ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
(Address of Principal Executive Offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Large accelerated filer ☐ |
|
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
Common Stock, No Par Value: |
Class A (voting) |
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Class B (nonvoting) |
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Page |
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Part I |
Item 1. |
Business |
4 |
Item 1A. |
Risk Factors |
17 |
|
Item 1B. |
Unresolved Staff Comments |
23 |
|
Item 2. |
Properties |
23 |
|
Item 3. |
Legal Proceedings |
23 |
|
Item 4. |
Mine Safety Disclosures |
23 |
|
Information About our Executive Officers |
24 |
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Part II |
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
25 |
Item 6. |
Selected Financial Data |
27 |
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 |
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
43 |
|
Item 8. |
Financial Statements and Supplementary Data |
46 |
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
82 |
|
Item 9A. |
Controls and Procedures |
82 |
|
Item 9B. |
Other Information |
84 |
|
Part III |
Item 10. |
Directors, Executive Officers and Corporate Governance |
84 |
Item 11. |
Executive Compensation |
85 |
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
85 |
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
85 |
|
Item 14. |
Principal Accountant Fees and Services |
85 |
|
Part IV |
Item 15. |
Exhibits and Financial Statement Schedules |
85 |
Item 16. |
Form 10-K Summary |
87 |
|
Signatures |
97 |
● | general economic conditions, including continued volatility of the financial markets, prevailing interest rate levels and stock and credit market performance, which may affect or continue to affect (among other things) our ability to sell our products and to collect amounts due to us, our ability to access capital resources and the costs associated with such access to capital and the market value of our investments; |
● | the risks related to our proposed merger with The Progressive Corporation (“Progressive”), and Carnation Merger Sub Inc. (“Merger Sub”) described under “Proposed Merger with The Progressive Corporation” in Part I, Item 1, “Business” hereof, including: |
• |
the inability to complete the proposed transaction due to the failure to obtain approval by our Class A shareholders of the proposed transaction or the failure to satisfy any of the other conditions to completion of the proposed transaction, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; |
• |
uncertainty as to the timing of completion of the proposed transaction; |
• |
the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement and plan of merger; |
• |
risks related to disruption of management’s attention from our ongoing business operations due to the proposed transaction; |
• |
the effect of the announcement of the proposed transaction on our relationships with our clients, operating results and business generally; and |
• |
the outcome of any legal proceedings to the extent initiated against us, Progressive or others following the announcement of the proposed transaction; |
● | the effects of the novel coronavirus ("COVID-19") pandemic and associated government actions on our operating and financial performance; |
● | our ability to obtain adequate premium rates and manage our growth strategy; |
● | increasing competition in the sale of our insurance products and services resulting from the entrance of new competitors into, or the expansion of the operations of existing competitors in, our markets and our ability to retain existing customers; |
● | other changes in the markets for our insurance products; |
● | the impact of technological advances, including those specific to the transportation industry; |
● | changes in the legal or regulatory environment, which may affect the manner in which claims are adjusted or litigated, including loss and loss adjustment expense; |
● | legal or regulatory changes or actions, including those relating to the regulation of the sale, underwriting and pricing of insurance products and services and capital requirements; |
● | the impact of a downgrade in our financial strength rating; |
● | technology or network security disruptions or breaches; |
● | adequacy of insurance reserves; |
● | availability of reinsurance and ability of reinsurers to pay their obligations; |
● | our ability to attract and retain qualified employees; |
● | tax law and accounting changes; and |
● | legal actions brought against us. |
1. | Protective Insurance Company (referred to herein as "Protective Insurance Co."), which is licensed by insurance authorities in all 50 states, the District of Columbia, all Canadian provinces and Puerto Rico; |
2. | Protective Specialty Insurance Company (referred to herein as "Protective Specialty"), which is currently approved for excess and surplus lines business by insurance authorities in 48 states and the District of Columbia and licensed in Indiana; |
3. | Sagamore Insurance Company (referred to herein as "Sagamore"), which is licensed by insurance authorities in 49 states and the District of Columbia and approved for excess and surplus lines business in one additional state; |
4. | B&L Brokerage Services, Inc. (referred to herein as "BLBS"), an Indiana-domiciled insurance broker licensed in all 50 states and the District of Columbia; and |
5. | B&L Insurance, Ltd. (referred to herein as "BLI"), which is domiciled and licensed in Bermuda. |
● | Commercial motor vehicle liability, physical damage and general liability insurance; |
● | Workers' compensation insurance; |
● | Specialized accident (medical and indemnity) insurance for independent contractors in the trucking industry; |
● | Non-trucking motor vehicle liability insurance for independent contractors; |
● | Fidelity and surety bonds; and |
● | Inland marine insurance consisting principally of cargo insurance. |
(dollars in thousands) |
2020 |
2019 |
2018 |
|||||||||
Reserves, gross of reinsurance recoverable, at the beginning of the year |
$ |
988,305 |
$ |
865,339 |
$ |
680,274 |
||||||
Reinsurance recoverable on unpaid losses at the beginning of the year |
398,305 |
375,935 |
308,143 |
|||||||||
Reserves at the beginning of the year |
590,000 |
489,404 |
372,131 |
|||||||||
Provision for losses and loss expenses: |
||||||||||||
Claims occurring during the current year |
319,269 |
349,018 |
329,078 |
|||||||||
Claims occurring during prior years |
(311 |
) |
(550 |
) |
16,786 |
|||||||
Total incurred losses and loss expenses |
318,958 |
348,468 |
345,864 |
|||||||||
Loss and loss expense payments: |
||||||||||||
Claims occurring during the current year |
77,880 |
90,364 |
84,738 |
|||||||||
Claims occurring during prior years |
165,777 |
157,508 |
143,853 |
|||||||||
Total paid |
243,657 |
247,872 |
228,591 |
|||||||||
Reserves at the end of the year |
665,301 |
590,000 |
489,404 |
|||||||||
Reinsurance recoverable on unpaid losses at the end of the year |
424,368 |
398,305 |
375,935 |
|||||||||
Reserves, gross of reinsurance recoverable, at the end of the year |
$ |
1,089,669 |
$ |
988,305 |
$ |
865,339 |
Years in Which Losses Were Incurred |
Reserve at December 31, 2019 |
(Savings) Deficiency Recorded During 2020 (1) |
% (Savings) Deficiency |
|||||||||
2019 |
$ |
258,655 |
$ |
(1,743 |
) |
(.7 |
)% |
|||||
2018 |
158,311 |
4,017 |
2.5 |
% |
||||||||
2017 |
65,516 |
(3,997 |
) |
(6.1 |
)% |
|||||||
2016 |
21,374 |
392 |
1.8 |
% |
||||||||
2015 |
16,377 |
858 |
5.2 |
% |
||||||||
2014 and prior |
69,767 |
162 |
.2 |
% |
||||||||
$ |
590,000 |
$ |
(311 |
) |
(.1 |
)% |
(1) | Consists of development on cases known at December 31, 2019, losses reported which were previously unknown at December 31, 2019 (incurred but not reported), unallocated loss expense paid related to accident years 2019 and prior and changes in the reserves for incurred but not reported losses and loss expenses. |
Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||||||||
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses (1) |
$ |
218,629 |
$ |
290,092 |
$ |
289,236 |
$ |
288,088 |
$ |
295,583 |
$ |
301,753 |
$ |
324,767 |
$ |
372,131 |
$ |
489,404 |
$ |
590,000 |
$ |
665,301 |
||||||||||||||||||||||
Liability Reestimated as of: (2) |
||||||||||||||||||||||||||||||||||||||||||||
One Year Later |
$ |
208,933 |
280,217 |
283,673 |
277,734 |
285,521 |
315,589 |
343,982 |
388,917 |
488,853 |
589,689 |
|||||||||||||||||||||||||||||||||
Two Years Later |
201,745 |
272,285 |
282,381 |
268,757 |
303,540 |
340,361 |
369,670 |
393,536 |
490,320 |
|||||||||||||||||||||||||||||||||||
Three Years Later |
204,243 |
276,525 |
279,685 |
288,862 |
332,175 |
361,791 |
382,982 |
390,951 |
||||||||||||||||||||||||||||||||||||
Four Years Later |
202,078 |
268,299 |
291,332 |
313,909 |
343,898 |
373,454 |
384,394 |
|||||||||||||||||||||||||||||||||||||
Five Years Later |
198,518 |
275,517 |
298,861 |
313,662 |
352,873 |
374,475 |
||||||||||||||||||||||||||||||||||||||
Six Years Later |
200,922 |
276,812 |
299,996 |
317,621 |
353,036 |
|||||||||||||||||||||||||||||||||||||||
Seven Years Later |
203,692 |
279,598 |
300,450 |
316,504 |
||||||||||||||||||||||||||||||||||||||||
Eight Years Later |
204,769 |
279,926 |
299,830 |
|||||||||||||||||||||||||||||||||||||||||
Nine Years Later |
205,047 |
278,192 |
||||||||||||||||||||||||||||||||||||||||||
Ten Years Later |
202,278 |
|||||||||||||||||||||||||||||||||||||||||||
Cumulative Redundancy (Deficiency) (3) |
$ |
16,351 |
$ |
11,900 |
$ |
(10,594 |
) |
$ |
(28,416 |
) |
$ |
(57,453 |
) |
$ |
(72,722 |
) |
$ |
(59,627 |
) |
$ |
(18,820 |
) |
$ |
(916 |
) |
$ |
311 |
|||||||||||||||||
Cumulative Amount of Liability Paid Through: (4) |
||||||||||||||||||||||||||||||||||||||||||||
One Year Later |
$ |
72,393 |
$ |
94,003 |
$ |
103,941 |
$ |
92,275 |
$ |
92,870 |
$ |
109,228 |
$ |
132,920 |
$ |
143,853 |
$ |
157,508 |
$ |
165,776 |
||||||||||||||||||||||||
Two Years Later |
109,382 |
156,271 |
162,087 |
159,282 |
166,642 |
195,951 |
217,376 |
220,502 |
243,766 |
|||||||||||||||||||||||||||||||||||
Three Years Later |
133,507 |
193,566 |
205,452 |
166,642 |
222,295 |
250,924 |
275,464 |
260,136 |
||||||||||||||||||||||||||||||||||||
Four Years Later |
147,462 |
214,873 |
202,803 |
234,158 |
258,576 |
287,311 |
295,576 |
|||||||||||||||||||||||||||||||||||||
Five Years Later |
158,172 |
227,359 |
241,533 |
251,696 |
283,107 |
301,159 |
||||||||||||||||||||||||||||||||||||||
Six Years Later |
166,112 |
234,578 |
252,648 |
263,194 |
292,069 |
|||||||||||||||||||||||||||||||||||||||
Seven Years Later |
168,524 |
241,383 |
258,630 |
269,206 |
||||||||||||||||||||||||||||||||||||||||
Eight Years Later |
173,015 |
246,052 |
262,371 |
|||||||||||||||||||||||||||||||||||||||||
Nine Years Later |
176,204 |
248,812 |
||||||||||||||||||||||||||||||||||||||||||
Ten Years Later |
178,577 |
(1) | Represents the estimated liability for unpaid losses and LAE recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and LAE for claims arising in all prior years that were unpaid at the respective balance sheet date, including incurred but not reported ("IBNR") losses, to the Company. |
(2) | Represents the re-estimated amount of the previously recorded liability based on additional information available to the Company as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of individual claims and as claims are settled and paid. |
(3) | Represents the aggregate change in the estimates of each calendar year-end reserve through December 31, 2020. |
(4) | Represents the cumulative amount paid with respect to the previously recorded calendar year-end liability as of the end of each succeeding year. The payment patterns shown in this table demonstrate the "long-tail" nature of much of the Company's business, whereby portions of claims, principally in workers' compensation coverages, do not fully pay out for more than ten years. |
Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||||||||
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||||||
Direct and Assumed: |
||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses |
$ |
344,520 |
$ |
421,556 |
$ |
455,454 |
$ |
474,470 |
$ |
506,102 |
$ |
513,596 |
$ |
576,330 |
$ |
680,274 |
$ |
865,339 |
$ |
988,305 |
$ |
1,089,669 |
||||||||||||||||||||||
Liability Reestimated as of December 31, 2020 |
341,571 |
434,106 |
496,856 |
547,749 |
632,297 |
672,667 |
686,485 |
735,058 |
892,796 |
1,010,036 |
||||||||||||||||||||||||||||||||||
Cumulative Redundancy (Deficiency) |
$ |
2,949 |
$ |
(12,550 |
) |
$ |
(41,402 |
) |
$ |
(73,279 |
) |
$ |
(126,195 |
) |
$ |
(159,071 |
) |
$ |
(110,155 |
) |
$ |
(54,784 |
) |
$ |
(27,457 |
) |
$ |
(21,731 |
) |
|||||||||||||||
Ceded: |
||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses |
$ |
140,401 |
$ |
54,428 |
$ |
132,320 |
$ |
167,366 |
$ |
178,887 |
$ |
204,349 |
$ |
188,829 |
$ |
204,199 |
$ |
190,870 |
$ |
275,339 |
$ |
424,368 |
||||||||||||||||||||||
Liability Reestimated as of December 31, 2020 |
153,803 |
78,878 |
163,128 |
212,229 |
247,629 |
290,699 |
239,357 |
240,163 |
217,410 |
297,381 |
||||||||||||||||||||||||||||||||||
Cumulative Redundancy (Deficiency) |
$ |
(13,402 |
) |
$ |
(24,450 |
) |
$ |
(30,808 |
) |
$ |
(44,863 |
) |
$ |
(68,742 |
) |
$ |
(86,350 |
) |
$ |
(50,528 |
) |
$ |
(35,964 |
) |
$ |
(26,540 |
) |
$ |
(22,042 |
) |
||||||||||||||
Net: |
||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses |
$ |
218,629 |
$ |
290,092 |
$ |
289,236 |
$ |
288,088 |
$ |
295,583 |
$ |
301,753 |
$ |
324,767 |
$ |
372,131 |
$ |
489,404 |
$ |
590,000 |
$ |
665,301 |
||||||||||||||||||||||
Liability Reestimated as of December 31, 2020 |
202,278 |
278,192 |
299,830 |
316,504 |
353,036 |
374,475 |
384,394 |
390,951 |
490,320 |
589,689 |
||||||||||||||||||||||||||||||||||
Cumulative Redundancy (Deficiency) |
$ |
16,351 |
$ |
11,900 |
$ |
(10,594 |
) |
$ |
(28,416 |
) |
$ |
(57,453 |
) |
$ |
(72,722 |
) |
$ |
(59,627 |
) |
$ |
(18,820 |
) |
$ |
(916 |
) |
$ |
311 |
2020 |
2019 |
|||||||
Fixed income securities |
88.1 |
% |
82.2 |
% |
||||
Short-term |
0.1 |
0.1 |
||||||
Cash equivalents |
4.5 |
6.2 |
||||||
Total fixed income and short-term securities |
92.7 |
88.5 |
||||||
Limited partnerships (equity basis) |
0.7 |
2.4 |
||||||
Commercial mortgage loans (amortized cost basis) |
1.0 |
1.2 |
||||||
Equity securities |
5.6 |
7.9 |
||||||
100.0 |
% |
100.0 |
% |
2020 |
2019 |
|||||||
Before federal tax: |
||||||||
Investment income |
2.9 |
% |
3.3 |
% |
||||
After federal tax: |
||||||||
Investment income |
2.8 |
3.3 |
• |
Net premiums earned. We experienced an effect on our net premiums earned in the second and third quarters of 2020 primarily due to the reduction in miles driven during that time, which is the basis of premiums we receive, by our commercial automobile insureds, as well as an overall reduction in public transportation units insured. During the fourth quarter of 2020, we saw a partial recovery of premium volume when miles driven increased as a result of increased shipping around the holidays. |
• |
Losses and loss expenses incurred. We saw a favorable impact on our losses and loss expenses incurred in commercial automobile during 2020 as a result of declines in accident frequency due to lower traffic density, but in the future we may incur higher claim and claim adjustment expenses in certain lines of business as a result of COVID-19 due to increases in frequency and/or severity of claims. For example, we may experience elevated frequency and severity in our workers’ compensation lines related to compensable claims by workers who demonstrate that the injury or illness arose both out of and in the course of their employment. We may also experience elevated frequency and severity in our liability coverages as a result of plaintiffs’ lawyers seeking to generate COVID-19-related claim activity against our insureds. Additionally, the anticipated and unknown risks related to COVID-19 may cause additional uncertainty in the process of estimating claims and claim adjustment expense reserves. For example, the behavior of claimants and policyholders may change in unexpected ways, the disruption to the court system may impact the timing and amounts of claims settlements and the actions taken by governmental bodies, both legislative and regulatory, in reaction to COVID-19 and their related impacts are hard to predict. As a result, our estimated level of claims and claim adjustment expense reserves may change. We are also subject to credit risk in our insurance operations, which may be exacerbated in times of economic distress. |
• |
Investments. The volatility in the global financial markets related to COVID-19 has contributed to net realized and unrealized investment losses, primarily due to the impact of changes in fair value on our equity investments. Our corporate fixed income portfolio may be adversely impacted by ratings downgrades, increased bankruptcies and credit spread widening in distressed industries, such as energy, gaming, lodging and leisure, autos, airlines and retail. Our money market investments have been impacted by lower interest rates and may continue to be impacted by these lower rates. Our investment portfolio also includes commercial mortgage-backed securities, which could be adversely impacted by declines in real estate valuations and/or financial market disruption. Further volatility in the global financial markets due to the continuing impact of COVID-19 could result in future net realized and unrealized investment losses, including potential impairments in our fixed income portfolio. In addition, further declines in fixed income yields would result in decreases in net investment income from future investment activity, including re-investments. |
• |
Liquidity. Collection of premiums, deductibles or self-insured retentions from our policyholders and reinsurance recoverables from our reinsurers may become increasingly difficult. At the state level, insurance departments throughout the country have issued bulletins and regulations urging or requiring insurers to extend grace periods for the payment of policy premiums and to refrain from canceling or non-renewing policies for the non-payment of policy premiums for policyholders adversely affected by COVID-19. It is uncertain what impact these government mandates may have on our ability to recover unpaid premiums on the affected policies or what our obligations may be for the payment of claims made under policies for which we have not received premium payments. |
• |
Adverse Legislative and/or Regulatory Action. Federal, state and local government actions to address and contain the impact of COVID-19 may adversely affect us. A number of states have instituted, and other states are considering instituting, changes designed to effectively expand workers' compensation coverage by creating presumptions of compensability of claims for certain types of workers. Regulatory restrictions or requirements could also impact pricing, risk selection and our rights and obligations with respect to our policies and insureds, including our ability to cancel policies or our right to collect premiums. |
• |
