Protective Insurance Corporation November 5, 2019

Unaudited Third Quarter Financial Statements Investor Contact: John Barnett

investors@protectiveinsurance.com

(317) 429-2554

PROTECTIVE INSURANCE CORPORATION ANNOUNCES RESULTS FOR THE QUARTER AND NINE MONTHS

Carmel, Indiana, November 5, 2019—Protective Insurance Corporation (NASDAQ: PTVCA, PTVCB) today reported results for the third quarter and first nine months of 2019. The Company produced a third quarter net loss of $0.7 million, or $0.05 per share, which compares to a net loss of $12.3 million, or $0.82 per share, for the prior year’s third quarter. For the first nine months of 2019, net income totaled $3.6 million, or $0.24 per share, which compares to a net loss of $9.5 million, or $0.63 per share, for the prior year period.

The loss from core business operations, before federal income tax benefit, was $1.1 million for the third quarter of 2019 compared to a loss from core business operations, before federal income tax benefit, of $17.9 million during the third quarter of 2018. For the first nine months of 2019, the loss from core business operations, before federal income tax expense, totaled $4.6 million compared to a loss from core business operations, before federal income tax benefit, of $6.6 million during the 2018 period.

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Book value per share increased by $0.07 per share to $25.33 during the third quarter of 2019, an increase of 0.3% in the quarter and total value creation of 0.7% including the $0.10 per share dividend paid to shareholders during the third quarter of 2019. Shareholders’ equity decreased by $4.0m during the third quarter of 2019, a decrease of 1.1%.

●	Net investment income increased 20.2% for the third quarter of 2019 compared to the prior year and 21.4% during the first nine months of 2019 compared to prior year.

●	Repurchased $10.6 million (618,032 shares) since January 1, 2019. These purchases are immediately accretive to book value per share, given an average repurchase price of 68% of September 30, 2019 book value.

●	Combined ratio of 107.1% for the third quarter of 2019 and 107.2% for the first nine months of 2019.

Net premiums earned for the third quarter of 2019 increased to $110.3 million, up 13.9% compared to the prior year period. The higher net premiums earned were primarily the result of lower premiums ceded in the current quarter when compared to the same period in 2018. Gross premiums written for the third quarter of 2019 decreased 1.1% to $137.1 million compared to $138.7 million written during the prior year period.

Underwriting operations produced a combined ratio of 107.1% during the third quarter of 2019 compared to a combined ratio of 124.3% for the prior year period. The higher combined ratio in the third quarter of 2018 reflects higher loss and loss expenses due to reserve strengthening of $16.4 million related to unfavorable prior accident year loss development in commercial automobile coverages. During the third quarter of 2018 we also ceded an additional $13.8 million in premiums related to the reserve strengthening, which did not recur in the 2019 period. For the third quarter of 2019, prior accident year loss development was unfavorable at $0.1 million. For the first nine months of both 2019 and 2018, the combined ratio was flat at 107.2%. The current year combined ratio reflects increased losses and loss expenses driven by severe commercial automobile claims, including continued emergence of severity. For the first nine months of 2019, prior accident year loss development was favorable at $1.6 million. The Company continues to maintain current accident-year loss ratios at a level consistent with rising severity expectations in commercial automobile. In our commercial automobile portfolio, the Company attained rate increases of 17.5% on $35.4 million of premiums available for renewal during the third quarter of 2019. As a result, the premium retention rate achieved in these product lines was less than in recent years, resulting from our commitment to remain disciplined in our underwriting and create long-term value for our stakeholders.

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Jeremy Johnson, Protective’s Chief Executive Officer, said: “Our third quarter results demonstrate progress towards our key pricing and risk selection initiatives. The accident year loss ratio has decreased a further 1.9pts from the 2^nd quarter, and 3.9pts from this time a year ago. We’re achieving significant rate increases in our commercial auto portfolio, while retaining our better priced business, managing volatility and exercising expense discipline. Our customers and distribution partners value the expertise we bring to them, and I’m confident in our ability to further improve underwriting performance.”

