Net earned premiums	$	20,154		$	1,195		$	21,349		$	—	$	—		$	—		$	21,349
Other income	50			45			95			2,575		46			(2,135		)	581
Total revenue	20,204			1,240			21,444			2,575		46			(2,135		)	21,930
Losses and loss adjustment expenses, net	12,549			1,833			14,382			—		—			—			14,382
Policy acquisition costs	5,807			345			6,152			1,574		—			(1,516		)	6,210
Operating expenses	3,411			276			3,687			535		118			—			4,340
Total expenses	21,767			2,454			24,221			2,109		118			(1,516		)	24,932
Underwriting gain (loss)	$	(1,563	)	$	(1,214	)	$	(2,777	)	$	466	$	(72	)	$	(619	)	$	(3,002	)

Net investment income												1,051			—			1,051
Net realized investment gains												715			—			715
Change in fair value of equity securities												(915		)	—			(915		)
Interest expense												(725		)	—			(725		)
Income (loss) before equity earnings of affiliates and income taxes												$	54		$	—		$	(2,876	)



Three Months Ended June 30, 2018	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	25,008		$	1,554		$	26,562		$	—	$	—		$	—		$	26,562
Net written premiums	$	22,284		$	311		$	22,595		$	—	$	—		$	—		$	22,595

Net earned premiums	$	20,872		$	3,066		$	23,938		$	—	$	—		$	—		$	23,938
Other income	23			58			81			2,546		36			(2,213		)	450
Total revenue	20,895			3,124			24,019			2,546		36			(2,213		)	24,388
Losses and loss adjustment expenses, net	12,334			2,733			15,067			—		—			—			15,067
Policy acquisition costs	5,797			1,267			7,064			1,621		—			(2,213		)	6,472
Operating expenses	3,732			258			3,990			383		(70		)	—			4,303
Total expenses	21,863			4,258			26,121			2,004		(70		)	(2,213		)	25,842
Underwriting gain (loss)	$	(968	)	$	(1,134	)	(2,102		)	542		106			—			(1,454		)

Net investment income												838			—			838
Net realized investment gains												12			—			12
Change in fair value of equity securities												29			—			29
Interest expense												(617		)	—			(617		)
Income (loss) before equity earnings of affiliates and income taxes												$	368		$	—		$	(1,192	)



Six Months Ended June 30, 2019	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	46,043		$	3,342		$	49,385		$	—	$	—		$	—		$	49,385
Net written premiums	$	39,484		$	2,272		$	41,756		$	—	$	—		$	—		$	41,756

Net earned premiums	$	40,852		$	2,184		$	43,036		$	—	$	—		$	—		$	43,036
Other income	74			75			149			4,480		132			(3,758		)	1,003
Total revenue	40,926			2,259			43,185			4,480		132			(3,758		)	44,039
Losses and loss adjustment expenses, net	25,095			3,743			28,838			—		—			—			28,838
Policy acquisition costs	11,221			755			11,976			2,962		—			(3,139		)	11,799
Operating expenses	6,375			541			6,916			1,138		609			—			8,663
Total expenses	42,691			5,039			47,730			4,100		609			(3,139		)	49,300
Underwriting gain (loss)	$	(1,765	)	$	(2,780	)	$	(4,545	)	$	380	$	(477	)	$	(619	)	$	(5,261	)

Net investment income												1,961			—			1,961
Net realized investment gains												734			—			734
Change in fair value of equity securities												350			—			350
Interest expense												(1,435		)	—			(1,435		)
Income (loss) before equity earnings of affiliates and income taxes												$	1,133		$	(619	)	$	(3,651	)



Six Months Ended June 30, 2018	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	46,796		$	3,503		$	50,299		$	—	$	—		$	—		$	50,299
Net written premiums	$	41,706		$	733		$	42,439		$	—	$	—		$	—		$	42,439

Net earned premiums	$	41,000		$	6,739		$	47,739		$	—	$	—		$	—		$	47,739
Other income	56			132			188			4,311		65			(3,757		)	807
Total revenue	41,056			6,871			47,927			4,311		65			(3,757		)	48,546
Losses and loss adjustment expenses, net	22,535			5,861			28,396			—		—			—			28,396
Policy acquisition costs	11,630			2,299			13,929			2,813		—			(3,757		)	12,985
Operating expenses	6,957			376			7,333			1,106		50			—			8,489
Total expenses	41,122			8,536			49,658			3,919		50			(3,757		)	49,870
Underwriting gain (loss)	$	(66	)	$	(1,665	)	$	(1,731	)	$	392	$	15		$	—		$	(1,324	)

Net investment income												1,639			—			1,639
Net realized investment gains												173			—			173
Change in fair value of equity securities												(268		)	—			(268		)
Interest expense												(1,236		)	—			(1,236		)
Income (loss) before equity earnings of affiliates and income taxes												$	323		$	—		$	(1,016	)