Operational Disruptions and Heightened Cybersecurity Risks. Our operations could be disrupted if key members of our senior management or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or outsourcing providers are unable to continue to work because of illness, government directives or otherwise. In addition, the interruption of our or their system capabilities could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions. Having shifted to primarily remote working arrangements, we also face a heightened risk of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities. To date, we have not experienced any such operational interruptions or cybersecurity disruptions during this time. |
• |
the attention of our management and our employees may be directed to Merger-related considerations and may be diverted from the day-to-day operations of our business; |
• |
our employees may experience uncertainty about their future roles with us, which might adversely affect our ability to retain and recruit key employees; |
• |
customers, suppliers or other parties with whom we maintain business relationships may experience uncertainty about our future and seek alternative relationships with third parties or seek to alter their business relationships with us; and |
• |
legal proceedings may be instituted against us, our directors and/or our officers with respect to the Merger. |
Name |
Age |
Title |
Served in Such Capacity Since |
|||
Jeremy D. Edgecliffe-Johnson |
50 |
Chief Executive Officer |
2019 (1) |
|||
John R. Barnett |
53 |
Chief Financial Officer |
2019 (2) |
|||
Bahr D. Omidfar |
60 |
Chief Information Officer |
2019 (3) |
|||
Jeremy F. Goldstein |
49 |
Executive Vice President |
2017 (4) |
|||
Patrick S. Schmiedt |
40 |
Chief Underwriting Officer |
2018 (5) |
(1) | Mr. Edgecliffe-Johnson joined the Company in May 2019 as Chief Executive Officer. Prior to joining the Company, Mr. Edgecliffe-Johnson served as President, U.S. Commercial of American International Group, Inc. (“AIG”) from February 2016 to December 2017, with responsibility for underwriting, operations, claims and distribution in the U.S., Canada, Brazil, Mexico and Puerto Rico. He served as Chief Executive Officer and President of Lexington Insurance Company, AIG’s excess and surplus lines unit, from February 2013 to December 2017. Mr. Edgecliffe-Johnson served in various executive leadership roles at AIG between 2000 and 2013, including Specialty Product Line Executive, U.S. & Canada; President of Cat Excess Liability; U.S. Executive for Energy Excess Casualty; and Regional Vice President for the Mid-Atlantic territory. Prior to joining AIG, Mr. Edgecliffe-Johnson served as a broker for Sedgwick, Inc. and Marsh, Inc. |
(2) | Mr. Barnett joined the Company in September 2019 as Chief Financial Officer. Prior to joining the Company, Mr. Barnett served as Chief Financial Officer and Executive Vice President of First Acceptance Corporation, a non-standard auto insurance underwriter (“First Acceptance”), since October 2018 and served as Senior Vice President, Finance of First Acceptance from May 2007 to March 2013. Mr. Barnett’s responsibilities at First Acceptance included financial reporting, accounting, planning and analysis, investments, actuarial, and treasury operations. From March 2013 to October 2018, Mr. Barnett served as Vice President, Finance of Broadcast Music, Inc., a music rights management company. Prior to his time at First Acceptance, Mr. Barnett served in various management and manufacturing roles during his career, including as Senior Manager, Planning and Analysis of Anheuser-Busch Companies from 1999 to 2007. |
(3) | Mr. Omidfar joined the Company in September 2019 as Chief Information Officer. Prior to joining the Company, Mr. Omidfar most recently served as Chief Technology Officer at CNA Financial Corporation from January 2018 to April 2019, where he developed, executed and led various initiatives, including the implementation of a new operating model; led strategic partnerships; and created a technology strategy and roadmap for the enterprise. Mr. Omidfar served in various Senior Vice President roles with Fidelity Investments, Inc. from August 2013 until January 2018, including SVP, Technology and Software Security from May 2015 to January 2018, SVP, Quality Assurance Testing and Software Security from October 2014 to April 2015 and SVP, Quality Assurance and Testing from August 2013 to September 2014. Mr. Omidfar also held roles at Rockwell Automation, Inc., Raytheon Company, Motorola, Inc., Deloitte LLP and Northrop Grumman Corporation and holds multiple certifications, including a Six Sigma Black Belt. |
(4) | Mr. Goldstein was appointed Executive Vice President in November 2017. He previously served as Senior Vice President of the Company from 2015 to 2017, as Vice President from 2011 to 2015 and as Corporate Secretary from 2016 to 2018. |
(5) | Mr. Schmiedt was appointed Chief Underwriting Officer in October 2018. He previously served as Senior Vice President of Underwriting from 2016 to 2018, as Vice President of Underwriting from 2015 to 2016 and as Assistant Vice President of Underwriting from 2013 to 2015. |
Period |
Total number of shares purchased (1) |
Average price paid per share |
Total number of shares purchased as part of publicly announced plans or programs (2) |
Maximum number of shares that may yet be purchased under the plans or programs (2) |
||||||||||||
October 1 - October 31, 2020 |
8,737 |
$ |
14.17 |
- |
1,375,729 |
|||||||||||
November 1 - November 30, 2020 |
- |
- |
1,375,729 |
|||||||||||||
December 1 - December 31, 2020 |
4,921 |
13.71 |
- |
1,375,729 |
||||||||||||
Total |
13,658 |
- |
(1) | Amounts represent shares withheld by the Company in connection with employee payroll tax withholding upon the vesting of stock awards. Stock amounts in the consolidated statements of shareholders’ equity are shown net of these shares withheld. |
(2) | On August 31, 2017, our Board of Directors authorized the reinstatement of the Company's share repurchase program for up to 2,464,209 shares of its Class A or Class B Common Stock. The repurchases may be made in the open market or through privately negotiated transactions, from time-to-time, and in accordance with applicable laws, rules and regulations. The share repurchase program may be amended, suspended or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. The Company has funded, and intends to continue to fund, the share repurchase program from cash on hand. No share repurchases have been made by the Company under the program since March 20, 2020. Additionally, in connection with the Merger Agreement with Progressive, the Company is prohibited from repurchasing any of its Class A or Class B Common Stock under the repurchase program. |
Year Ended December 31 |
||||||||||||||||||||||||
Index |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||
Protective Insurance Corporation |
$ |
100.00 |
$ |
109.25 |
$ |
108.82 |
$ |
79.54 |
$ |
78.68 |
$ |
68.98 |
||||||||||||
Russell 2000 Index |
100.00 |
121.31 |
139.08 |
123.76 |
155.35 |
186.36 |
||||||||||||||||||
PTVCB Peer Group |
100.00 |
120.65 |
131.77 |
136.11 |
152.67 |
123.13 |
PTVCB Peer Group |
||
Amerisafe, Inc. |
Heritage Insurance Holdings, Inc. |
|
Atlas Financial Holdings, Inc. |
James River Group Holdings, Ltd. |
|
Donegal Group Inc. |
NMI Holdings, Inc. |
|
Employers Holdings, Inc. |
Safety Insurance Group, Inc. |
|
FedNat Holding Company |
United Insurance Holdings Corp. |
|
Hallmark Financial Services, Inc. |
Universal Insurance Holdings, Inc. |
|
HCI Group, Inc. |
Year Ended December 31 |
||||||||||||||||||||
2020 |
2019 |
2018 |
2017 |
2016 |
||||||||||||||||
(Dollars in thousands, except per share data) |
||||||||||||||||||||
Gross premiums written |
$ |
547,561 |
$ |
574,918 |
$ |
582,500 |
$ |
504,737 |
$ |
403,004 |
||||||||||
Net premiums earned |
445,515 |
447,288 |
432,880 |
328,145 |
276,011 |
|||||||||||||||
Net investment income |
25,422 |
26,249 |
22,048 |
18,095 |
14,483 |
|||||||||||||||
Net realized and unrealized gains (losses) on investments |
(9,236 |
) |
12,889 |
(25,691 |
) |
19,686 |
23,228 |
|||||||||||||
Losses and loss expenses incurred |
318,958 |
348,468 |
345,864 |
247,518 |
186,481 |
|||||||||||||||
Net income (loss) |
4,463 |
7,347 |
(34,075 |
) |
18,323 |
28,945 |
||||||||||||||
Earnings (loss) per share -- net income (loss) (1) |
0.31 |
0.50 |
(2.28 |
) |
1.21 |
1.92 |
||||||||||||||
Cash dividends per share |
0.40 |
0.40 |
1.12 |
1.08 |
1.04 |
|||||||||||||||
Investment portfolio (2) |
1,043,704 |
968,205 |
878,638 |
854,595 |
749,501 |
|||||||||||||||
Total assets |
1,722,827 |
1,634,360 |
1,490,131 |
1,357,016 |
1,154,137 |
|||||||||||||||
Shareholders' equity |
363,082 |
364,316 |
356,082 |
418,811 |
404,345 |
|||||||||||||||
Book value per share |
25.43 |
25.51 |
23.95 |
27.83 |
26.81 |
(1) | Earnings (loss) per share are adjusted for the dilutive effect of restricted stock outstanding for each year presented other than 2018. |
(2) | Includes money market instruments classified as cash equivalents in the consolidated balance sheets. |
(dollars in thousands) |
2020 |
2019 |
2018 |
|||||||||
Income (loss) before federal income tax expense (benefit) |
$ |
6,363 |
$ |
8,673 |
$ |
(43,872 |
) |
|||||
Less: Net realized and unrealized gains (losses) on investments |
(9,236 |
) |
12,889 |
(25,691 |
) |
|||||||
Less: Net investment income |
25,422 |
26,249 |
22,048 |
|||||||||
Less: Corporate charges and CECL allowance adjustment included in other operating expenses 1 |
(4,422 |
) |
– |
– |
||||||||
Less: Goodwill impairment charge included in other operating expenses |
– |
– |
(3,152 |
) |
||||||||
Underwriting loss |
$ |
(5,401 |
) |
$ |
(30,465 |
) |
$ |
(37,077 |
) |
|||
Other operating expenses |
$ |
143,428 |
$ |
138,456 |
$ |
137,177 |
||||||
Less: Corporate charges and CECL allowance adjustment 1 |
4,422 |
– |
– |
|||||||||
Less: Goodwill impairment charge |
– |
– |
3,152 |
|||||||||
Other operating expenses, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge |
$ |
139,006 |
$ |
138,456 |
$ |
134,025 |
||||||
Ratios |
||||||||||||
Losses and loss expenses incurred |
$ |
318,958 |
$ |
348,468 |
$ |
345,864 |
||||||
Net premiums earned |
445,515 |
447,288 |
432,880 |
|||||||||
Loss ratio |
71.6 |
% |
77.9 |
% |
79.9 |
% |
||||||
Other operating expenses |
$ |
143,428 |
$ |
138,456 |
$ |
137,177 |
||||||
Less: Commissions and other income |
7,048 |
9,171 |
9,932 |
|||||||||
Other operating expenses, less commissions and other income |
136,380 |
129,285 |
127,245 |
|||||||||
Net premiums earned |
445,515 |
447,288 |
432,880 |
|||||||||
Expense ratio |
30.6 |
% |
28.9 |
% |
29.4 |
% |
||||||
Impact of corporate charges and CECL allowance adjustment 1 |
(1.0 |
)% |
– |
– |
||||||||
Impact of goodwill impairment charge |
– |
0.0 |
% |
(0.7 |
)% |
|||||||
Expense ratio, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge |
29.6 |
% |
28.9 |
% |
28.7 |
% |
||||||
Combined ratio |
102.2 |
% |
106.8 |
% |
109.3 |
% |
||||||
Combined ratio, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge |
101.2 |
% |
106.8 |
% |
108.6 |
% |
1 | Represents the corporate charges incurred in conjunction with the Board's review of the Contingent Sale Agreement, activities of the Special Committee and an adjustment to our CECL allowance related to the PSG litigation matter discussed above. |
2020 |
2019 |
Change |
% Change |
|||||||||||||
Gross premiums written |
$ |
547,561 |
$ |
574,918 |
$ |
(27,357 |
) |
(4.8 |
)% |
|||||||
Ceded premiums written |
(106,561 |
) |
(122,676 |
) |
16,115 |
(13.1 |
)% |
|||||||||
Net premiums written |
$ |
441,000 |
$ |
452,242 |
$ |
(11,242 |
) |
(2.5 |
)% |
|||||||
Net premiums earned |
$ |
445,515 |
$ |
447,288 |
$ |
(1,773 |
) |
(0.4 |
)% |
|||||||
Net investment income |
25,422 |
26,249 |
(827 |
) |
(3.2 |
)% |
||||||||||
Commissions and other income |
7,048 |
9,171 |
(2,123 |
) |
(23.1 |
)% |
||||||||||
Net realized and unrealized gains (losses) on investments |
(9,236 |
) |
12,889 |
(22,125 |
) |
(171.7 |
)% |
|||||||||
Total revenue |
468,749 |
495,597 |
||||||||||||||
Losses and loss expenses incurred |
318,958 |
348,468 |
(29,510 |
) |
(8.5 |
)% |
||||||||||
Other operating expenses |
143,428 |
138,456 |
4,972 |
3.6 |
% |
|||||||||||
Total expenses |
462,386 |
486,924 |
||||||||||||||
Income (loss) before federal income tax expense (benefit) |
6,363 |
8,673 |
(2,310 |
) |
||||||||||||
Federal income tax expense (benefit) |
1,900 |
1,326 |
574 |
|||||||||||||
Net income (loss) |
$ |
4,463 |
$ |
7,347 |
$ |
(2,884 |
) |
2019 |
2018 |
Change |
% Change |
|||||||||||||
Gross premiums written |
$ |
574,918 |
$ |
582,500 |
$ |
(7,582 |
) |
(1.3 |
)% |
|||||||
Ceded premiums written |
(122,676 |
) |
(138,102 |
) |
15,426 |
(11.2 |
)% |
|||||||||
Net premiums written |
$ |
452,242 |
$ |
444,398 |
$ |
7,844 |
1.8 |
% |
||||||||
Net premiums earned |
$ |
447,288 |
$ |
432,880 |
$ |
14,408 |
3.3 |
% |
||||||||
Net investment income |
26,249 |
22,048 |
4,201 |
19.1 |
% |
|||||||||||
Commissions and other income |
9,171 |
9,932 |
(761 |
) |
(7.7 |
)% |
||||||||||
Net realized and unrealized gains (losses) on investments |
12,889 |
(25,691 |
) |
38,580 |
(150.2 |
)% |
||||||||||
Total revenue |
495,597 |
439,169 |
||||||||||||||
Losses and loss expenses incurred |
348,468 |
345,864 |
2,604 |
0.8 |
% |
|||||||||||
Other operating expenses |
138,456 |
137,177 |
1,279 |
0.9 |
% |
|||||||||||
Total expenses |
486,924 |
483,041 |
||||||||||||||
Income (loss) before federal income tax expense (benefit) |
8,673 |
(43,872 |
) |
52,545 |
||||||||||||
Federal income tax expense (benefit) |
1,326 |
(9,797 |
) |
11,123 |
||||||||||||
Net income (loss) |
$ |
7,347 |
$ |
(34,075 |
) |
$ |
41,422 |
5% Increase in Ultimate Loss Ratio |
10% Increase in Ultimate Loss Ratio |
|||||||
Gross loss expense from further strengthening current reserve position |
$ |
47.2 |
$ |
94.5 |
||||
Net financial loss |
$ |
11.8 |
$ |
23.6 |
||||
$/share (after tax) |
$ |
0.64 |
$ |
1.28 |
2020 |
2019 |
2018 |
||||||||||
Reinsurance recoverable |
$ |
455,564 |
$ |
432,067 |
$ |
392,436 |
||||||
Premium ceded (reduction to premium earned) |
113,125 |
124,446 |
131,080 |
|||||||||
Losses ceded (reduction to losses incurred) |
105,895 |
121,963 |
148,285 |
|||||||||
Reinsurance ceded credits (reduction to operating expenses) |
24,764 |
25,932 |
23,124 |
● | Consistency in the individual case reserving processes; |
● | The selection of loss development factors in the establishment of bulk reserves for incurred but not reported losses and loss expenses; |
● | Projected future loss trend; and |
● | Expected loss ratios for the current book of business, particularly the Company's commercial automobile products, where the number of accounts insured, selected SIRs, policy limits and reinsurance structures may vary widely from period to period. |
10% Loss Ratio Increase |
10% Loss Ratio Decrease |
20% Loss Ratio Increase |
20% Loss Ratio Decrease |
|||||||||||||
Gross Reserves |
$ |
114.2 |
$ |
(114.2 |
) |
$ |
228.3 |
$ |
(220.0 |
) |
||||||
Net Reserves |
$ |
39.4 |
$ |
(40.8 |
) |
$ |
78.8 |
$ |
(98.7 |
) |
||||||
Net premiums earned |
$ |
(2.9 |
) |
$ |
16.6 |
$ |
(2.9 |
) |
$ |
35.7 |
||||||
Cumulative Net Underwriting Income (Loss) |
$ |
(42.3 |
) |
$ |
57.4 |
$ |
(81.7 |
) |
$ |
134.4 |
2020 |
2019 |
|||||||
Total deferred tax liabilities |
$ |
(15,083 |
) |
$ |
(15,484 |
) |
||
Total deferred tax assets |
24,063 |
17,519 |
||||||
Net deferred tax assets (liabilities) |
$ |
8,980 |
$ |
2,035 |
Payments Due by Period |
||||||||||||||||||||
Total |
Less than 1 year |
1 - 3 Years |
3 - 5 Years |
More Than 5 Years |
||||||||||||||||
(dollars in millions) |
||||||||||||||||||||
Loss and loss expense reserves |
$ |
1,089.7 |
$ |
381.4 |
$ |
359.6 |
$ |
130.8 |
$ |
217.9 |
||||||||||
Investment commitment |
0.4 |
0.4 |
– |
– |
– |
|||||||||||||||
Operating leases |
0.1 |
0.1 |
– |
– |
– |
|||||||||||||||
Borrowings |
20.0 |
20.0 |
– |
– |
– |
|||||||||||||||
Total |
$ |
1,110.2 |
$ |
401.9 |
$ |
359.6 |
$ |
130.8 |
$ |
217.9 |
● | 6% of the Company's consolidated investment portfolio of $1,043.7 million; and |
● | 18% of the Company's shareholders' equity of $363.1 million. |
Increase (Decrease) |
||||||||||||
Fair Value |
Interest Rate Risk |
Equity Risk |
||||||||||
2020 |
||||||||||||
Fixed income securities |
||||||||||||
Agency collateralized mortgage obligations |
$ |
11,931 |
$ |
(495 |
) |
$ |
– |
|||||
Agency mortgage-backed securities |
102,107 |
(2,076 |
) |
– |
||||||||
Asset-backed securities |
107,696 |
(1,703 |
) |
– |
||||||||
Bank loans |
11,361 |
(57 |
) |
– |
||||||||
Collateralized mortgage obligations |
5,118 |
(219 |
) |
– |
||||||||
Corporate securities |
360,241 |
(11,804 |
) |
– |
||||||||
Mortgage-backed securities |
38,056 |
(1,104 |
) |
– |
||||||||
Municipal obligations |
45,143 |
(2,137 |
) |
– |
||||||||
Non-U.S. government obligations |
30,600 |
(422 |
) |
– |
||||||||
U.S. government obligations |
207,439 |
(6,969 |
) |
– |
||||||||
Total fixed income securities |
919,692 |
(26,986 |
) |
– |
||||||||
Equity securities: |
||||||||||||
Consumer |
11,598 |
– |
(1,160 |
) |
||||||||
Energy |
1,227 |
– |
(123 |
) |
||||||||
Financial |
29,064 |
– |
(2,906 |
) |
||||||||
Industrial |
5,180 |
– |
(518 |
) |
||||||||
Technology |
2,851 |
– |
(285 |
) |
||||||||
Other |
8,249 |
– |
(825 |
) |
||||||||
Total equity securities |
58,169 |
– |
(5,817 |
) |
||||||||
Limited partnerships |
7,214 |
– |
(494 |
) |
||||||||
Short-term |
1,000 |
– |
– |
|||||||||
Total |
$ |
986,075 |
$ |
(26,986 |
) |
$ |
(6,311 |
) |
||||
2019 |
||||||||||||
Fixed income securities |
||||||||||||
Agency collateralized mortgage obligations |
$ |
12,093 |
$ |
(414 |
) |
$ |
– |
|||||
Agency mortgage-backed securities |
56,280 |
(607 |
) |
– |
||||||||
Asset-backed securities |
106,397 |
(691 |
) |
– |
||||||||
Bank loans |
14,568 |
(73 |
) |
– |
||||||||
Certificates of deposit |
2,835 |
(18 |
) |
– |
||||||||
Collateralized mortgage obligations |
5,616 |
(166 |
) |
– |
||||||||
Corporate securities |
281,381 |
(8,735 |
) |
– |
||||||||
Mortgage-backed securities |
47,463 |
(1,682 |
) |
– |
||||||||
Municipal obligations |
36,286 |
(1,618 |
) |
– |
||||||||
Non-U.S. government obligations |
24,179 |
(480 |
) |
– |
||||||||
U.S. government obligations |
208,440 |
(7,082 |
) |
– |
||||||||
Total fixed income securities |
795,538 |
(21,566 |
) |
– |
||||||||
Equity securities: |
||||||||||||
Consumer |
16,707 |
– |
(1,671 |
) |
||||||||
Energy |
3,074 |
– |
(307 |
) |
||||||||
Financial |
31,577 |
– |
(3,158 |
) |
||||||||
Industrial |
4,927 |
– |
(493 |
) |
||||||||
Technology |
2,817 |
– |
(282 |
) |
||||||||
Funds (e.g., mutual funds, closed end funds, ETFs) |
9,460 |
– |
(946 |
) |
||||||||
Other |
8,250 |
– |
(825 |
) |
||||||||
Total equity securities |
76,812 |
– |
(7,682 |
) |
||||||||
Limited partnerships |
23,292 |
– |
(1,670 |
) |
||||||||
Short-term |
1,000 |
– |
– |
|||||||||
Total |
$ |
896,642 |
$ |
(21,566 |
) |
$ |
(9,352 |
) |
Increase (Decrease) |
||||||||||||
Fair Value |
Interest Rate Risk |
Equity Risk |
||||||||||
2020 |
||||||||||||
Fixed income securities |
||||||||||||
Agency collateralized mortgage obligations |
$ |
11,931 |
$ |
(744 |
) |
$ |
– |
|||||
Agency mortgage-backed securities |
102,107 |
(3,114 |
) |
– |
||||||||
Asset-backed securities |
107,696 |
(2,554 |
) |
– |
||||||||
Bank loans |
11,361 |
(85 |
) |
– |
||||||||
Collateralized mortgage obligations |
5,118 |
(328 |
) |
– |
||||||||
Corporate securities |
360,241 |
(17,708 |
) |
– |
||||||||