Commercial automobile products covered by our reinsurance treaties from July-2013 through June-2019 are subject to an aggregate stop-loss provision. Once this aggregate stop-loss level is reached, for every $100 of additional loss, the Company is responsible only for its $25 retention. The following table illustrates the benefit of these reinsurance treaties, as the net financial loss to the Company of a further increase in ultimate losses for each of the six most recent reinsurance treaty years (2013-2018) covering these commercial automobile products is only about 25% of the gross loss:

	5% Increase in Ultimate Loss Ratio		10% Increase in Ultimate Loss Ratio
Gross loss expense from further strengthening current reserve position	$	45.5	$	90.9
Net financial loss		11.8		23.1
$/share (after tax)	$	0.64	$	1.25

Commercial automobile products covered by the Company’s reinsurance treaty from July-2019 through June-2020 are also subject to an aggregate stop-loss provision. Once the aggregate stop-loss level is reached, for every $100 of additional loss, the Company is responsible for its $65 retention. This increase in the Company’s retention compared to recent years, reflects both: (1) the Company choosing to buy less reinsurance, due to a higher cost of reinsurance for the 2019 treaty-year, and (2) the Company’s confidence in profitability improvements given rate increases it’s receiving on its commercial automobile products.

Net investment income for the third quarter of 2019 increased 20.2% to $6.7 million compared to $5.6 million in the prior year period. The increase reflects an increase in average funds invested resulting from positive cash flow, as well as the continued reallocation from equity investments in limited partnerships and cash and cash equivalent investments into short duration, high quality bonds. Our fixed income investment portfolio continues to emphasize shorter-duration instruments. If there was a hypothetical increase in interest rates of 100 basis points, the price of our fixed income portfolio, including cash, at September 30, 2019 would be expected to fall by approximately 2.6%. Credit quality remains high with a weighted average rating of AA-, including cash. For the first nine months of 2019, net investment income increased 21.4% to $19.4 million, compared to $16.0 million in 2018, reflecting investment impacts similar to those experienced during the third quarter.

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The Company continues to focus on our operating initiative of expense discipline, reflected in the 0.3 percentage point decline in the expense ratio during the first nine months of 2019 when compared to 2018. Additionally, the expense ratio for the third quarter of 2019 included charges of $1.6 million related to severance and new hire costs as well as bad debt expense, which we do not expect to recur. We will continue to manage our expense base, particularly as we gain greater clarity on the impact of continuing to attain increasing premium rates, and the influence of increased rates upon the retention of renewing policies.

Book value per share as of September 30, 2019 was $25.33, an increase of $1.38 per share during the first nine months of 2019, after the payment of cash dividends to shareholders totaling $0.30 per share.

The Company's net income (loss), determined in accordance with U.S. generally accepted accounting principles (GAAP) includes items that may not be indicative of ongoing operations. The following table reconciles income (loss) before federal income tax expense (benefit) to underwriting loss, a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing operating trends.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2019			2018			2019			2018

Income (loss) before federal income tax expense (benefit)	$	(1,019	)	$	(15,569	)	$	4,445		$	(12,199	)
Less: Net realized gains on investments		1,141			449			1,468			1,740
Less: Net unrealized gains (losses) - equity securities and limited partnerships		(1,016	)		1,924			7,573			(7,335	)
Income (loss) from core business operations	$	(1,144	)	$	(17,942	)	$	(4,596	)	$	(6,604	)
Less: Net investment income		6,703			5,578			19,434			16,010
Underwriting loss	$	(7,847	)	$	(23,520	)	$	(24,030	)	$	(22,614	)

The Company’s management uses the term income (loss) from core business operations, a non-GAAP financial measure, which is defined as income (loss) before federal income tax expense (benefit) excluding pre-tax realized and unrealized investment gains and losses. This financial measure is used to evaluate the Company’s operating performance because the recognition of realized investment gains and losses, and occurrence of unrealized gains, could distort analysis of trends in the core underwriting business.