Mortgage-backed securities |
38,056 |
(1,655 |
) |
– |
||||||||
Municipal obligations |
45,143 |
(3,205 |
) |
– |
||||||||
Non-U.S. government obligations |
30,600 |
(633 |
) |
– |
||||||||
U.S. government obligations |
207,439 |
(10,454 |
) |
– |
||||||||
Total fixed income securities |
919,692 |
(40,480 |
) |
– |
||||||||
Equity securities: |
||||||||||||
Consumer |
11,598 |
– |
(1,740 |
) |
||||||||
Energy |
1,227 |
– |
(184 |
) |
||||||||
Financial |
29,064 |
– |
(4,360 |
) |
||||||||
Industrial |
5,180 |
– |
(777 |
) |
||||||||
Technology |
2,851 |
– |
(428 |
) |
||||||||
Other |
8,249 |
– |
(1,237 |
) |
||||||||
Total equity securities |
58,169 |
– |
(8,726 |
) |
||||||||
Limited partnerships |
7,214 |
– |
(741 |
) |
||||||||
Short-term |
1,000 |
– |
– |
|||||||||
Total |
$ |
986,075 |
$ |
(40,480 |
) |
$ |
(9,467 |
) |
||||
2019 |
||||||||||||
Fixed income securities |
||||||||||||
Agency collateralized mortgage obligations |
$ |
12,093 |
$ |
(622 |
) |
$ |
– |
|||||
Agency mortgage-backed securities |
56,280 |
(911 |
) |
– |
||||||||
Asset-backed securities |
106,397 |
(1,037 |
) |
– |
||||||||
Bank loans |
14,568 |
(109 |
) |
– |
||||||||
Certificates of deposit |
2,835 |
(27 |
) |
– |
||||||||
Collateralized mortgage obligations |
5,616 |
(248 |
) |
– |
||||||||
Corporate securities |
281,381 |
(13,103 |
) |
– |
||||||||
Mortgage-backed securities |
47,463 |
(2,523 |
) |
– |
||||||||
Municipal obligations |
36,286 |
(2,426 |
) |
– |
||||||||
Non-U.S. government obligations |
24,179 |
(720 |
) |
– |
||||||||
U.S. government obligations |
208,440 |
(10,623 |
) |
– |
||||||||
Total fixed income securities |
795,538 |
(32,349 |
) |
– |
||||||||
Equity securities: |
||||||||||||
Consumer |
16,707 |
– |
(2,506 |
) |
||||||||
Energy |
3,074 |
– |
(461 |
) |
||||||||
Financial |
31,577 |
– |
(4,737 |
) |
||||||||
Industrial |
4,927 |
– |
(739 |
) |
||||||||
Technology |
2,817 |
– |
(423 |
) |
||||||||
Funds (e.g., mutual funds, closed end funds, ETFs) |
9,460 |
– |
(1,419 |
) |
||||||||
Other |
8,250 |
– |
(1,238 |
) |
||||||||
Total equity securities |
76,812 |
– |
(11,523 |
) |
||||||||
Limited partnerships |
23,292 |
– |
(2,506 |
) |
||||||||
Short-term |
1,000 |
– |
– |
|||||||||
Total |
$ |
896,642 |
$ |
(32,349 |
) |
$ |
(14,029 |
) |
Valuation of Incurred but Not Reported Loss and Loss Expense Reserves |
||
Description of the Matter |
As of December 31, 2020, the liability for incurred but not reported loss and loss expense reserves, net of reinsurance (“IBNR”), represented a significant portion of the loss and loss expense reserve, net of reinsurance. As discussed in Note A and Note C to the consolidated financial statements, the carrying amount of the loss and loss expense reserve, net of reinsurance, is management’s best estimate of the ultimate liability for indemnity costs and related adjustment expense necessary to investigate and settle claims and is based upon individual case estimates for reported claims and actuarial estimates for IBNR. The estimate for IBNR is determined based on evaluations of individual reported claims and by actuarial estimation processes considering historical experience, relevant economic information, and available industry statistics. The IBNR estimate is driven by management’s expected loss ratio assumption, which is comprised of various factors, including historical payment patterns and expected future trends in claim severity and frequency. Auditing management’s best estimate of IBNR was complex and required the involvement of our actuarial specialists due to the significant measurement uncertainty associated with the estimation and high degree of subjectivity in management’s determination of the expected loss ratio assumption. Management’s expected loss ratio assumption has a significant effect on the valuation of IBNR. |
|
How We Addressed the Matter in Our Audit |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating IBNR. These audit procedures included, among others, testing management’s review and approval controls over the expected loss ratio assumption for estimating IBNR. With the assistance of actuarial specialists, our audit procedures included, among others, an evaluation of the Company’s expected loss ratio assumption, which included a comparison of historical payment patterns, expected future trends in claim severity and frequency, and consideration of relevant economic information and other industry factors to our prior year analysis and actual current year loss activity. To evaluate the expected loss ratio assumption, we developed an independent range of reasonable reserve estimates that we compared to management’s best estimate of IBNR. We also analyzed year-to-year movements within our independently developed range. Additionally, we performed a review of the development of prior years’ reserve estimates. |
|
Personnel Staffing Group Recoverable Allowance |
||
Description of the Matter |
As of December 31, 2020, the Company has a recoverable due from a single customer, Personnel Staffing Group, for $47.3 million related to claims that have been paid or will be paid on behalf of Personnel Staffing Group by the Company for which the Company has recorded a $16.5 million credit impairment allowance. As discussed above and in Note A and Note T to the consolidated financial statements, the allowance amount is management’s best estimate of the ultimate credit impairment for the recoverable based on the expected timing and amount of cash flows from Personnel Staffing Group. This estimate is particularly sensitive to the default and recovery in default assumptions which have a significant impact on the allowance. These assumptions involve significant uncertainty and management judgment. Auditing management’s best estimate of the Personnel Staffing Group recoverable allowance (the allowance) required the involvement of our valuation specialists due to the significant measurement uncertainty associated with management’s estimation. The uncertainty is primarily driven by the high degree of subjectivity in management’s determination of the default and recovery in default assumptions. |
|
How We Addressed the Matter in Our Audit |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating the allowance. These audit procedures included, among others, testing management review and approval controls over the assumptions for estimating the allowance. With the assistance of our valuation specialists, our audit procedures included, among others, reviewing contract terms between Personnel Staffing Group and the Company, reading minutes of the meetings of the committees of the board of directors, reading summaries of the lawsuits with Personnel Staffing Group, reviewing legal letters pertinent to the matter, reviewing historical bankruptcy data from similar entities within the industry, and evaluating the Company’s selection of methods used to estimate the allowance compared with those methods used in the industry for similar types of analyses. To evaluate the significant assumptions used by management, we compared the significant assumptions to industry data for entities with similar characteristics to Personnel Staffing Group and financial data specific to Personnel Staffing Group. With the assistance of the valuation specialists, we developed an independent range of reasonable allowance estimates that we compared to management’s best estimate. |
December 31 |
||||||||
2020 |
2019 |
|||||||
Assets |
||||||||
Investments: |
||||||||
Fixed income securities (Amortized cost: $ |
$ |
$ |
||||||
Equity securities |
||||||||
Limited partnerships |
||||||||
Commercial mortgage loans (less allowance of $ |
||||||||
Short-term and other |
||||||||
Cash and cash equivalents |
||||||||
Restricted cash and cash equivalents |
||||||||
Accounts receivable (less allowance of $ |
||||||||
Accrued investment income |
||||||||
Reinsurance recoverable (less allowance of $ |
||||||||
Prepaid reinsurance premiums |
||||||||
Deferred policy acquisition costs |
||||||||
Property and equipment (less accumulated depreciation of $ |
||||||||
Other assets |
||||||||
Current federal income taxes |
||||||||
Deferred federal income taxes |
||||||||
$ |
$ |
|||||||
Liabilities and Shareholders' Equity |
||||||||
Reserves: |
||||||||
Losses and loss expenses |
$ |
$ |
||||||
Unearned premiums |
||||||||
Reinsurance payable |
||||||||
Short-term borrowings |
||||||||
Depository liabilities |
||||||||
Accounts payable and other liabilities |
||||||||
Current federal income taxes payable |
||||||||
Shareholders' equity: |
||||||||
Common stock: |
||||||||
Class A voting -- authorized |
||||||||
Class B non-voting -- authorized |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income |
||||||||
Retained earnings |
||||||||
$ |
$ |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Revenue: |
||||||||||||
Net premiums earned |
$ |
$ |
$ |
|||||||||
Net investment income |
||||||||||||
Commissions and other income |
||||||||||||
Net realized gains (losses) on investments, excluding impairment losses |
( |
) |
( |
) |
||||||||
Impairment losses on investments |
( |
) |
( |
) |
( |
) |
||||||
Net unrealized gains (losses) on equity securities and limited partnership investments |
( |
) |
||||||||||
Net realized and unrealized gains (losses) on investments |
( |
) |
( |
) |
||||||||
Expenses: |
||||||||||||
Losses and loss expenses incurred |
||||||||||||
Other operating expenses |
||||||||||||
Income (loss) before federal income tax expense (benefit) |
( |
) |
||||||||||
Federal income tax expense (benefit) |
( |
) |
||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) |
|||||||
Net income (loss) per share: |
||||||||||||
Basic |
$ |
$ |
$ |
( |
) |
|||||||
Diluted |
$ |
$ |
$ |
( |
) |
|||||||
Weighted average number of shares outstanding: |
||||||||||||
Basic |
||||||||||||
Dilutive effect of share equivalents |
n/a |
|||||||||||
Diluted |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) |
|||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Unrealized net gains (losses) on fixed income securities |
( |
) |
||||||||||
Foreign currency translation adjustments |
( |
) |
||||||||||
Other comprehensive income (loss) |
( |
) |
||||||||||
Comprehensive income (loss) |
$ |
$ |
$ |
( |
) |
Common Stock |
Additional |
Accumulated Other |
||||||||||||||||||||||||||||||
Class A |
Class B |
Paid-In |
Comprehensive |
Retained |
Total |
|||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Capital |
Income (Loss) |
Earnings |
Equity |
|||||||||||||||||||||||||
Balance at January 1, 2018 |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||
Cumulative effect of adoption of ASU 2016-01, net of tax |
( |
) |
||||||||||||||||||||||||||||||
Cumulative effect of adoption of ASU 2018-02 |
( |
) |
||||||||||||||||||||||||||||||
Net loss |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Change in unrealized gain (loss) on investments, net of tax |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Common stock dividends |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Repurchase of common stock |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||
Restricted stock grants |
||||||||||||||||||||||||||||||||
Balance at December 31, 2018 |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||||||||||
Net income |
– |
– |
||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax |
– |
– |
||||||||||||||||||||||||||||||
Change in unrealized gain (loss) on investments, net of tax |
– |
– |
||||||||||||||||||||||||||||||
Common stock dividends |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Repurchase of common stock |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Restricted stock grants |
||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||
Cumulative effect of adoption of ASU 2016-13, net of tax |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income |
– |
– |
||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax |
– |
– |
||||||||||||||||||||||||||||||
Change in unrealized gain (loss) on investments, net of tax |
– |
– |
||||||||||||||||||||||||||||||
Common stock dividends |
– |
– |
( |
) |
( |
) |
||||||||||||||||||||||||||
Repurchase of common stock |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||
Restricted stock grants |
||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Operating activities |
||||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) |
|||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||
Change in accounts receivable and unearned premium |
( |
) |
( |
) |
( |
) |
||||||
Change in accrued investment income |
( |
) |
( |
) |
||||||||
Change in reinsurance recoverable on paid losses |
( |
) |
( |
) |
||||||||
Change in losses and loss expenses reserves, net of reinsurance |
||||||||||||
Change in other assets, other liabilities and current income taxes |
( |
) |
||||||||||
Amortization of net policy acquisition costs |
||||||||||||
Net policy acquisition costs deferred |
( |
) |
( |
) |
( |
) |
||||||
Provision for deferred income tax expense (benefit) |
( |
) |
( |
) |
( |
) |
||||||
Bond amortization |
( |
) |
( |
) |
||||||||
Depreciation |
||||||||||||
Net realized and unrealized (gains) losses on investments |
( |
) |
||||||||||
Compensation expense related to restricted stock |
||||||||||||
Net cash provided by operating activities |
||||||||||||
Investing activities |
||||||||||||
Purchases of fixed income securities and equity securities |
( |
) |
( |
) |
( |
) |
||||||
Purchases of limited partnership interests |
( |
) |
||||||||||
Distributions from limited partnerships |
||||||||||||
Proceeds from maturities |
||||||||||||
Proceeds from sales of fixed income securities |
||||||||||||
Proceeds from sales of equity securities |
||||||||||||
Purchase of insurance company-owned life insurance |
( |
) |
||||||||||
Purchase of commercial mortgage loans |
( |
) |
( |
) |
( |
) |
||||||
Proceeds from commercial mortgage loans |
||||||||||||
Purchases of property and equipment |
( |
) |
( |
) |
( |
) |
||||||
Proceeds from disposals of property and equipment |
||||||||||||
Net cash provided by (used in) investing activities |
( |
) |
( |
) |
||||||||
Financing activities |
||||||||||||
Dividends paid to shareholders |
( |
) |
( |
) |
( |
) |
||||||
Repurchase of common shares |
( |
) |
( |
) |
( |
) |
||||||
Net cash used in financing activities |
( |
) |
( |
) |
( |
) |
||||||
Effect of foreign exchange rates on cash and cash equivalents |
( |
) |
||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents |
( |
) |
( |
) |
||||||||
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year |
||||||||||||
Cash, cash equivalents and restricted cash and cash equivalents at end of year |
$ |
$ |
$ |
|||||||||
Supplemental Disclosures of Cash Flow Information |
||||||||||||
Cash paid (refunds received) for income taxes |
$ |
$ |
( |
) |
$ |
|||||||
Cash paid for interest |
$ |
$ |
$ |
Fair Value |
Cost or Amortized Cost |
Allowance for Credit Losses |
Gross Unrealized Gains |
Gross Unrealized Losses |
Net Unrealized Gains (Losses) |
|||||||||||||||||||
December 31, 2020 |
||||||||||||||||||||||||
Fixed income securities |
||||||||||||||||||||||||
Agency collateralized mortgage obligations |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Agency mortgage-backed securities |
( |
) |
||||||||||||||||||||||
Asset-backed securities |
( |
) |
( |
) |
||||||||||||||||||||
Bank loans |
( |
) |
( |
) |
||||||||||||||||||||
Collateralized mortgage obligations |
( |
) |
||||||||||||||||||||||
Corporate securities |
( |
) |
||||||||||||||||||||||
Mortgage-backed securities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Municipal obligations |
( |
) |
||||||||||||||||||||||
Non-U.S. government obligations |
||||||||||||||||||||||||
U.S. government obligations |
( |
) |
||||||||||||||||||||||
Total fixed income securities |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
Fair Value |
Cost or Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Net Unrealized Gains (Losses) |
||||||||||||||||
December 31, 2019 |
||||||||||||||||||||
Fixed income securities |
||||||||||||||||||||
Agency collateralized mortgage obligations |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Agency mortgage-backed securities |
( |
) |
||||||||||||||||||
Asset-backed securities |
( |
) |
( |
) |
||||||||||||||||
Bank loans |
( |
) |
( |
) |
||||||||||||||||
Certificates of deposit |
||||||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||||||
Corporate securities |
( |
) |
||||||||||||||||||
Mortgage-backed securities |
( |
) |
||||||||||||||||||
Municipal obligations |
( |
) |
||||||||||||||||||
Non-U.S. government obligations |
||||||||||||||||||||
U.S. government obligations |
( |
) |
||||||||||||||||||
Total fixed income securities |
$ |
$ |
$ |
$ |
( |
) |
$ |
2020 |
2019 |
|||||||||||||||||||||||
Number of Securities |
Fair Value |
Gross Unrealized Loss |
Number of Securities |
Fair Value |
Gross Unrealized Loss |
|||||||||||||||||||
Fixed income securities: |
||||||||||||||||||||||||
12 months or less |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||
Greater than 12 months |
( |
) |
( |
) |
||||||||||||||||||||
Total fixed income securities |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
Fair Value |
Cost or Amortized Cost |
|||||||||||||||
One year or less |
$ |
% |
$ |
% |
||||||||||||
Excess of one year to five years |
||||||||||||||||
Excess of five years to ten years |
||||||||||||||||
Excess of ten years |
||||||||||||||||
Total contractual maturities |
||||||||||||||||
Asset-backed securities |
||||||||||||||||
Total |
$ |
% |
$ |
% |
2020 |
2019 |
2018 |
||||||||||
Interest on fixed income securities |
$ |
$ |
$ |
|||||||||
Dividends on equity securities |
||||||||||||
Money market funds, Short-term and other |
||||||||||||
Investment expenses |
( |
) |
( |
) |
( |
) |
||||||
Net investment income |
$ |
$ |
$ |
2020 |
2019 |
2018 |
||||||||||
Gross gains on available-for-sale fixed income securities during the period: |
$ |
$ |
$ |
|||||||||
Gross losses on available-for-sale fixed income securities during the period: |
( |
) |
( |
) |
( |
) |
||||||
Impairment losses on investments |
( |
) |
( |
) |
( |
) |
||||||
Change in value of limited partnership investments |
( |
) |
( |
) |
||||||||
Gains (losses) on equity securities: |
||||||||||||
Realized gains (losses) on equity securities sold during the period(1) |
( |
) |
( |
) |
||||||||
Unrealized gains (losses) on equity securities held at the end of the period |
( |
) |
||||||||||
Total realized and unrealized gains (losses) on equity securities |
( |
) |
( |
) |
||||||||
Net realized and unrealized gains (losses) on investments |
$ |
( |
) |
$ |
$ |
( |
) |
(1) |
2020 |
2019 |
2018 |
||||||||||
Cumulative charges to income at beginning of year |
$ |
$ |
$ |
|||||||||
Write-downs based on objective and subjective criteria |
||||||||||||
Recovery of prior write-downs upon sale or disposal |
( |
) |
( |
) |
( |
) |
||||||
Net pre-tax realized gain (loss) |
( |
) |
||||||||||
Cumulative charges to income at end of year |
$ |
$ |
$ |
2020 |
2019 |
2018 |
||||||||||
Reserves, gross of reinsurance recoverable, at the beginning of the year |
$ |
$ |
$ |
|||||||||
Reinsurance recoverable on unpaid losses at the beginning of the year |
||||||||||||
Reserves at the beginning of the year |
||||||||||||
Provision for losses and loss expenses: |
||||||||||||
Claims occurring during the current year |
||||||||||||
Claims occurring during prior years |
( |
) |
( |
) |
||||||||
Total incurred losses and loss expenses |
||||||||||||
Loss and loss expense payments: |
||||||||||||
Claims occurring during the current year |
||||||||||||
Claims occurring during prior years |
||||||||||||
Total paid |
||||||||||||
Reserves at the end of the year |
||||||||||||
Reinsurance recoverable on unpaid losses at the end of the year |
||||||||||||
Reserves, gross of reinsurance recoverable, at the end of the year |
$ |
$ |
$ |
Prior Year (Savings) / Deficiency |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Workers' Compensation |
$ |
$ |
( |
) |
$ |
( |
) |
|||||
Commercial Auto Liability |
||||||||||||
Occupational Accident |
( |
) |
( |
) |
||||||||
Physical Damage |
( |
) |
( |
) |
( |
) |
||||||
Professional Liability Assumed |
||||||||||||
Other short-duration contracts |
( |
) |
( |
) |
( |
) |
||||||
Total |
$ |
( |
) |
$ |
( |
) |
$ |
As of December 31, 2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
Total of Incurred-but-Not-Reported Liabilities Plus Expected Development |
Number of Reported |
||||||||||||||||||||||||||||||||||||||||||||||
Accident Year |
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
on Reported |
Claims |
|||||||||||||||||||||||||||||||||||||||||||||
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Claims |
Per Year |
|||||||||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Total |
$ |
$ |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
||||||||||||||||||||||||||||||||||||||||
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
||||||||||||||||||||||||||||||||||||||||
Accident Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||
Total |
$ |
|||||||||||||||||||||||||||||||||||||||
Outstanding liabilities prior to 2011, net of reinsurance |
||||||||||||||||||||||||||||||||||||||||
Liabilities for claims and claims adjustment expenses, net of reinsurance |
$ |
As of December 31, 2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
Total of Incurred-but-Not-Reported Liabilities Plus Expected Development |
Number of Reported |
||||||||||||||||||||||||||||||||||||||||||||||
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
on Reported |
Claims |
||||||||||||||||||||||||||||||||||||||||||||||
Accident Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Claims |
Per Year |
||||||||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Total |
$ |
$ |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
||||||||||||||||||||||||||||||||||||||||
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
||||||||||||||||||||||||||||||||||||||||
Accident Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||
Total |
$ |
|||||||||||||||||||||||||||||||||||||||
Outstanding liabilities prior to 2011, net of reinsurance |
||||||||||||||||||||||||||||||||||||||||
Liabilities for claims and claims adjustment expenses, net of reinsurance |
$ |
As of December 31, 2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
Total of Incurred-but-Not-Reported Liabilities Plus Expected Development |
Number of Reported |
||||||||||||||||||||||||||||||||||||||||||||||
Accident Year |
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
on Reported |
Claims |
|||||||||||||||||||||||||||||||||||||||||||||
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
Claims |
Per Year |
|||||||||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
N/A |
||||||||||||||||||||||||||||||||||||
2012 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2014 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2016 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2017 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2018 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2019 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
2020 |
N/A |
|||||||||||||||||||||||||||||||||||||||||||||||
Total |
$ |
$ |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
||||||||||||||||||||||||||||||||||||||||
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
||||||||||||||||||||||||||||||||||||||||
Accident Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||
Total |
$ |
|||||||||||||||||||||||||||||||||||||||
Outstanding liabilities prior to 2011, net of reinsurance |
||||||||||||||||||||||||||||||||||||||||
Liabilities for claims and claims adjustment expenses, net of reinsurance |
$ |
As of December 31, 2020 2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
Total of Incurred-but-Not-Reported Liabilities Plus Expected Development |
Number of Reported |
||||||||||||||||||||||||||||||||||||||||||||||
Accident Year |
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
on Reported |
Claims |
|||||||||||||||||||||||||||||||||||||||||||||
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2018 |
2020 |
Claims |
Per Year |
|||||||||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||||||||||
Total |
$ |
$ |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
||||||||||||||||||||||||||||||||||||||||
For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited) |
||||||||||||||||||||||||||||||||||||||||
Accident Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
||||||||||||||||||||||||||||||
2011 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
2013 |
||||||||||||||||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||
2020 |
||||||||||||||||||||||||||||||||||||||||
Total |
$ |
|||||||||||||||||||||||||||||||||||||||
Outstanding liabilities prior to 2011, net of reinsurance |
||||||||||||||||||||||||||||||||||||||||
Liabilities for claims and claims adjustment expenses, net of reinsurance |
$ |
As of December 31, 2020 |
||||||||||||||||||||
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
Total of Incurred-but-Not- Reported Liabilities Plus |
Number of |
||||||||||||||||||
For the Years Ended December 31 (2018-2019 is Supplementary Information and Unaudited) |
Expected Development |
Reported Claims |
||||||||||||||||||
Accident Year |
2018 |
2019 |
2020 |
on Reported Claims |
Per Year |
|||||||||||||||
2018 |
$ |
$ |
$ |
$ |
||||||||||||||||
2019 |
||||||||||||||||||||
2020 |
||||||||||||||||||||
Total |
$ |
$ |
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |
||||||||||||
For the Years Ended December 31 (2018-2019 is Supplementary Information and Unaudited) |
||||||||||||
Accident Year |
2018 |
2019 |
2020 |
|||||||||
2018 |
$ |
$ |
$ |
|||||||||
2019 |
||||||||||||
2020 |
||||||||||||
Total |
$ |
|||||||||||
Outstanding liabilities prior to 2018, net of reinsurance |
||||||||||||
Liabilities for claims and claims adjustment expenses, net of reinsurance |
$ |
(1) |
2020 |
2019 |
|||||||
Net outstanding liabilities |
||||||||
Commercial Liability |
$ |
$ |
||||||
Workers' Compensation |
||||||||
Occupational Accident |
||||||||
Physical Damage |
||||||||
Professional Liability Assumed |
||||||||
Other short-duration insurance lines |
||||||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance |
||||||||
Reinsurance recoverable on unpaid claims |
||||||||
Commercial Liability |
||||||||
Workers' Compensation |
||||||||
Occupational Accident |
||||||||
Physical Damage |
||||||||
Other short-duration insurance lines |
||||||||
Reinsurance recoverable on unpaid losses at the end of the year |
||||||||
Unallocated claims adjustment expenses |
||||||||
Total gross liability for unpaid claims and claims adjustment expense |
$ |
$ |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited) |
||||||||||||||||||||
Years |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
||||||||||
Commercial Liability |
||||||||||||||||||||
Workers' Compensation |
||||||||||||||||||||
Occupational Accident |
( |
|||||||||||||||||||
Physical Damage |
( |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||
Professional Liability Assumed |
Premiums Written |
Premiums Earned |
|||||||||||||||||||||||
2020 |
2019 |
2018 |
2020 |
2019 |
2018 |
|||||||||||||||||||
Direct |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Ceded on direct |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||
Net direct |
||||||||||||||||||||||||
Assumed |
||||||||||||||||||||||||
Ceded on assumed |
||||||||||||||||||||||||
Net assumed |
||||||||||||||||||||||||
Net |
$ |
$ |
$ |
$ |
$ |
$ |
2020 |
2019 |
|||||||
Case unpaid losses, net of allowance for reinsurance |
$ |
$ |
||||||
Incurred but not reported unpaid losses and loss expenses |
||||||||
Paid losses and loss expenses |
||||||||
Unearned premiums |
||||||||
$ |
$ |
2020 |
2019 |
|||||||
Deferred tax liabilities: |
||||||||
Unrealized gain on fixed income and equity security investments |
$ |
$ |
||||||
Deferred acquisition costs |
||||||||
Loss and loss expense reserves |
||||||||
Limited partnership investments |
||||||||
Accelerated depreciation |
||||||||
Other |
||||||||
Total deferred tax liabilities |
||||||||
Deferred tax assets: |
||||||||
Loss and loss expense reserves |
||||||||
Limited partnership investments |
||||||||
Unearned premiums discount |
||||||||
Impairment related investment declines |
||||||||
Deferred compensation |
||||||||
Deferred ceding commission |
||||||||
Allowance for credit losses |
||||||||
Other |
||||||||
Total deferred tax assets |
||||||||
Net deferred tax assets |
$ |
$ |
2020 |
2019 |
2018 |
||||||||||
Statutory federal income rate applied to pre-tax income (loss) |
$ |
$ |
$ |
( |
) |
|||||||
Tax effect of (deduction): |
||||||||||||
Tax-exempt investment income |
( |
) |
( |
) |
( |
) |
||||||
Valuation allowance |
||||||||||||
Other |
( |
) |
( |
) |
( |
) |
||||||
Federal income tax expense (benefit) |
$ |
$ |
$ |
( |
) |
2020 |
2019 |
2018 |
||||||||||
Tax expense (benefit) on pre-tax income (loss): |
||||||||||||
Current |
$ |
$ |
$ |
|||||||||
Deferred |
( |
) |
( |
) |
( |
) |
||||||
$ |
$ |
$ |
( |
) |
2020 |
2019 |
2018 |
||||||||||
Limited partnerships |
$ |
( |
) |
$ |
$ |
( |
) |
|||||
Discounts of loss and loss expense reserves |
( |
) |
( |
) |
( |
) |
||||||
Reserves - salvage and subrogation and other |
( |
) |
||||||||||
Unearned premium discount |
( |
) |
( |
) |
||||||||
Deferred compensation |
( |
) |
( |
) |
||||||||
Impairment related investment declines |
( |
) |
( |
) |
||||||||
Deferred acquisitions costs and ceding commission |
||||||||||||
Unrealized gains / losses |
( |
) |
( |
) |
||||||||
Valuation allowance |
||||||||||||
Other |
( |
) |
||||||||||
Provision for deferred federal income taxes |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
2020 |
2019 |
|||||||
Investments: |
||||||||
Total unrealized gain before federal income tax expense (benefit) |
$ |
$ |
||||||
Deferred tax benefit (liability) (1) |
( |
) |
( |
) |
||||
Net unrealized gains on investments |
||||||||
Foreign exchange adjustment: |
||||||||
Total unrealized losses |
( |
) |
( |
) |
||||
Deferred tax benefit |
||||||||
Net unrealized losses on foreign exchange adjustment |
( |
) |
( |
) |
||||
Accumulated other comprehensive income |
$ |
$ |
(1) |
2020 |
2019 |
2018 |
||||||||||
Investments: |
||||||||||||
Pre-tax holding gains (losses) on fixed income securities arising during period |
$ |
$ |
$ |
( |
) |
|||||||
Less: applicable federal income tax expense (benefit) (1) |
( |
) |
||||||||||
( |
) |
|||||||||||
Pre-tax gains (losses) on fixed income securities included in net income (loss) during period (1) |
( |
) |
( |
) |
( |
) |
||||||
Less: applicable federal income tax expense (benefit) |
( |
) |
( |
) |
( |
) |
||||||
( |
) |
( |
) |
( |
) |
|||||||
Change in unrealized gains (losses) on investments |
$ |
$ |
$ |
( |
) |
(1) |
2020 |
2019 |
2018 |
||||||||||
Amortization of gross deferred policy acquisition costs |
$ |
$ |
$ |
|||||||||
Other underwriting expenses |
||||||||||||
Reinsurance ceded credits |
( |
) |
( |
) |
( |
) |
||||||
Total underwriting expenses |
||||||||||||
Operating expenses of non-insurance companies |
||||||||||||
Goodwill impairment charge |
||||||||||||
Total other operating expenses |
$ |
$ |
$ |
Grant Date |
Number of Shares Issued |
Vesting Date |
Service Period |
Grant Date Fair Value Per Share |
||||||
2/9/2018 |
$ |
|||||||||
5/8/2018 |
$ |
|||||||||
5/7/2019 |
$ |
|||||||||
5/17/2019 |
$ |
|||||||||
5/22/2019 |
$ |
|||||||||
5/5/2020 |
$ |
2020 |
2019 |
2018 |
||||||||||
Revenues: |
||||||||||||
Net premiums earned |
$ |
$ |
$ |
|||||||||
Net investment income |
||||||||||||
Net realized and unrealized gains (losses) on investments |
( |
) |
( |
) |
||||||||
Commissions and other income |
||||||||||||
Total revenues |
$ |
$ |
$ |
2020 |
2019 |
2018 |
||||||||||
Average shares outstanding for basic earnings (loss) per share |
||||||||||||
Dilutive effect of share equivalents |
||||||||||||
Average shares outstanding for diluted earnings (loss) per share |
Description |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Fixed income securities: |
||||||||||||||||
Agency collateralized mortgage obligations |
$ |
$ |
$ |
$ |
||||||||||||
Agency mortgage-backed securities |
||||||||||||||||
Asset-backed securities |
||||||||||||||||
Bank loans |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Corporate securities |
||||||||||||||||
Options embedded in convertible securities |
||||||||||||||||
Mortgage-backed securities |
||||||||||||||||
Municipal obligations |
||||||||||||||||
Non-U.S. government obligations |
||||||||||||||||
U.S. government obligations |
||||||||||||||||
Total fixed income securities |
||||||||||||||||
Equity securities: |
||||||||||||||||
Consumer |
||||||||||||||||
Energy |
||||||||||||||||
Financial |
||||||||||||||||
Industrial |
||||||||||||||||
Technology |
||||||||||||||||
Other |
||||||||||||||||
Total equity securities |
||||||||||||||||
Short-term investments |
||||||||||||||||
Cash equivalents |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
Description |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Fixed income securities: |
||||||||||||||||
Agency collateralized mortgage obligations |
$ |
$ |
$ |
$ |
||||||||||||
Agency mortgage-backed securities |
||||||||||||||||
Asset-backed securities |
||||||||||||||||
Bank loans |
||||||||||||||||
Certificates of deposit |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Corporate securities |
||||||||||||||||
Options embedded in convertible securities |
||||||||||||||||
Mortgage-backed securities |
||||||||||||||||
Municipal obligations |
||||||||||||||||
Non-U.S. government obligations |
||||||||||||||||
U.S. government obligations |
||||||||||||||||
Total fixed income securities |
||||||||||||||||
Equity securities: |
||||||||||||||||
Consumer |
||||||||||||||||
Energy |
||||||||||||||||
Financial |
||||||||||||||||
Industrial |
||||||||||||||||
Technology |
||||||||||||||||
Funds (e.g., mutual funds, closed end funds, ETFs) |
||||||||||||||||
Other |
||||||||||||||||
Total equity securities |
||||||||||||||||
Short-term investments |
||||||||||||||||
Cash equivalents |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
Level Input: |
Input Definition: |
|
Level 1 |
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. |
|
Level 2 |
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date. |
|
Level 3 |
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
Carrying |
Fair Value |
|||||||||||||||||||
2020: |
Value |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||
Assets: |
||||||||||||||||||||
Limited partnerships |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Commercial mortgage loans |
||||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Short-term borrowings |
||||||||||||||||||||
2019: |
||||||||||||||||||||
Assets: |
||||||||||||||||||||
Limited partnerships |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Commercial mortgage loans |
||||||||||||||||||||
Liabilities: |
||||||||||||||||||||
Short-term borrowings |
2020 |
2019 |
|||||||||||||||||||||||||||||||
1st |
2nd |
3rd |
4th |
1st |
2nd |
3rd |
4th |
|||||||||||||||||||||||||
Net premiums earned |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments |
( |
) |
||||||||||||||||||||||||||||||
Losses and loss expenses incurred |
||||||||||||||||||||||||||||||||
Net income (loss) |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income (loss) per diluted share |
$ |
( |
) |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
2021 |
$ |
|||
2022 |
||||
2023 |
||||
2024 and thereafter |
||||
Total minimum payments required |
$ |
(a) 1. | List of Financial Statements--The following consolidated financial statements of the registrant and its subsidiaries (including the Report of Independent Registered Public Accounting Firm) are submitted in Item 8 of this Annual Report on Form 10-K. |
2. | List of Financial Statement Schedules--The following consolidated financial statement schedules of Protective Insurance Corporation and subsidiaries are included in this Annual Report on Form 10-K: |
Schedule I | Summary of Investments--Other than Investments in Related Parties |
Schedule II | Condensed Financial Information of Registrant |
Schedule III | Supplementary Insurance Information |
Schedule IV | Reinsurance |
Schedule VI | Supplemental Information Concerning Property/Casualty Insurance Operations |
Exhibit No. |
Description |
|
Agreement and Plan of Merger, dated as of February 14, 2021, by and among the Company, The Progressive Corporation and Carnation Merger Sub Inc. (Incorporated as an exhibit by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 16, 2021) |
||
Amended and Restated Articles of Incorporation of Protective Insurance Corporation (Incorporated as an exhibit by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2018) |
||
Code of By-Laws of Protective Insurance Corporation, as amended through January 3, 2021 (Incorporated as an exhibit by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 4, 2021) |
||
Description of the Company’s Securities Registered Under Section 12 of the Exchange Act (Incorporated as an exhibit by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019) |
||
Protective Insurance Corporation Restricted Stock Compensation Plan (Incorporated as an exhibit by reference to Exhibit A to the Company's definitive Proxy Statement filed on April 1, 2010 for its Annual Meeting held May 4, 2010)* |
||
Protective Insurance Corporation Annual Incentive Plan (Incorporated as an exhibit by reference to Appendix A to the Company's definitive Proxy Statement filed on April 7, 2017 for its Annual Meeting held May 9, 2017)* |
||
Protective Insurance Corporation Long-Term Incentive Plan (Incorporated as an exhibit by reference to Appendix B to the Company's definitive Proxy Statement filed on April 7, 2017 for its Annual Meeting held May 9, 2017)* |
||
Employment Agreement, effective as of May 22, 2019, by and between the Company and Jeremy D. Edgecliffe-Johnson (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 22, 2019)* |
||
Amendment 1 to the Employment Agreement, effective as of May 22, 2019, by and between the Company and Jeremy D. Edgecliffe-Johnson, dated as of March 31, 2020 (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on May 6, 2020)* |
||
Amendment 2 to the Employment Agreement, effective as of May 22, 2019, by and between the Company and Jeremy D. Edgecliffe-Johnson, dated as of August 3, 2020 (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 5, 2020)* |
||
Offer Letter, dated September 6, 2019, between the Company and John R. Barnett (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2019)* |
||