The combined ratios and the components, as presented herein, are commonly used in the property/casualty insurance industry and are applied to the Company’s GAAP underwriting results.

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Conference Call Information:

Protective Insurance Corporation has scheduled its quarterly conference call for Wednesday, November 6, 2019, at 11:00 AM EST to discuss results for the third quarter ended September 30, 2019.

To participate via teleconference, investors may dial 1-877-705-6003 (U.S./Canada) or 1-201-493-6725 (International or local) at least five minutes prior to the beginning of the call. A replay of the call will be available through November 13, 2019 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13694810. Investors and interested parties may also listen to the call via a live webcast, accessible on the company’s web site via a link at the top of the main Investor Relations page. To participate in the webcast, please register at least fifteen minutes prior to the start of the call. The webcast will be archived on this site until May 6, 2020. The webcast may be accessed directly at: http://public.viavid.com/index.php?id=136212.

Also available on the investor relations section of our web site is an investor presentation providing additional information to be reviewed in conjunction with our earnings call. We have also made available complete interim financial statements and copies of our filings with the Securities and Exchange Commission.

The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and footnotes as disclosed in the Company’s annual audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.

Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties. Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.

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Protective Insurance Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share data)



	September 30		December 31
	2019		2018
Assets
Investments ¹:
Fixed income securities (2019: $744,762; 2018: $600,504)	$	757,841	$	592,645
Equity securities		72,837		66,422
Limited partnerships, at equity		22,645		55,044
Commercial mortgage loans		9,418		6,672
Short-term ²		1,000		1,000
		863,741		721,783
Cash and cash equivalents		85,777		163,996
Restricted cash and cash equivalents		22,410		6,815
Accounts receivable		105,801		102,972
Reinsurance recoverable		418,031		392,436
Other assets		93,756		88,426
Current federal income taxes		4,267		7,441
Deferred federal income taxes		2,984		6,262
	$	1,596,767	$	1,490,131

Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	960,695	$	865,339
Reserves for unearned premiums		76,329		71,625
Borrowings under line of credit		20,000		20,000
Accounts payable and other liabilities		176,313		177,085
		1,233,337		1,134,049
Shareholders' equity:
Common stock-no par value		613		634
Additional paid-in capital		53,670		54,720
Accumulated other comprehensive income ( loss)		9,594		(7,347	)
Retained earnings		299,553		308,075
		363,430		356,082
	$	1,596,767	$	1,490,131

Number of common and common
equivalent shares outstanding		14,347		14,869
Book value per outstanding share	$	25.33	$	23.95

¹2019 & 2018 cost in parentheses
²Approximates cost

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Protective Insurance Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2019			2018			2019			2018
Revenues
Net premiums earned	$	110,288		$	96,807		$	335,931		$	314,209
Net investment income		6,703			5,578			19,434			16,010
Commissions and other income		2,716			3,413			6,761			7,488
Net realized gains on investments, excluding impairment losses		1,199			449			1,872			1,740
Other-than-temporary impairment losses on investments		(58	)		-			(404	)		-
Net unrealized gains (losses) on equity securities and limited partnership investments		(1,016	)		1,924			7,573			(7,335	)
Net realized and unrealized gains (losses) on investments		125			2,373			9,041			(5,595	)
		119,832			108,171			371,167			332,112
Expenses
Losses and loss expenses incurred		84,781			94,540			262,336			244,327
Other operating expenses		36,070			29,200			104,386			99,984
		120,851			123,740			366,722			344,311
Income (loss) before federal income tax expense (benefit)		(1,019	)		(15,569	)		4,445			(12,199	)
Federal income tax expense (benefit)		(312	)		(3,244	)		869			(2,691	)
Net income (loss)	$	(707	)	$	(12,325	)	$	3,576		$	(9,508	)