Non-Compete, Severance and Confidentiality Agreement, dated effective as of October 1, 2019, between the Company and John R. Barnett (Incorporated as an exhibit by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2019)* |
||
Confidentiality, Non-Competition, and Non-Solicitation Agreement, dated May 25, 2018, by and between the Company and Jeremy F. Goldstein (Incorporated as an exhibit by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018)* |
||
Confidentiality, Non-Competition, and Non-Solicitation Agreement, dated July 26, 2018, by and between the Company and Patrick S. Schmiedt (Incorporated as an exhibit by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018)* |
||
Offer Letter, dated August 23, 2019, between the Company and Bahr D. Omidfar (Incorporated as an exhibit by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019)* |
Non-Compete, Severance and Confidentiality Agreement, dated effective as of September 16, 2019, between the Company and Bahr D. Omidfar (Incorporated as an exhibit by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019)* |
||
Severance, Confidentiality, Non-Competition and Non-Solicitation Agreement, dated June 22, 2018, by and between the Company and Matthew A. Thompson (Incorporated as an exhibit by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2018)* |
||
Employment Agreement, dated as of November 13, 2018, by and between the Company and John D. Nichols, Jr. (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on November 16, 2018)* |
||
Form of November 2019 Protective Insurance Corporation Long-Term Incentive Award Agreement (Incorporated as an exhibit by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019)* |
||
Form of Long-Term Incentive Plan Award Agreement, by and between the Company and certain Executives, dated as of July 6, 2020 (Incorporated as an exhibit by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on August 5, 2020)* |
||
Form of Indemnification Agreement, by and between the Company and members of the Company's Board of Directors, dated as of May 5, 2020 (Incorporated as an exhibit be reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on May 6, 2020)* |
||
Voting and Support Agreement, dated as of February 14, 2021, by and among the Company, The Progressive Corporation and the Company's shareholders listed therein (Incorporated as an exhibit by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 16, 2021) |
||
21 |
Subsidiaries of Protective Insurance Corporation |
|
23 |
Consent of Ernst & Young LLP |
|
24 |
Powers of Attorney for certain Officers and Directors |
|
31.1 |
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 |
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32 |
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
101 |
The following materials from Protective Insurance Corporation's Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Operations, (3) the Consolidated Statements of Comprehensive Income (Loss), (4) the Consolidated Statements of Shareholders' Equity, (5) the Consolidated Statements of Cash Flows, and (6) the Notes to Consolidated Financial Statements. |
|
104 |
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101) |
Type of Investment |
Cost |
Fair Value |
Amount at Which Shown in the Consolidated Balance Sheet (1) |
|||||||||
Fixed Income Securities: |
||||||||||||
Bonds: |
||||||||||||
Agency collateralized mortgage obligations |
$ |
$ |
$ |
|||||||||
Agency mortgage-backed securities |
||||||||||||
Asset-backed securities |
||||||||||||
Bank loans |
||||||||||||
Collateralized mortgage obligations |
||||||||||||
Corporate securities |
||||||||||||
Mortgage-backed securities |
||||||||||||
Municipal obligations |
||||||||||||
Non-U.S. government obligations |
||||||||||||
U.S. government obligations |
||||||||||||
Total fixed income securities |
||||||||||||
Equity Securities: |
||||||||||||
Common Stocks: |
||||||||||||
Consumer |
||||||||||||
Energy |
||||||||||||
Financial |
||||||||||||
Industrial |
||||||||||||
Technology |
||||||||||||
Other |
||||||||||||
Total equity securities |
||||||||||||
Commercial mortgage loans |
||||||||||||
Short-term: |
||||||||||||
Certificates of deposit |
||||||||||||
Total short-term and other |
||||||||||||
Total investments |
$ |
$ |
$ |
(1) |
December 31 |
||||||||
2020 |
2019 |
|||||||
Assets |
||||||||
Investment in subsidiaries |
$ |
$ |
||||||
Due from affiliates |
||||||||
Investments other than subsidiaries: |
||||||||
Fixed income securities |
||||||||
Limited partnerships |
||||||||
Cash and cash equivalents |
||||||||
Accounts receivable |
||||||||
Other assets |
||||||||
Total assets |
$ |
$ |
||||||
Liabilities and shareholders' equity |
||||||||
Liabilities: |
||||||||
Premiums payable |
$ |
$ |
||||||
Deposits from insureds |
||||||||
Short-term borrowings |
||||||||
Other liabilities |
||||||||
Shareholders' equity: |
||||||||
Common stock: |
||||||||
Class A |
||||||||
Class B |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income |
||||||||
Retained earnings |
||||||||
Total liabilities and shareholders' equity |
$ |
$ |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Revenue: |
||||||||||||
Commissions and service fees |
$ |
$ |
$ |
|||||||||
Cash dividends from subsidiaries |
||||||||||||
Net investment income |
||||||||||||
Net realized losses on investments |
( |
) |
( |
) |
( |
) |
||||||
Other |
||||||||||||
Expenses: |
||||||||||||
Salary and related items |
||||||||||||
Other |
||||||||||||
Loss before federal income tax benefit and equity in undistributed income of subsidiaries |
( |
) |
( |
) |
( |
) |
||||||
Federal income tax benefit |
( |
) |
( |
) |
( |
) |
||||||
( |
) |
( |
) |
( |
) |
|||||||
Equity in undistributed income of subsidiaries |
( |
) |
||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) |
|||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Unrealized net gains (losses) on fixed income securities |
( |
) |
||||||||||
Foreign currency translation adjustments |
( |
) |
||||||||||
Other comprehensive income (loss) |
( |
) |
||||||||||
Comprehensive income (loss) |
$ |
$ |
$ |
( |
) |
Year Ended December 31 |
||||||||||||
2020 |
2019 |
2018 |
||||||||||
Net cash provided by operating activities |
$ |
$ |
$ |
|||||||||
Investing activities: |
||||||||||||
Purchases of investments |
( |
) |
( |
) |
( |
) |
||||||
Sales or maturities of investments |
||||||||||||
Distributions from limited partnerships |
||||||||||||
Net purchases of property and equipment |
( |
) |
( |
) |
||||||||
Net cash provided by (used in) investing activities |
( |
) |
( |
) |
||||||||
Financing activities: |
||||||||||||
Dividends paid to shareholders |
( |
) |
( |
) |
( |
) |
||||||
Repurchase of common shares |
( |
) |
( |
) |
( |
) |
||||||
Net cash used in financing activities |
( |
) |
( |
) |
( |
) |
||||||
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents |
( |
) |
( |
) |
||||||||
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year |
||||||||||||
Cash, cash equivalents and restricted cash and cash equivalents at end of year |
$ |
$ |
$ |
As of December 31 |
Year Ended December 31 |
|||||||||||||||||||||||||||||||||||||||
Segment |
Deferred Policy Acquisition Costs |
Reserves for Unpaid Claims and Claim Adjustment Expenses |
Unearned Premiums |
Other Policy Claims and Benefits Payable |
Net Premium Earned |
Net Investment Income |
Benefits, Claims, Losses and Settlement Expenses |
Amortization of Deferred Policy Acquisition Costs |
Other Operating Expenses |
Net Premiums Written |
||||||||||||||||||||||||||||||
(A) |
(A) |
(A) (B) |
||||||||||||||||||||||||||||||||||||||
Property/Casualty Insurance |
||||||||||||||||||||||||||||||||||||||||
2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||||||
2018 |
(A) |
(B) |
Direct Premiums |
Ceded to Other Companies |
Assumed from Other Companies |
Net Amount |
% of Amount Assumed to Net |
||||||||||||||||
Premiums Earned - |
||||||||||||||||||||
Years Ended December 31: |
||||||||||||||||||||
2020 |
$ |
$ |
$ |
$ |
% |
|||||||||||||||
2019 |
% |
|||||||||||||||||||
2018 |
% |
Note: |
Additions |
||||||||||||||||||||
Description |
Balance as of Beginning of Period |
Charged to Costs and Expenses |
Other Additions |
Deductions |
Balance as of End of Period |
|||||||||||||||
January 1, 2018 |
||||||||||||||||||||
Accounts receivable |
$ |
$ |
$ |
$ |
||||||||||||||||
Reinsurance recoverable |
||||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||
Accounts receivable |
||||||||||||||||||||
Reinsurance recoverable |
||||||||||||||||||||
December 31, 2019 |
||||||||||||||||||||
Fixed income securities |
||||||||||||||||||||
Accounts receivable |
||||||||||||||||||||
Reinsurance recoverable |
||||||||||||||||||||
Deductible receivable allowance (2) |
||||||||||||||||||||
Mortgage loans |
||||||||||||||||||||
December 31, 2020 |
$ |
$ |
$ |
$ |
(1) |
(2) |
As of December 31 |
Year Ended December 31 |
|||||||||||||||||||||||||||||||||||||||||||
Deferred Policy |
Reserves for Unpaid Claims |
Discount, if any Deducted |
Net |
Claims and Claim Adjustment Expenses Incurred Related to |
Amortization of Deferred Policy |
Paid Claims and Claims |
Net |
|||||||||||||||||||||||||||||||||||||
Affiliation with Registrant |
Acquisition Costs |
Adjustment Expenses |
from Reserves |
Unearned Premiums |
Earned Premiums |
Investment Income |
Current Year |
Prior Years |
Acquisition Costs |
Adjustment Expenses |
Premiums Written |
|||||||||||||||||||||||||||||||||
Consolidated Property/Casualty Subsidiaries: |
||||||||||||||||||||||||||||||||||||||||||||
2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||
2019 |
( |
) |
||||||||||||||||||||||||||||||||||||||||||
2018 |
PROTECTIVE INSURANCE CORPORATION |
||
March 11, 2021 |
By: |
/s/ Jeremy D. Edgecliffe-Johnson |
Jeremy D. Edgecliffe-Johnson |
||
Chief Executive Officer |
Signatures |
Title |
Date |
||
/s/ Jeremy D. Edgecliffe-Johnson |
Chief Executive Officer and Director |
March 11, 2021 |
||
Jeremy D. Edgecliffe-Johnson |
(Principal Executive Officer) |
|||
/s/ John R. Barnett |
Chief Financial Officer |
March 11, 2021 |
||
John R. Barnett |
(Principal Financial Officer and Principal Accounting Officer) |
|||
/s/ Steven J. Bensinger |
Director |
March 11, 2021 |
||
Steven J. Bensinger |
||||
/s/ Stuart D. Bilton |
Director |
March 11, 2021 |
||
Stuart D. Bilton |
||||
/s/ Otto N. Frenzel IV |
Director |
March 11, 2021 |
||
Otto N. Frenzel IV |
||||
/s/ Stephen J. Gray |
Director |
March 11, 2021 |
||
Stephen J. Gray |
||||
/s/ LoriAnn Lowery-Biggers |
Director |
March 11, 2021 |
||
LoriAnn Lowery-Biggers |
||||
/s/ David W. Michelson |
Director |
March 11, 2021 |
||
David W. Michelson |
||||
/s/ John D. Nichols, Jr. |
Director, Chairman of the Board of Directors |
March 11, 2021 |
||
John D. Nichols, Jr. |
||||
/s/ James A. Porcari III |
Director |
March 11, 2021 |
||
James A. Porcari III |
||||
/s/ Nathan Shapiro |
Director |
March 11, 2021 |
||
Nathan Shapiro |
||||
/s/ Robert Shapiro |
Director |
March 11, 2021 |
||
Robert Shapiro |
NAME | STATE OR JURISDICTION OF ORGANIZATION OR INCORPORATION | |
Protective Insurance Company | Indiana | |
Sagamore Insurance Company (1) | Indiana | |
Protective Specialty Insurance Company (1) | Indiana | |
B&L Insurance, Ltd. | Bermuda | |
B&L Brokerage Services, Inc. | Indiana | |
B&L Management, Inc. | Indiana |
(1) | Wholly-owned subsidiary of Protective Insurance Company |
Signature and Title | Date | ||
/s/ Jeremy D. Edgecliffe-Johnson | March 11, 2021 | ||
Jeremy D. Edgecliffe-Johnson, Chief Executive Officer and Director | |||
/s/ Steven J. Bensinger | March 11, 2021 | ||
Steven J. Bensinger, Director | |||
/s/ Stuart D. Bilton | March 11, 2021 | ||
Stuart D. Bilton, Director | |||
/s/ Otto N. Frenzel IV | March 11, 2021 | ||
Otto N. Frenzel IV, Director | |||
/s/ Stephen J. Gray | March 11, 2021 | ||
Stephen J. Gray, Director | |||
/s/ LoriAnn Lowery-Biggers | March 11, 2021 | ||
LoriAnn Lowery-Biggers, Director | |||
/s/ David W. Michelson | March 11, 2021 | ||
David W. Michelson, Director | |||
/s/ John D. Nichols, Jr. | March 11, 2021 | ||
John D. Nichols, Jr., Director, Chairman of the Board of Directors | |||
/s/ James A. Porcari III | March 11, 2021 | ||
James A. Porcari III, Director | |||
/s/ Nathan Shapiro | March 11, 2021 | ||
Nathan Shapiro, Director | |||
/s/ Robert Shapiro | March 11, 2021 | ||
Robert Shapiro, Director |
1. | I have reviewed this Annual Report on Form 10-K of Protective Insurance Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jeremy D. Edgecliffe-Johnson | |
Jeremy D. Edgecliffe-Johnson | |
Chief Executive Officer |
1. | I have reviewed this Annual Report on Form 10-K of Protective Insurance Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ John R. Barnett | |
John R. Barnett | |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jeremy D. Edgecliffe-Johnson | |
Jeremy D. Edgecliffe-Johnson | |
Chief Executive Officer | |
March 11, 2021 |
/s/ John R. Barnett | |
John R. Barnett | |
Chief Financial Officer | |
March 11, 2021 |
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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets | ||
Fixed maturities, amortized cost | $ 894,468 | $ 783,047 |
Fixed maturities, allowance for credit losses | 1,035 | 0 |
Commercial mortgage loans, allowance | 195 | 0 |
Account receivable, allowance | 19,960 | 2,233 |
Reinsurance recoverable, allowance for credit losses | 972 | 1,171 |
Property and equipment, accumulated depreciation | $ 25,959 | $ 20,091 |
Class A Voting [Member] | ||
Shareholders' equity: | ||
Common stock, shares authorized (in shares) | 3,000,000 | 3,000,000 |
Common stock, shares outstanding (in shares) | 2,603,350 | 2,603,350 |
Class B Non-voting [Member] | ||
Shareholders' equity: | ||
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares outstanding (in shares) | 11,674,345 | 11,675,956 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Consolidated Statements of Comprehensive Income (Loss) [Abstract] | |||||||||||
Net income (loss) | $ 11,971 | $ 3,281 | $ 11,367 | $ (22,156) | $ 3,771 | $ (707) | $ 1,535 | $ 2,748 | $ 4,463 | $ 7,347 | $ (34,075) |
Other comprehensive income (loss), net of tax: | |||||||||||
Unrealized net gains (losses) on fixed income securities | 12,141 | 16,071 | (6,868) | ||||||||
Foreign currency translation adjustments | 249 | 645 | (830) | ||||||||
Other comprehensive income (loss) | 12,390 | 16,716 | (7,698) | ||||||||
Comprehensive income (loss) | $ 16,853 | $ 24,063 | $ (41,773) |
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands |
Additional Paid-in Capital [Member] |
Accumulated Other Comprehensive Income (Loss) [Member] |
Retained Earnings [Member] |
Total |
Class A [Member]
Common Stock [Member]
|
Class B [Member]
Common Stock [Member]
|
Class B [Member] |
Cumulative Effect, Period of Adoption, Adjustment [Member]
Additional Paid-in Capital [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Retained Earnings [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member] |
Cumulative Effect, Period of Adoption, Adjustment [Member]
Class A [Member]
Common Stock [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Class B [Member]
Common Stock [Member]
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2018 at Dec. 31, 2017 | $ 55,078 | $ 46,391 | $ 316,700 | $ 418,811 | $ 112 | $ 530 | |||||||
Balance at January 1, 2018 (ASU 2016-01 [Member]) at Dec. 31, 2017 | $ 0 | $ (46,157) | $ 46,157 | $ 0 | $ 0 | $ 0 | |||||||
Balance at January 1, 2018 (ASU 2018-02 [Member]) at Dec. 31, 2017 | 0 | 117 | (117) | 0 | $ 0 | $ 0 | |||||||
Beginning balance (in shares) at Dec. 31, 2017 | 2,623,000 | 12,424,000 | |||||||||||
Beginning balance (in shares) (ASU 2016-01 [Member]) at Dec. 31, 2017 | 0 | 0 | |||||||||||
Beginning balance (in shares) (ASU 2018-02 [Member]) at Dec. 31, 2017 | 0 | 0 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||
Net income (loss) | 0 | 0 | (34,075) | (34,075) | $ 0 | $ 0 | |||||||
Foreign currency translation adjustment, net of tax | 0 | (830) | 0 | (830) | 0 | 0 | |||||||
Change in unrealized gain (loss) on investments, net of tax | 0 | (6,868) | 0 | (6,868) | 0 | 0 | |||||||
Common stock dividends | 0 | 0 | (16,835) | (16,835) | 0 | 0 | |||||||
Repurchase of common stock | (832) | 0 | (3,755) | (4,596) | $ 0 | $ (9) | |||||||
Repurchase of common stock (in shares) | (8,000) | (192,000) | |||||||||||
Restricted stock grants | 474 | 0 | 0 | 475 | $ 0 | $ 1 | |||||||
Restricted stock grants (in shares) | 0 | 22,000 | |||||||||||
Balance at December 31, 2019 at Dec. 31, 2018 | 54,720 | (7,347) | 308,075 | 356,082 | $ 112 | $ 522 | |||||||
Ending balance (in shares) at Dec. 31, 2018 | 2,615,000 | 12,254,000 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||
Net income (loss) | 0 | 0 | 7,347 | 7,347 | $ 0 | $ 0 | |||||||
Foreign currency translation adjustment, net of tax | 0 | 645 | 0 | 645 | 0 | 0 | |||||||
Change in unrealized gain (loss) on investments, net of tax | 0 | 16,071 | 0 | 16,071 | 0 | 0 | |||||||
Common stock dividends | 0 | 0 | (5,857) | (5,857) | 0 | 0 | |||||||
Repurchase of common stock | (2,896) | 0 | (8,577) | (11,501) | $ (1) | $ (27) | |||||||
Repurchase of common stock (in shares) | (12,000) | (665,000) | |||||||||||
Restricted stock grants | 1,525 | 0 | 0 | 1,529 | $ 0 | $ 4 | |||||||
Restricted stock grants (in shares) | 0 | 87,000 | |||||||||||
Balance at December 31, 2019 at Dec. 31, 2019 | 53,349 | 9,369 | 300,988 | 364,316 | $ 111 | $ 499 | |||||||
Balance at December 31, 2019 (ASU 2016-13 [Member]) at Dec. 31, 2019 | $ 0 | $ 0 | $ (12,281) | $ (12,281) | $ 0 | $ 0 | |||||||
Ending balance (in shares) at Dec. 31, 2019 | 2,603,000 | 11,676,000 | |||||||||||
Ending balance (in shares) (ASU 2016-13 [Member]) at Dec. 31, 2019 | 0 | 0 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||
Net income (loss) | 0 | 0 | 4,463 | 4,463 | $ 0 | $ 0 | |||||||
Foreign currency translation adjustment, net of tax | 0 | 249 | 0 | 249 | 0 | 0 | |||||||
Change in unrealized gain (loss) on investments, net of tax | 0 | 12,141 | 0 | 12,141 | 0 | 0 | |||||||
Common stock dividends | 0 | 0 | (5,813) | (5,813) | 0 | 0 | |||||||
Repurchase of common stock | (563) | 0 | (1,214) | (1,782) | $ 0 | $ (5) | |||||||
Repurchase of common stock (in shares) | 0 | (127,000) | (126,764) | ||||||||||
Restricted stock grants | 1,785 | 0 | 0 | 1,789 | $ 0 | $ 4 | |||||||
Restricted stock grants (in shares) | 0 | 126,000 | |||||||||||
Balance at December 31, 2019 at Dec. 31, 2020 | $ 54,571 | $ 21,759 | $ 286,143 | $ 363,082 | $ 111 | $ 498 | |||||||
Ending balance (in shares) at Dec. 31, 2020 | 2,603,000 | 11,675,000 |
Summary of Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies |
Note A - Summary of Significant Accounting Policies
Description of Business: Protective Insurance Corporation (the "Company"), based in Carmel, Indiana, is a property-casualty insurer specializing in marketing and underwriting property, liability and workers' compensation coverage for trucking and public transportation fleets, as well as coverage for trucking industry independent contractors. The Company offers a range of products and services, the most significant being commercial automobile and workers' compensation insurance products. The Company operates as one reportable property and casualty insurance segment based on how its operating results are regularly reviewed by its chief operating decision maker when making decisions about how resources are allocated and assessing performance.