Per share data - diluted:
Income (loss) before net gains (losses) on investments	$	(.06	)	$	(.95	)	$	(.24	)	$	(.34	)
Net gains (losses) on investments		.01			.13			.48			(.29	)
Net income (loss)	$	(.05	)	$	(.82	)	$	.24		$	(.63	)

Reconciliation of shares outstanding:
Average shares outstanding - basic		14,361			14,969			14,607			14,998
Dilutive effect of share equivalents		-			-			77			-
Average shares outstanding - diluted		14,361			14,969			14,684			14,998

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Protective Insurance Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

	Nine Months Ended
	September 30
	2019			2018

Net cash provided by operating activities	$	62,322		$	60,370
Investing activities:
Purchases of available-for-sale investments		(342,299	)		(330,217	)
Purchases of limited partnership interests		-			(450	)
Proceeds from sales or maturities
of available-for-sale investments		183,261			228,487
Proceeds from sales of equity securities		19,408			117,692
Purchase of insurance company-owned life insurance		-			(10,000	)
Purchase of commercial mortgage loans		(2,746	)		-
Distributions from limited partnerships		33,395			369
Other investing activities		(1,655	)		(4,352	)
Net cash provided by (used in) investing activities		(110,636	)		1,529
Financing activities:
Dividends paid to shareholders		(4,429	)		(12,652	)
Repurchase of common shares		(10,283	)		(2,620	)
Net cash used in financing activities		(14,712	)		(15,272	)

Effect of foreign exchange rates on cash and cash equivalents		402			(209	)

Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents		(62,624	)		46,418
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		170,811			68,713
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	108,187		$	115,131

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Financial Highlights (unaudited)
Protective Insurance Corporation and Subsidiaries
(In thousands, except per share data)	Three Months Ended						Nine Months Ended
	September 30						September 30
	2019			2018			2019			2018

Annualized
Book value per share beginning of period	$	25.26		$	27.14		$	23.95		$	27.83
Book value per share end of period		25.33			25.96			25.33			25.96
Change in book value per share	$	0.07		$	(1.18	)	$	1.38		$	(1.87	)
Dividends paid		0.10			0.28			0.30			0.84
Change in book value per share plus dividends paid	$	0.17		$	(0.90	)	$	1.68		$	(1.03	)
Total value creation ¹		2.7	%		(13.3	%)		9.4	%		(4.9	%)


Return on average shareholders' equity:
Average shareholders' equity		365,423			397,640			359,771			403,430

Net income		(707	)		(12,325	)		3,576			(9,508	)
Less: Net realized gains (losses) on investments, net of tax		99			1,875			7,142			(4,420	)
Net operating income (loss)		(806	)		(14,200	)		(3,566	)		(5,088	)

Return on net income ²		(0.8	%)		(12.4	%)		1.3	%		(3.1	%)
Return on net operating income (loss) ²		(0.9	%)		(14.3	%)		(1.3	%)		(1.7	%)


Loss and LAE expenses incurred	$	84,781		$	94,540		$	262,336		$	244,327
Net premiums earned		110,288			96,807			335,931			314,209
Loss and LAE ratio		76.9	%		97.7	%		78.1	%		77.8	%

Other operating expenses	$	36,070		$	29,200		$	102,658		$	99,984
Less: Commissions and other income		2,716			3,413			5,033			7,488
Other operating expenses, less commissions and other income	$	33,354		$	25,787		$	97,625		$	92,496
Net premiums earned		110,288			96,807			335,931			314,209
Expense ratio		30.2	%		26.6	%		29.1	%		29.4	%

Combined ratio³		107.1	%		124.3	%		107.2	%		107.2	%


Gross premiums written	$	137,145		$	138,699		$	433,191		$	429,792
Net premiums written		109,292			97,014			340,309			324,702

¹Total Value Creation equals change in book value plus dividends paid, divided by beginning book value. Quarterly amounts have been annualized.
²Quarterly and year-to-date amounts have been annualized
³ The combined ratio is calculated as ratio of losses and loss expenses incurred, plus other operating expenses, less commission and other income to net premiums earned.

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