The term “Insurance Subsidiaries,” as used throughout this Annual Report on Form 10-K, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd.
Effective August 1, 2018, the Company changed its name to Protective Insurance Corporation to better align its holding company's and Insurance Subsidiaries' identities and to reflect its position within the insurance industry.
Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates: Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results will differ from those estimates.
Cash and Cash Equivalents: The Company considers investments in money market funds to be cash equivalents. Carrying amounts for these instruments approximate their fair values.
Investments: Carrying amounts for fixed income securities represent fair value and are based on quoted market prices, where available, or broker/dealer quotes for specific securities where quoted market prices are not available. Equity securities are carried at quoted market prices (fair value).
Commercial mortgage loans are carried primarily at amortized cost along with an allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The Company recorded an allowance of $195 on its commercial mortgage loans as of December 31, 2020 in conjunction with the adoption of the credit losses accounting standard discussed below.
The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to record its proportionate share of the limited partnership's net income. To the extent the limited partnerships include both realized and unrealized investment gains or losses in the determination of net income or loss, then the Company would also recognize, through its consolidated statements of operations, its proportionate share of the investee's unrealized, as well as realized, investment gains or losses within net unrealized gains (losses) on equity securities and limited partnership investments.
Short-term and other investments are carried at cost, which approximates their fair values.
Fixed income securities are considered to be available-for-sale. The related unrealized net gains or losses (net of applicable tax effects) on fixed income securities are reflected directly in other comprehensive income (loss) within shareholders' equity. Included within available-for-sale fixed income securities are convertible debt securities. A portion of the changes in the fair values of convertible debt securities is reflected as a component of net realized gains (losses) on investments, excluding impairment losses within the consolidated statements of operations. Realized gains and losses on disposals of fixed income securities are recorded on the trade date. Realized gains and losses on fixed income securities are determined by the specific identification of the cost of investments sold and are included in net realized gains (losses) on investments, excluding impairment losses.
Equity securities are recorded at fair value, with unrealized net gains or losses reflected as a component of net unrealized gains (losses) on equity securities and limited partnership investments within the consolidated statements of operations. Realized gains and losses on disposals of equity securities are recorded on the trade date and included in net realized gains (losses) on investments, excluding impairment losses.
Investment Impairments: For a fixed income security in an unrealized loss position where the Company has the intent to sell the fixed income security, or it is more likely than not that the Company will have to sell the fixed income security before recovery of its amortized cost basis, the decline in value is recorded within impairment losses on investments in the consolidated statements of operations. The new cost basis of the investment is the previous amortized cost basis less the impairment recognized. The new cost basis is not adjusted for any subsequent recoveries in fair value.
For a fixed income security that the Company does not intend to sell or in cases where it is more likely than not that the Company will not have to sell the security, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the consolidated statements of operations. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income (loss). The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted.
The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, focusing on those below investment grade, with emphasis on securities downgraded below investment grade. The credit loss is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed income security. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the appropriate effective interest rate. Additionally, the Company may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost.
The Company reports investment income due and accrued separately from available-for-sale fixed income securities and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments, excluding impairment losses at the time the issuer defaults or is expected to default on payments.
Deductible Receivables: Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a net of allowance basis in the consolidated balance sheets within accounts receivable. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors. A probability-of-default methodology, which reflects current and forecasted economic conditions, is used to estimate the allowance for expected credit losses for uncollateralized deductible receivables. As of December 31, 2020, the Company recorded an allowance for expected credit losses of $16,500 ($13,035, net of tax). See Note T – Litigation, Commitments and Contingencies for further discussion.
Property and Equipment: Property and equipment are carried at cost, less accumulated depreciation. Depreciation is computed principally by the straight-line method.
Goodwill and Other Intangible Assets: In the fourth quarter of 2018, the Company concluded the entire goodwill balance was impaired, resulting in an impairment loss of $3,152. See Note M for further discussion. This impairment charge is included within other operating expenses in the consolidated statement of operations for the year ended December 31, 2018. Intangible assets determined to have finite lives, such as customer relationships and employment agreements, are amortized over their estimated useful lives in a manner that best reflects the economic benefits of the intangible asset. In addition, impairment testing is performed on these amortizing intangible assets if impairment indicators are noted..
Reserves for Losses and Loss Expenses: The reserves for losses and loss expenses are determined using case basis evaluations and statistical analyses and represent estimates of the ultimate cost of all reported and unreported losses which are unpaid at year-end. These reserves include estimates of future trends in claim severity and frequency and other factors which could vary as the losses are ultimately settled. While actual results will differ from such estimates, management believes that the reserves for losses and loss expenses are adequate. The estimates are continually reviewed, and as adjustments to these reserves become necessary, such adjustments are reflected in current operations.
Recognition of Revenue and Costs: Premiums are earned over the period for which insurance protection is provided. A reserve for unearned premiums is established to reflect amounts applicable to subsequent accounting periods. Commissions to unaffiliated companies and premium taxes applicable to unearned premiums are deferred and expensed as the related premiums are earned. The Company does not defer acquisition costs that are not directly variable with the production of premiums. If it is determined that expected losses and deferred expenses will likely exceed the related unearned premiums, the asset representing deferred policy acquisition costs is reduced and an expense is charged against current operations to reflect any such premium deficiency. In the event that the expected premium deficiency exceeds deferred policy acquisition costs, an additional liability would be recorded with a corresponding expense to current operations for the amount of the excess premium deficiency. Anticipated investment income is considered in determining recoverability of deferred acquisition costs. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded on its consolidated balance sheet at December 31, 2020.
Reinsurance: Reinsurance premiums, commissions, expense reimbursements and reserves related to the Company's reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other insurers have been reported as a reduction of premiums earned. Amounts applicable to reinsurance ceded for unearned premiums and claim loss reserves have been reported as reinsurance recoverable assets. Certain reinsurance contracts provide for additional or return premiums and commissions based upon profits or losses to the reinsurer over prescribed periods. Estimates of additional or return premiums and commissions are adjusted quarterly to recognize actual loss experience to date, as well as projected loss experience applicable to the various contract periods. Estimates of reinstatement premiums on reinsurance contracts covering catastrophic events are, to the extent reasonably determinable, recorded concurrently with the related loss.
Should impairment in the ability of a reinsurer to satisfy its obligations to the Company be determined to exist, current year operations would be charged in amounts sufficient to provide for the Company's additional liability. Such charges, when incurred, are included in other operating expenses, rather than losses and loss expenses incurred, because the inability of the Company to collect from reinsurers is a credit risk rather than a deficiency associated with the loss reserving process.
Deferred Taxes: Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement and tax return bases of assets and liabilities based on enacted tax rates and laws. The deferred tax benefits of the deferred tax assets are recognized to the extent realization of such benefits is more likely than not. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred income tax expense or benefit generally represents the net change in deferred income tax assets and liabilities during the year. Current income tax expense represents the tax liability associated with revenues and expenses currently taxable or deductible on various income tax returns for the year reported.
Restricted Stock: Shares of restricted stock vest over the vesting period from the date of grant and certain shares of restricted stock are accelerated for retirement-eligible recipients in accordance with the non-substantive, post-grant date vesting clause of Accounting Standards Codification ("ASC") Topic 715, Compensation—Retirement Benefits. Restricted stock is valued based on the closing price of the Company's Class B Common Stock on the day the award is granted.
Earnings (Loss) Per Share: Diluted earnings (loss) per share of common stock are based on the average number of shares of Class A and Class B Common Stock outstanding during the year, adjusted for the dilutive effect, if any, of restricted stock awards outstanding. Basic earnings (loss) per share are presented exclusive of the effect of share-based awards outstanding.
Comprehensive Income (Loss): The Company records accumulated other comprehensive income (loss) from unrealized gains and losses on available-for-sale securities and from foreign exchange adjustments as a separate component of shareholders' equity. A reclassification adjustment to other comprehensive income (loss) is made for gains or losses during the period included in net income (loss).
Fair Value Measurements: The Company provides disclosures related to recurring and non-recurring fair value measurements with separate disclosures for the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements, along with an explanation for the transfers. Additionally, separate disclosures are provided for purchases, sales, issuances and settlements on a gross basis for Level 3 fair value measurements as well as additional clarification for both the level of disaggregation reported for each class of assets or liabilities and disclosures of inputs and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for assets and liabilities categorized as Level 2 or Level 3.
Insurance Company-Owned Life Insurance: Included within other assets on the consolidated balance sheets at December 31, 2020 and 2019 was $11,458 and $11,049 of company-owned life insurance. The carrying value of the company-owned life insurance policies represents the cash surrender value as reported by the respective insurer, which approximates fair value.
Recently Adopted Accounting Pronouncements: In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01. The amendments in ASU 2016-01 changed the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Previously, the Company's equity securities were classified as available-for-sale and changes in fair value were recognized in accumulated other comprehensive income (loss) as a component of shareholders' equity. The Company adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective approach and recorded a cumulative-effect adjustment to reclassify unrealized gains on equity securities of $71,012 ($46,157, net of tax) from other comprehensive income (loss) to retained earnings within the consolidated balance sheet as of December 31, 2018. Unrealized gains or losses on equity securities are now recognized in the consolidated statements of operations within net unrealized gains (losses) on equity securities and limited partnership investments.
In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), or ASU 2016-02. ASU 2016-02 superseded the prior lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The guidance provided for a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, or ASU 2018-11, which provided adopters an additional transition method by allowing entities to initially apply ASU 2016-02, and subsequent related standards, at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the new guidance on January 1, 2019 utilizing the transition method allowed per ASU 2018-11, and accordingly, comparative period financial information was not adjusted for the effects of the new guidance. No cumulative-effect adjustment was required to the opening balance of retained earnings on the adoption date. The Company's adoption of the new standard did not have any impact on the Company's consolidated statements of operations or cash flows. As of December 31, 2020 the Company had a right-of-use asset and a lease liability recorded within the consolidated balance sheet, each of approximately $120, which are included within other assets and accounts payable and other liabilities.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. This update provided clarification, corrected errors in and made minor improvements to various ASC topics. Many of the amendments in this update had transition guidance with effective dates for annual periods beginning after December 15, 2018, and some amendments in this update did not require transition guidance and were effective upon issuance of this update. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 introduced a current expected credit loss (CECL) model for measuring expected credit losses for certain types of financial instruments held at the reporting date requiring significant judgment in application based on historical experience, current conditions and reasonable supportable forecasts, but is not prescriptive about certain aspects of estimating expected losses. The guidance replaced the current incurred loss model for measuring expected credit losses and provided for additional disclosure requirements. Subsequently, the FASB issued additional ASUs on Topic 326 that did not change the core principle of the guidance in ASU 2016-13, but provided clarification and implementation guidance on certain aspects of ASU 2016-13, and have the same effective date and transition requirements as ASU 2016-13. The Company adopted the guidance using a modified retrospective approach as of January 1, 2020 and recognized an pre-tax cumulative effect adjustment of $15,545 ($12,281, net of tax), to the opening balance of retained earnings. The adjustment was primarily related to estimating credit losses on the Company’s accounts receivable balances, reinsurance recoverable balances and commercial mortgage loans at the date of adoption with $15,000 ($11,850, net of tax) attributed to the ongoing litigation with Personnel Staffing Group ("PSG") discussed in Note T - Litigation, Commitments and Contingencies.
The updated guidance in ASU 2016-13 also amended the previous other-than-temporary impairment (“OTTI”) model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. This update removed the disclosure requirements for the amounts of and the reasons for transfers between Level 1 and Level 2 and disclosure of the policy for timing of transfers between levels. This update also removed disclosure requirements for the valuation processes for Level 3 fair value measurements. Additionally, this update added disclosure requirements for the changes in unrealized gains and losses for recurring Level 3 fair value measurements and quantitative information for certain unobservable inputs in Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. As the requirements of this guidance are applicable to disclosure only, the adoption of ASU 2018-13 had no material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 became effective on January 1, 2021 and is not expected to have a material effect on the Company's consolidated financial statements.
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Investments |
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Investments |
Note B - Investments
The following is a summary of available-for-sale securities at December 31:
The following table summarizes, for available-for-sale fixed income securities in an unrealized loss position at December 31, 2020 and December 31, 2019, the aggregate fair value and gross unrealized loss categorized by the duration individual securities have been continuously in an unrealized loss position.
The fair value and the cost or amortized costs of fixed income investments at December 31, 2020, organized by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.
Major categories of investment income for the years ended December 31, 2020, 2019 and 2018 are summarized as follows:
Following is a summary of the components of net realized and unrealized gains (losses) for the years ended December 31, 2020, 2019 and 2018:
As discussed in Note A, the Company adopted the provisions of the new CECL model for measuring expected credit losses for available-for-sale fixed income securities as of January 1, 2020. The updated guidance amended the previous OTTI model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account on the consolidated balance sheet with a corresponding adjustment to earnings and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. For those securities in an unrealized loss position throughout the year where the Company intended to sell the security at the balance sheet date, a write down to earnings of $1,826 was recorded during the year ended December 31, 2020. The Company also analyzed securities in an unrealized loss position for credit losses and recorded an allowance for credit losses of $1,035 as of December 31, 2020. The Company reviewed its remaining fixed income securities in an unrealized loss position as of December 31, 2020 and determined the losses were the result of non-credit factors, such as the increase in market volatility due to the disruption in global financial markets as a result of the novel coronavirus ("COVID-19") pandemic and responses to it. The Company currently does not intend to sell nor does it expect to be required to sell these securities before recovery of their amortized cost.
Gain and loss activity for fixed income securities, as shown in the previous table, includes adjustments for impairment losses on investments for the years ended December 31, 2020, 2019 and 2018 summarized as follows:
There is no primary market and only a limited secondary market for the Company's investments in limited partnerships and, in most cases, the Company is prohibited from disposing of its limited partnership interests for some period of time and generally must seek approval from the applicable general partner for any such disposal. Distributions of earnings from these partnerships are largely at the sole discretion of the general partners, and distributions are generally not received by the Company for many years after the earnings have been reported. The Company has a commitment to contribute up to an additional $350 to a limited partnership as of December 31, 2020.
The fair value of regulatory deposits with various insurance departments in the United States and Canada totaled $122,896 and $99,763 at December 31, 2020 and 2019, respectively.
Short-term investments at December 31, 2020 included $1,000 in certificates of deposit issued by a Bermuda bank.
The Company's fixed income securities are over 93% invested in investment grade fixed income investments. The Company has no fixed income investments that were originally issued with guarantees by a third-party insurance company nor does the Company have any direct exposure to any guarantor at December 31, 2020.
Approximately $63,660 of fixed income investments (6.1% of the Company's consolidated investment portfolio, which includes money market instruments classified as cash equivalents) consists of non-rated bonds and bonds rated as less than investment grade at year-end. These investments have a $2,230 aggregate net unrealized gain position at December 31, 2020.
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Loss and Loss Expense Reserves |
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Loss and Loss Expense Reserves |
Note C - Loss and Loss Expense Reserves
Activity in the reserves for losses and loss expenses for the years ended December 31, 2020, 2019 and 2018 is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.
The table above shows that a reserve savings of $311 developed during 2020 in the settlement of claims occurring on or before December 31, 2019, compared to a reserve savings of $550 in 2019 and reserve deficiencies of $16,786 in 2018. The developments for each year are composed of individual claim savings and deficiencies which, in the aggregate, have resulted from the settlement of claims at amounts higher or lower than previously reserved and from changes in estimates of losses incurred but not reported as part of the normal reserving process.
The following table reconciles the triangles presented in this note to the total (savings) / deficiency for the Company of $311 shown in the table above:
The $311 prior accident year savings that developed during 2020 related to favorable loss development in the Company's occupational accident business, partially offset by unfavorable loss development in commercial automobile coverages. This 2020 savings compares to savings of $550 for 2019 related to favorable loss development in the Company's workers' compensation business, and a deficiency of $16,786 for 2018 related to unfavorable development from commercial automobile coverages. This unfavorable loss development was the result of increased claim severity due to a more challenging litigation environment, as well as an unexpected increase in the time to settle claims leading to an unfavorable change in claim settlement patterns.
Loss reserves have been reduced by estimated salvage and subrogation recoverable of approximately $4,000 and $4,000 at December 31, 2020 and 2019, respectively.
The following is information about incurred and paid claims development as of December 31, 2020, net of reinsurance, as well as cumulative claim frequency and the total of incurred‐but‐not‐reported liabilities plus expected development on reported claims included within the net incurred claims amounts.
Workers' Compensation
Commercial Liability
Professional Liability Reinsurance Assumed (in runoff)
Occupational Accident
Physical Damage (1)
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheet at December 31, 2020 and 2019 is as follows.
The following is supplementary information about average historical claims duration as of December 31, 2020:
Reserve methodologies for incurred but not reported losses
The Company uses both standard actuarial techniques common to most insurance companies as well as proprietary techniques developed by the Company in connection with its specialty business products. For its short-tail lines of business, the Company uses predominantly the incurred or paid loss development factor methods. The Company has found that the use of accident quarter loss development triangles, rather than those based upon accident year, are most responsive to claim settlement trends and fluctuations in premium exposure for its short-tail lines. A minimum of 12 running accident quarters is used to project the reserve necessary for incurred but not reported losses for its short-tail lines.
The Company also uses the loss development factor approach for its long-tail lines of business, including workers' compensation. A minimum of 15 accident years is included in the loss development triangles used to calculate link ratios and the selected loss development factors used to determine the reserves for incurred but not reported losses. Significant emphasis is placed on the use of tail factors for the Company's long-tail lines of business.
For the Company's commercial automobile risks, which are covered by regularly updated reinsurance agreements and which contain wide-ranging self-insured retentions ("SIR"), traditional actuarial methods are supplemented by other methods, as described below, in consideration of the Company's exposures to loss. In situations where the Company's reinsurance structure, the insured's SIR selections, policy volume, and other factors are changing, current accident period loss exposures may not be homogenous enough with historical loss data to allow for reliable projection of future developed losses. Therefore, the Company supplements the above-described actuarial methods with loss ratio reserving techniques developed from the Company's proprietary databases to arrive at the reserve for incurred but not reported losses for the calendar/accident period under review. As losses for a given calendar/accident period develop with the passage of time, management evaluates such development on a monthly and quarterly basis and adjusts reserve factors, as necessary, to reflect current judgment with regard to the anticipated ultimate incurred losses. This process continues until all losses are settled for each period subject to this method. The Company notes there is more inherent uncertainty in 2020 than normal due to COVID-19, which could lead to either favorable or unfavorable impacts to its loss development that are currently unknown.
Claim count methodology
The Company uses a claim event and coverage combination to estimate frequency. For example, a single claim event involving loss for physical damage of a vehicle and personal injury to a claimant would be considered two claims for purposes of the calculation of frequency. A single claim event causing personal injury to two claimants would be considered a single claim under the methodology. Due to the number of reinsurance assumed treaties entered into (and the varying structures: both quota share and excess of loss) the Company deems it impractical to collect claim frequency information related to this business and this information has not been made available to the Company.
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Reinsurance |
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Reinsurance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance |
Note D – Reinsurance
The Insurance Subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Some reinsurance contracts provide that a loss be shared among the Company and its reinsurers on a predetermined pro-rata basis ("quota share"), while other contracts provide that the Company keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount ("excess of loss"). Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product-line basis. Certain treaties covering commercial automobile risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.
The Company also serves as an assuming reinsurer on treaties with direct writing insurance companies and, prior to June 30, 2015, under retrocessions from other reinsurers for catastrophic property coverages. Accordingly, for periods prior to that date, the occurrence of catastrophic events could have had a significant impact on the Company's operations. In addition, the Insurance Subsidiaries participate in certain mandatory residual market pools, which require insurance companies to provide coverages on assigned risks. The assigned risk pools allocate participation to all insurers based upon each insurer's portion of premium writings on a state or national level. Historically, the operation of these assigned risk pools has resulted in net losses being allocated to the Company, although such losses have not been material in relation to the Company's operations.
The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premiums written and earned for the most recent three years:
Net losses and loss expenses incurred for 2020, 2019 and 2018 have been reduced by ceded reinsurance recoveries of approximately $105,895, $121,927 and $148,173, respectively. Ceded reinsurance premiums and loss recoveries for the purchase of catastrophe reinsurance coverage on the Company's net direct business were not material.
Net losses and loss expenses incurred include expenses of $432 for 2020, expenses of $193 for 2019 and a savings of $1,300 for 2018, relating to reinsurance assumed from non-affiliated insurance or reinsurance companies.
Components of reinsurance recoverable at December 31, 2020 and 2019 are as follows:
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Income Taxes |
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Income Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
Note E - Income Taxes
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the "U.S. Tax Act") was signed into law, which lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The Company finalized its accounting for the tax effects of the U.S. Tax Act during 2018. No material adjustments to income tax expense (benefit) were recorded during 2018.
Deferred income taxes are calculated to account for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
A summary of the difference between federal income tax expense (benefit) computed at the statutory rate and that reported in the consolidated financial statements as of December 31, 2020, 2019 and 2018 is as follows:
Federal income tax expense (benefit) as of December 31, 2020, 2019 and 2018 consists of the following:
The provision for deferred federal income taxes as of December 31, 2020, 2019 and 2018 consists of the following:
In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during the periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance, including the Company's current three year cumulative GAAP loss through December 31, 2020, the increase in deferred tax assets due to the adoption of CECL at January 1, 2020 discussed in Note A, the change in unrealized gains and losses and the loss of a high taxable income year from the carryback period. The three year cumulative loss limits the Company's ability to use projected income beyond 2020 in the analysis. As of December 31, 2020 and 2019, the Company had no valuation allowance. However, the application of intra-period tax allocation rules to benefits associated with deferred tax assets resulted in a charge to continuing operations as of December 31, 2020 of $1,264 in the consolidated statement of operations, offset by a corresponding benefit in shareholders' equity within accumulated other comprehensive income.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures. The CARES Act, among other things, permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act, noting it does not have a material impact.
The Company has no uncertain tax positions as of December 31, 2020 or 2019. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit) and changes in such accruals would impact the Company's effective tax rate. There were no amounts accrued for the payment of interest at December 31, 2020, 2019 and 2018. As of December 31, 2020, calendar years 2019, 2018 and 2017 remain subject to examination by the Internal Revenue Service.
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Shareholders' Equity |
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Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity |
Note F - Shareholders' Equity
The Company's Class A and Class B Common Stock has a stated value of approximately $0.04 per share. The Company paid a total of $5,692, or $0.40 per share, in dividends during 2020, $5,857, or $0.40 per share, during 2019 and $16,835, or $1.12 per share, during 2018.
On August 31, 2017, the Company's Board of Directors authorized the reinstatement of its share repurchase program for up to 2,464,209 shares of the Company's Class A or Class B Common Stock. No duration has been placed on the Company's share repurchase program, and the Company reserves the right to amend, suspend or discontinue it at any time. The share repurchase program does not commit the Company to repurchase any shares of its common stock.
During the year ended December 31, 2020, the Company paid $1,782 to repurchase 126,764 shares of Class B Common Stock at an average share price of $14.07 under the share repurchase program. No share repurchases have been made by the Company since March 20, 2020.
Accumulated Other Comprehensive Income (Loss)
A reconciliation of the components of accumulated other comprehensive income (loss) at December 31, 2020 and 2019 is as follows:
Details of changes in net unrealized gains (losses) on investments for the years ended December 31, 2020, 2019 and 2018 are as follows:
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Other Operating Expenses |
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Other Operating Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Operating Expenses |
Note G - Other Operating Expenses
Details of other operating expenses for the years ended December 31:
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Employee Benefit Plans |
12 Months Ended |
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Dec. 31, 2020 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans |
Note H - Employee Benefit Plans
The Company maintains a defined contribution 401(k) Employee Savings and Profit Sharing Plan (the "Plan") which covers nearly all employees. The Company's contributions are based on a set percentage and the contributions to the Plan for 2020, 2019 and 2018 were $3,274, $3,213 and $3,486, respectively.
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Stock Based Compensation |
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Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation |
Note I - Stock Based Compensation
The Company issues shares of restricted Class B Common Stock to the Company's outside directors as part of their annual retainer compensation. The shares are distributed to the outside directors on the vesting date, which, with the exception of pro-rated annual retainers granted to outside directors, is one year following the date of grant. On May 17, 2019, the Company granted shares of restricted Class B Common Stock in connection with the election of a new outside director, reflecting such director’s pro-rated annual retainer compensation, which shares vested and were distributed on May 7, 2020. Additionally, effective May 22, 2019, John D. Nichols, Jr. ceased serving as the Company's Interim Chief Executive Officer and principal executive officer, but continued to serve as Chairman of the Company's Board of Directors. On May 22, 2019, the Company granted shares of restricted Class B Common Stock to Mr. Nichols in connection with this transition, reflecting his pro-rated annual retainer compensation, which shares also vested and were distributed on May 7, 2020. The table below provides details of the restricted stock issuances to directors for 2020, 2019 and 2018:
Compensation expense related to the above stock grants is recognized over the period in which the directors render the services.
Director compensation expense associated with these restricted stock grants of $598, $518 and $464 was charged against income for the restricted stock awards granted in 2020, 2019 and 2018, respectively.
In March 2018, the Company's Compensation Committee, now known as the Compensation and Human Capital Committee (the "Committee"), granted equity-based awards pursuant to the Company's Long-Term Incentive Plan (the "Long-Term Incentive Plan"). Certain participants under the Long-Term Incentive Plan were granted equity awards (the "2018 LTIP Awards"), with the number of shares of Class B Common Stock earned pursuant to such awards determined by applying a performance matrix consisting of a measurement of the combined results of the Company's 2018 growth in gross premiums earned and the Company's 2018 combined ratio. The combined ratio is calculated as a ratio of (A) losses and loss expenses incurred, plus other operating expenses, less commission and other income to (B) net premiums earned. No 2018 LTIP Awards were earned based on the Company's performance in 2018, and therefore no shares were issued pursuant to the 2018 LTIP Awards. In addition to the 2018 LTIP Awards, in March 2018 the Committee also granted Value Creation Incentive Plan awards (the "2018 VCIP Awards") to certain participants under the Long-Term Incentive Plan. The 2018 VCIP Awards are performance-based equity awards that could be earned based on the Company's cumulative operating income over a three-year performance period from January 1, 2018 through December 31, 2020 relative to a cumulative operating income goal for the period set by the Committee in March 2018. For the purpose of the 2018 VCIP Awards, cumulative operating income is equal to income before taxes excluding net realized gains (losses) on investments. Any 2018 VCIP Awards earned would have been paid in unrestricted shares of the Company's Class B Common Stock at the end of the three-year performance period, but no later than March 15, 2021. No shares were earned under the 2018 VCIP Awards for the three-year performance period ended December 31, 2020.
On November 13, 2018, the Company entered into an employment agreement with its Interim Chief Executive Officer, John D. Nichols, Jr. Pursuant to the terms of this employment agreement, on November 13, 2018, Mr. Nichols was granted 85,000 restricted shares of the Company's Class B Common Stock (the "Nichols Stock Grant"), of which 42,500 shares vested as of October 17, 2019, 21,250 shares vested as of October 17, 2020, and 21,250 shares will vest as of October 17, 2021. The Company incurred $193 of expense during the year ended December 31, 2020 related to the Nichols Stock Grant.
In March 2019, the Committee granted equity-based awards pursuant to the Long-Term Incentive Plan. Certain participants under the Long-Term Incentive Plan were granted equity awards (the "2019 LTIP Awards"), with the number of shares of Class B Common Stock earned pursuant to such awards determined by applying a performance matrix consisting of a corporate performance component as well as a personal performance component. The corporate performance component of the 2019 LTIP Awards was determined based on the Company's achievement of 2019 underwriting income compared to the plan target. The Company's underwriting income was calculated as income (loss) before federal income tax expense (benefit), less net realized and unrealized gains (losses) on investments, less net investment income. The personal performance component of the 2019 LTIP Awards was determined based on the achievement of personal goals that aligned with departmental and corporate objectives for 2019. 2019 LTIP Awards earned were paid in shares of restricted Class B Common Stock in early 2020. of such shares will vest annually over the three-year period beginning one year from the date of issue. The Company incurred $110 of expense during the year ended December 31, 2020 related to the 2019 LTIP Awards.
On May 22, 2019, the Company entered into an employment agreement with its new Chief Executive Officer, Jeremy D. Edgecliffe-Johnson. Pursuant to the terms of this employment agreement, on May 22, 2019, Mr. Edgecliffe-Johnson was granted 70,000 restricted shares of the Company's Class B Common Stock (the "Edgecliffe-Johnson Stock Grant"), of which 35,000 shares will vest as of June 1, 2022, 21,000 shares will vest as of June 1, 2023, and 14,000 shares will vest as of June 1, 2024. The Company incurred $240 of expense during the year ended December 31, 2020 related to the Edgecliffe-Johnson Stock Grant.
On November 5, 2019, the Board of the Company, upon the recommendation of the Committee, approved equity compensation awards to be granted to seven members of senior management as of November 12, 2019 under the Long-Term Incentive Plan. The Board approved a total of $1,100 in grants of restricted shares of the Company’s Class B Common Stock, which will vest on January 1, 2023, subject to the recipient’s continued employment with the Company through the vesting date. The Company incurred $352 of expense during the year ended December 31, 2020 related to this grant.
On July 6, 2020, the Committee granted a total of 101,400 restricted shares of the Company's Class B Common Stock to certain members of senior management under the Long-Term Incentive Plan. These 101,400 restricted shares will vest on July 1, 2023, subject to the recipient’s continued employment with the Company through the vesting date. The Company incurred $221 of expense during the year ended December 31, 2020 related to this grant.
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Segment Information |
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
Note J – Segment Information
The Company has one reportable business segment in its operations: Property and Casualty Insurance. The property and casualty insurance segment provides multiple lines of insurance coverage primarily to commercial automobile companies, as well as to independent contractors who contract with commercial automobile companies.
The following table summarizes segment revenues for the years ended December 31:
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Earnings (Loss) Per Share |
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Earnings (Loss) Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share |
Note K - Earnings (Loss) Per Share
The following is a reconciliation of the denominators used in the calculation of basic and diluted earnings (loss) per share for the years ended December 31:
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Concentrations of Credit Risk |
12 Months Ended |
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Dec. 31, 2020 | |
Concentrations of Credit Risk [Abstract] | |
Concentrations of Credit Risk |
Note L - Concentrations of Credit Risk
The Company writes policies of excess insurance attaching above SIRs and also writes policies that contain per-claim deductibles. Those losses and claims that fall within the SIR limits are obligations of the insured; however, the Company writes surety bonds in favor of various regulatory agencies guaranteeing the insureds' payment of claims within the SIR. Further, specified portions of losses and claims incurred under large deductible policies, while obligations of the Company, are contractually reimbursable to the Company from the insureds. The Company requires collateral from its insureds to serve as a source of reimbursement if the Company is obligated to pay claims within the SIR by reason of an insured's default or if the insured fails to reimburse the Company for deductible amounts paid by the Company. Acceptable collateral may be provided in the form of letters of credit on Company-approved banks, Company-approved marketable securities or cash.
The amount of collateral required of an insured is determined by the financial condition of the insured, the type of obligations guaranteed by the Company, estimated reserves for incurred losses within the SIR or deductible that have been reported to the insured or the Company, estimated incurred but not reported losses, and estimated losses that are expected to occur within the SIR or be deductible prior to the next collateral adjustment date. In general, the Company attempts to hold collateral equal to 100% of the ultimate losses that would be paid by or due the Company in the event of an insured's default. Periodic audits are conducted by the Company to evaluate its exposure and the collateral required. If a deficiency in collateral is noted as the result of an audit, additional collateral is requested immediately. Because collateral amounts contain numerous estimates of the Company's exposure, are adjusted only periodically and are sometimes reduced based on the superior financial condition of the insured, the amount of collateral held by the Company at a given point in time may not be sufficient to fully reimburse the Company for all amounts due in the event of an insured's default. In that regard, the Company is not fully collateralized for the potential maximum exposure relating to FedEx Corporation and certain of its subsidiaries and related entities ("FedEx"). However, the Company believes that an event of default in excess of the collateralized amounts is remote.
The Company's balance sheet includes paid and estimated unpaid amounts recoverable from reinsurers under various agreements. These recoverables are only partially collateralized. The two largest amounts due from individual reinsurers, net of collateral and offsets, were $55,097 and $46,488 at December 31, 2020.
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Acquisition and Related Goodwill and Intangibles |
12 Months Ended |
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Dec. 31, 2020 | |
Acquisition and Related Goodwill and Intangibles [Abstract] | |
Acquisition and Related Goodwill and Intangibles |
Note M – Acquisition and Related Goodwill and Intangibles
On October 31, 2008, the Company purchased a commercial lines specialty insurance agency for a cash purchase price of $3,500. As part of the purchase, the Company recorded goodwill of $3,152 and intangible assets of $179. Accumulated amortization of intangible assets was $179 as of both December 31, 2020 and 2019.
During the fourth quarter of 2018, the Company conducted its annual impairment review. Based on the results of that review, the Company concluded that its entire goodwill balance was impaired, resulting in an impairment loss of $3,152. The Company utilized a market approach, which considered revenue and earnings multiples of its own and comparable company information. In the analysis, the Company considered the significant decline in its stock price and the decline in overall financial performance during 2018, particularly in more recent periods, as well as the downgrade to its A.M. Best Company, Inc. rating in late 2018.
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Fair Value |
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Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value |
Note N – Fair Value
Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:
As of December 31, 2020:
As of December 31, 2019:
Level inputs, as defined by the FASB guidance, are as follows:
The Company did not have any Level 3 assets at December 31, 2020 or 2019. Level 3 assets, when present, are valued using various unobservable inputs including extrapolated data, proprietary models and indicative quotes.
Quoted market prices are obtained whenever possible. Where quoted market prices are not available, fair values are estimated using broker/dealer quotes for specific securities. These techniques are significantly affected by the Company's assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs have not been considered in estimating fair values.
Transfers between levels, if any, are recorded as of the beginning of the reporting period. There were no significant transfers of assets between Level 1 and Level 2 during 2020 or 2019.
In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balance sheets.
Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine the underlying economic value of the Company. The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:
Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity. The underlying assets of the Company's investments in limited partnerships are carried primarily at fair value; therefore, the Company's carrying value of limited partnerships approximates fair value. As these investments are not actively traded and the corresponding inputs are based on data provided by the investees, they are classified as Level 3.
Commercial mortgage loans: Commercial mortgage loans are carried primarily at amortized cost along with a valuation allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The fair value of the Company’s investment in these commercial mortgage loans is based on expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk. These investments are classified as Level 3.
Short-term borrowings: The fair value of the Company's short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to the Company for debt of similar terms and remaining maturities.
A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheets at December 31, 2020 and 2019 is as follows:
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Quarterly Results of Operations (Unaudited) |
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Quarterly Results of Operations (Unaudited) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results of Operations (Unaudited) |
Note O - Quarterly Results of Operations (Unaudited)
Quarterly results of operations are as follows:
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Statutory |
12 Months Ended |
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Dec. 31, 2020 | |
Statutory [Abstract] | |
Statutory |
Note P - Statutory
Net income of the Insurance Subsidiaries, all of which are wholly-owned, as determined in accordance with statutory accounting practices, was $3,881, $25,302 and $36,236 for 2020, 2019 and 2018, respectively. Consolidated statutory capital and surplus for these Insurance Subsidiaries was $347,489 and $371,793 at December 31, 2020 and 2019, respectively, of which $50,584 may be transferred by dividend or loan to Protective during calendar year 2021 with proper notification to, but without approval from, regulatory authorities.
State regulatory authorities prescribe calculations of the minimum amount of statutory capital and surplus necessary for each insurance company to remain authorized. These computations are referred to as risk-based capital requirements and are based on a number of complex factors taking into consideration the quality and nature of assets, the historical adequacy of recorded liabilities and the specific nature of business conducted. At December 31, 2020, the minimum statutory capital and surplus requirements of the Insurance Subsidiaries was $136,544. Actual consolidated statutory capital and surplus at December 31, 2020 exceeded this requirement by $210,946.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||
Leases |
Note Q - Leases
The Company leases certain computer and related equipment using noncancelable operating leases. Lease expense for 2020, 2019 and 2018 was $135, $302 and $204, respectively. At December 31, 2020, future lease payments for operating leases with initial or remaining noncancelable terms of one year or more consisted of the following:
The Company recorded a right-of-use asset and lease liability on the consolidated balance sheet at December 31, 2020 of $120, which are included within
and . |
Debt |
12 Months Ended |
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Dec. 31, 2020 | |
Debt [Abstract] | |
Debt |
Note R – Debt
On August 9, 2018, the Company entered into a credit agreement providing a revolving credit facility with a $40,000 limit, with the option for up to an additional $35,000 in incremental loans at the discretion of the lenders. This credit agreement has an expiration date of August 9, 2022. Interest on this revolving credit facility is referenced to the London Interbank Offered Rate and can be fixed for periods of up to one year at the Company's option. Outstanding drawings on this revolving credit facility were $20,000 as of December 31, 2020. At December 31, 2020, the effective interest rate was 1.25%, and the Company had $20,000 remaining under the revolving credit facility. The current outstanding borrowings were used to repay the Company's previous line of credit. The Company's revolving credit facility has two financial covenants, each of which were met as of December 31, 2020. These covenants require the Company to have a minimum U.S. generally accepted accounting principles net worth and a maximum consolidated debt to equity ratio of 0.35.
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Related Parties |
12 Months Ended |
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Dec. 31, 2020 | |
Related Parties [Abstract] | |
Related Parties |
Note S - Related Parties
The Company utilizes the services of an investment firm of which one director of the Company is a partial owner. This investment firm manages equity securities and fixed income portfolios held by the Company with an aggregate market value of approximately $7,796 at December 31, 2020. Total commissions and net fees earned by this investment firm and its affiliates on these portfolios were $110, $145 and $103 for the years ended December 31, 2020, 2019 and 2018.
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Litigation, Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2020 | |
Litigation, Commitments and Contingencies [Abstract] | |
Litigation, Commitments and Contingencies |
Note T - Litigation, Commitments and Contingencies
In the ordinary, regular and routine course of their business, the Company and its Insurance Subsidiaries are frequently involved in various matters of litigation relating principally to claims for insurance coverage provided. No currently pending matter is deemed by management to be material to the Company, other than as noted below.
Personnel Staffing Group Litigation
In July 2019, Protective Insurance Company (“Protective”) was named as a defendant in an action brought by a former insured, Personnel Staffing Group d/b/a MVP Staffing (“PSG”), in the U.S. District Court for the Central District of California (the “California Action”) alleging that Protective had breached its workers’ compensation insurance policy and had breached the duties of good faith and fair dealing. Protective provided workers’ compensation insurance to PSG from January 1, 2017 through June 30, 2018, which was subject to a $500 per claim deductible to be paid by PSG. No specific damages were included in the complaint. In August 2019, Protective filed a motion to dismiss or stay the action. On April 28, 2020, Protective's motion to dismiss the California Action was granted without prejudice on grounds that Indiana is the more appropriate forum. On May 4, 2020, PSG filed a notice of appeal in the 9th Circuit Court of Appeals, challenging the order of dismissal in the California Action.
In August 2019, Protective filed a lawsuit against PSG in Marion County Superior Court, in Indianapolis, Indiana (the “Indiana Court”) alleging breach of contract, breach of the parties' collateral agreement, breach of the parties' indemnity agreement, and seeking a declaratory judgment regarding PSG’s obligation to fund its ongoing claim deductible obligations and adequately collateralize Protective’s current and ongoing claims exposure pursuant to terms of the parties' agreements (the “Indiana Action”). In October 2019, Protective amended the complaint to include allegations of misrepresentation as to source of coverage, negligent misrepresentation, fraud and racketeering and seeking injunctive relief. In November 2019, PSG filed a motion to dismiss the Indiana Action on the basis of comity with the California Action, claiming that California was the proper forum for Protective’s claims.
In February 2020, the Indiana Court issued an order dismissing the Indiana Action without prejudice; the Indiana Court declined to rule on the legal effect of the forum selection clause in the parties’ agreements, finding that any interpretation should be addressed by the court in the California Action. Following the court's granting of Protective’s motion to dismiss in the California Action, on May 1, 2020, Protective filed a motion with the Indiana Court to re-open the Indiana Action, which was denied on September 23, 2020. On December 22, 2020, Protective moved for reconsideration of its Motion to Re-Open the Indiana Action, which the Indiana Court granted on February 5, 2021. On February 18, 2021, PSG moved for further reconsideration and for hearing, which was held on March 2, 2021. The Indiana court has taken the matter under advisement. Protective intends to vigorously pursue its claims against PSG, however, the ultimate outcome cannot be presently determined.
Pursuant to the terms of the workers’ compensation policies, Protective has a duty to adjust and pay claims arising under the policies regardless of whether PSG makes payments to Protective for deductible obligations under the policies. Under its contractual obligations to Protective, PSG is required to maintain a “loss fund” for the payment of claims, the balance of which is to remain at or above $4,000; in addition, PSG is required to provide collateral in an amount equal to 110% of Protective’s current open case reserves on workers’ compensation claims arising under the policies.
As of December 31, 2020, Protective had approximately $21,780 in receivables on claims arising under PSG’s workers’ compensation policies and had exhausted all collateral provided by PSG. Protective continues to pay claims settlements under the policies without reimbursement from PSG. For the past six months, the average monthly invoices have been approximately $740. PSG’s estimated ultimate obligation under the agreements is approximately $47,000 as of December 31, 2020 (inclusive of the $21,780 in receivables noted above). At December 31, 2020, based on the Company's assessment that PSG will continue to operate as a business and that the terms of the agreement with PSG will be legally enforceable, the Company believes that it will fully collect all current and future amounts due from PSG relating to this matter.
The Company included this matter in its assessment of the impact of adopting ASU 2016-13, the new guidance for measuring CECL, which is discussed in Note A. A probability-of-default methodology was applied to projected estimated cash flows to estimate the allowance for expected credit losses for this matter. The Company considered the delay in reimbursement for claims paid as well as probability of default assumptions when analyzing the credit loss related to this matter. As of January 1, 2020, in conjunction with the adoption of ASU 2016-13, the Company recorded an allowance for expected credit losses of $15,000 ($11,850, net of tax) as a reduction to equity. During the third quarter of 2020, the Company performed an update to its CECL allowance calculation related to the PSG matter. As noted above, there have been further delays in the litigation process, which have extended the estimated cash flow timing. As a result of these delays and an increase in the estimated ultimate obligation, the Company recorded an additional allowance of $1,500 ($1,185, net of tax) within other operating expenses in the condensed consolidated statement of operations in the third quarter of 2020. No additional allowance was recorded in the fourth quarter of 2020. In the event of a situation that results in no recovery from PSG, the Company would incur an estimated charge to the consolidated statement of operations of $30,500 ($24,095, net of tax), which represents the estimated ultimate obligation discussed above less the CECL allowance.
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note U – Subsequent Events
Proposed Merger with The Progressive Corporation
Merger Agreement
On February 14, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Progressive Corporation, an Ohio corporation (“Progressive”), and Carnation Merger Sub Inc., an Indiana corporation and wholly-owned indirect subsidiary of Progressive (“Merger Sub”). The Merger Agreement provides for, subject to the satisfaction or waiver of specified conditions, the merger of Merger Sub with and into the Company (the “Merger”), whereupon the separate existence of Merger Sub will cease and Protective will continue as the surviving corporation and as a wholly-owned indirect subsidiary of Progressive.
The Company's Board of Directors (the "Board"), at the unanimous recommendation of the Special Committee of the Board, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, the Company and its shareholders, and approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby. The Merger is expected to close prior to the end of the third quarter of 2021. At the effective time of the Merger, each issued and outstanding share of common stock, without par value, of the Company (other than each share of the Company’s common stock that is owned by the Company as treasury stock or by any subsidiary of the Company and each share of the Company’s common stock owned by Progressive, Merger Sub or any other subsidiary of Progressive immediately prior to the effective time of the Merger) will be automatically canceled and converted into the right to receive $23.30 in cash, without interest for a total transaction value of approximately $338 million.
The Merger Agreement contains various customary representations and warranties from each of the Company, Progressive and Merger Sub. The Company has also agreed to various customary covenants, including but not limited to conducting its business in the ordinary course and not engaging in certain types of transactions during the period between the execution of the Merger Agreement and the closing of the Merger. However, the Merger Agreement permits the Company to continue to pay regular quarterly dividends not to exceed $0.10 per share of the Company’s common stock. The Merger is subject to certain conditions, including approval of the Merger by the Company's Class A shareholders, legal and regulatory approvals including from the Indiana Department of Insurance and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary closing conditions.
Voting and Support Agreement
On February 14, 2021, the Company also entered into a Voting and Support Agreement (the “Voting Agreement”) with Progressive and certain of the Company's shareholders. The Voting Agreement requires that the Company shareholders party to the Voting Agreement: (i) appear at the meeting of the holders of the Company's Class A common stock to consider resolutions to approve the Merger Agreement and the Merger or otherwise cause their shares of the Company's common stock to be counted as present for purposes of calculating a quorum, and (ii) vote their shares (a) in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and any action reasonably requested by Progressive or the Board in furtherance of the foregoing, (b) against any action or agreement that would result in a material breach of any covenant, representation or warranty or other obligation or agreement of the Company contained in the Merger Agreement and (c) against any takeover proposal or superior proposal (provided, that if the Board changes its recommendation with respect to the Merger, any shares of Class A common stock owned by such shareholders in excess of approximately 35% of the outstanding shares of Class A common stock will be voted in the same proportion as those shares of Class A common stock voted by the holders of the Company’s Class A common stock that are not party to the Voting Agreement).
There can be no assurance that the Merger will occur or, if it does occur, of its terms or timing. For additional information regarding the risks associated with the Merger, please see Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.
Dividends
On February 22, 2021, the Company's Board of Directors declared a regular quarterly dividend of $0.10 per share on the Company's Class A and Class B Common Stock. The dividend per share will be payable March 10, 2021 to shareholders of record on March 5, 2021.
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Schedule I - Summary of Investments Other Than Investments in Related Parties |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule I - Summary of Investments Other Than Investments in Related Parties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule I - Summary of Investments Other Than Investments in Related Parties |
SCHEDULE I
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in thousands)
As of December 31, 2020
|
Schedule II - Condensed Financial Information of Registrant |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule II - Condensed Financial Information of Registrant [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule II - Condensed Financial Information of Registrant |
SCHEDULE II
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS - PARENT COMPANY ONLY
(in thousands)
SCHEDULE II
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS - PARENT COMPANY ONLY
(in thousands)
SCHEDULE II
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - PARENT COMPANY ONLY
(in thousands)
SCHEDULE II
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS - PARENT COMPANY ONLY
(in thousands)
Note to Condensed Financial Statements -- Basis of Presentation
The Company's investment in subsidiaries is stated at cost plus equity in the undistributed earnings of subsidiaries since the date of acquisition. The Company's share of net income of its subsidiaries is included in income using the equity method. These financial statements should be read in conjunction with the Company's consolidated financial statements.
|
Schedule III - Supplementary Insurance Information |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule III - Supplementary Insurance Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule III - Supplementary Insurance Information |
SCHEDULE III
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(in thousands)
|
Schedule IV - Reinsurance |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule IV - Reinsurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule IV - Reinsurance |
SCHEDULE IV
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
REINSURANCE
(in thousands)
|
Schedule V - Valuation Allowance and Qualifying Accounts |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule V - Valuation Allowances and Qualifying Accounts [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule V - Valuation Allowances and Qualifying Accounts |
SCHEDULE V
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
VALUATION ALLOWANCES AND QUALIFYING ACCOUNTS
(in thousands)
|
Schedule VI - Supplemental Information Concerning Property/Casualty Insurance Operations |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule VI - Supplemental Information Concerning Property/Casualty Insurance Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule VI - Supplemental Information Concerning Property/Casualty Insurance Operations |
SCHEDULE VI
PROTECTIVE INSURANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
(in thousands)
|
Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Summary of Significant Accounting Policies [Abstract] | |
Description of Business |
Description of Business: Protective Insurance Corporation (the "Company"), based in Carmel, Indiana, is a property-casualty insurer specializing in marketing and underwriting property, liability and workers' compensation coverage for trucking and public transportation fleets, as well as coverage for trucking industry independent contractors. The Company offers a range of products and services, the most significant being commercial automobile and workers' compensation insurance products. The Company operates as one reportable property and casualty insurance segment based on how its operating results are regularly reviewed by its chief operating decision maker when making decisions about how resources are allocated and assessing performance.
The term “Insurance Subsidiaries,” as used throughout this Annual Report on Form 10-K, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd.
Effective August 1, 2018, the Company changed its name to Protective Insurance Corporation to better align its holding company's and Insurance Subsidiaries' identities and to reflect its position within the insurance industry.
|
Basis of Presentation |
Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company transactions and accounts have been eliminated in consolidation.
|
Use of Estimates |
Use of Estimates: Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results will differ from those estimates.
|
Cash and Cash Equivalents |
Cash and Cash Equivalents: The Company considers investments in money market funds to be cash equivalents. Carrying amounts for these instruments approximate their fair values.
|
Investments |
Investments: Carrying amounts for fixed income securities represent fair value and are based on quoted market prices, where available, or broker/dealer quotes for specific securities where quoted market prices are not available. Equity securities are carried at quoted market prices (fair value).
Commercial mortgage loans are carried primarily at amortized cost along with an allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The Company recorded an allowance of $195 on its commercial mortgage loans as of December 31, 2020 in conjunction with the adoption of the credit losses accounting standard discussed below.
The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to record its proportionate share of the limited partnership's net income. To the extent the limited partnerships include both realized and unrealized investment gains or losses in the determination of net income or loss, then the Company would also recognize, through its consolidated statements of operations, its proportionate share of the investee's unrealized, as well as realized, investment gains or losses within net unrealized gains (losses) on equity securities and limited partnership investments.
Short-term and other investments are carried at cost, which approximates their fair values.
Fixed income securities are considered to be available-for-sale. The related unrealized net gains or losses (net of applicable tax effects) on fixed income securities are reflected directly in other comprehensive income (loss) within shareholders' equity. Included within available-for-sale fixed income securities are convertible debt securities. A portion of the changes in the fair values of convertible debt securities is reflected as a component of net realized gains (losses) on investments, excluding impairment losses within the consolidated statements of operations. Realized gains and losses on disposals of fixed income securities are recorded on the trade date. Realized gains and losses on fixed income securities are determined by the specific identification of the cost of investments sold and are included in net realized gains (losses) on investments, excluding impairment losses.
Equity securities are recorded at fair value, with unrealized net gains or losses reflected as a component of net unrealized gains (losses) on equity securities and limited partnership investments within the consolidated statements of operations. Realized gains and losses on disposals of equity securities are recorded on the trade date and included in net realized gains (losses) on investments, excluding impairment losses.
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Investment Impairments |
Investment Impairments: For a fixed income security in an unrealized loss position where the Company has the intent to sell the fixed income security, or it is more likely than not that the Company will have to sell the fixed income security before recovery of its amortized cost basis, the decline in value is recorded within impairment losses on investments in the consolidated statements of operations. The new cost basis of the investment is the previous amortized cost basis less the impairment recognized. The new cost basis is not adjusted for any subsequent recoveries in fair value.
For a fixed income security that the Company does not intend to sell or in cases where it is more likely than not that the Company will not have to sell the security, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the consolidated statements of operations. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income (loss). The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted.
The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, focusing on those below investment grade, with emphasis on securities downgraded below investment grade. The credit loss is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed income security. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the appropriate effective interest rate. Additionally, the Company may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost.
The Company reports investment income due and accrued separately from available-for-sale fixed income securities and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments, excluding impairment losses at the time the issuer defaults or is expected to default on payments.
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Deductible Receivables |
Deductible Receivables: Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a net of allowance basis in the consolidated balance sheets within accounts receivable. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors. A probability-of-default methodology, which reflects current and forecasted economic conditions, is used to estimate the allowance for expected credit losses for uncollateralized deductible receivables. As of December 31, 2020, the Company recorded an allowance for expected credit losses of $16,500 ($13,035, net of tax). See Note T – Litigation, Commitments and Contingencies for further discussion.
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Property and Equipment |
Property and Equipment: Property and equipment are carried at cost, less accumulated depreciation. Depreciation is computed principally by the straight-line method.
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Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets: In the fourth quarter of 2018, the Company concluded the entire goodwill balance was impaired, resulting in an impairment loss of $3,152. See Note M for further discussion. This impairment charge is included within other operating expenses in the consolidated statement of operations for the year ended December 31, 2018. Intangible assets determined to have finite lives, such as customer relationships and employment agreements, are amortized over their estimated useful lives in a manner that best reflects the economic benefits of the intangible asset. In addition, impairment testing is performed on these amortizing intangible assets if impairment indicators are noted. |
Reserves for Losses and Loss Expenses |
Reserves for Losses and Loss Expenses: The reserves for losses and loss expenses are determined using case basis evaluations and statistical analyses and represent estimates of the ultimate cost of all reported and unreported losses which are unpaid at year-end. These reserves include estimates of future trends in claim severity and frequency and other factors which could vary as the losses are ultimately settled. While actual results will differ from such estimates, management believes that the reserves for losses and loss expenses are adequate. The estimates are continually reviewed, and as adjustments to these reserves become necessary, such adjustments are reflected in current operations.
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Recognition of Revenue and Costs |
Recognition of Revenue and Costs: Premiums are earned over the period for which insurance protection is provided. A reserve for unearned premiums is established to reflect amounts applicable to subsequent accounting periods. Commissions to unaffiliated companies and premium taxes applicable to unearned premiums are deferred and expensed as the related premiums are earned. The Company does not defer acquisition costs that are not directly variable with the production of premiums. If it is determined that expected losses and deferred expenses will likely exceed the related unearned premiums, the asset representing deferred policy acquisition costs is reduced and an expense is charged against current operations to reflect any such premium deficiency. In the event that the expected premium deficiency exceeds deferred policy acquisition costs, an additional liability would be recorded with a corresponding expense to current operations for the amount of the excess premium deficiency. Anticipated investment income is considered in determining recoverability of deferred acquisition costs. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded on its consolidated balance sheet at December 31, 2020.
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Reinsurance |
Reinsurance: Reinsurance premiums, commissions, expense reimbursements and reserves related to the Company's reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other insurers have been reported as a reduction of premiums earned. Amounts applicable to reinsurance ceded for unearned premiums and claim loss reserves have been reported as reinsurance recoverable assets. Certain reinsurance contracts provide for additional or return premiums and commissions based upon profits or losses to the reinsurer over prescribed periods. Estimates of additional or return premiums and commissions are adjusted quarterly to recognize actual loss experience to date, as well as projected loss experience applicable to the various contract periods. Estimates of reinstatement premiums on reinsurance contracts covering catastrophic events are, to the extent reasonably determinable, recorded concurrently with the related loss.
Should impairment in the ability of a reinsurer to satisfy its obligations to the Company be determined to exist, current year operations would be charged in amounts sufficient to provide for the Company's additional liability. Such charges, when incurred, are included in other operating expenses, rather than losses and loss expenses incurred, because the inability of the Company to collect from reinsurers is a credit risk rather than a deficiency associated with the loss reserving process.
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Deferred Taxes |
Deferred Taxes: Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement and tax return bases of assets and liabilities based on enacted tax rates and laws. The deferred tax benefits of the deferred tax assets are recognized to the extent realization of such benefits is more likely than not. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred income tax expense or benefit generally represents the net change in deferred income tax assets and liabilities during the year. Current income tax expense represents the tax liability associated with revenues and expenses currently taxable or deductible on various income tax returns for the year reported.
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Restricted Stock |
Restricted Stock: Shares of restricted stock vest over the vesting period from the date of grant and certain shares of restricted stock are accelerated for retirement-eligible recipients in accordance with the non-substantive, post-grant date vesting clause of Accounting Standards Codification ("ASC") Topic 715, Compensation—Retirement Benefits. Restricted stock is valued based on the closing price of the Company's Class B Common Stock on the day the award is granted.
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Earnings (Loss) Per Share |
Earnings (Loss) Per Share: Diluted earnings (loss) per share of common stock are based on the average number of shares of Class A and Class B Common Stock outstanding during the year, adjusted for the dilutive effect, if any, of restricted stock awards outstanding. Basic earnings (loss) per share are presented exclusive of the effect of share-based awards outstanding.
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Comprehensive Income (Loss) |
Comprehensive Income (Loss): The Company records accumulated other comprehensive income (loss) from unrealized gains and losses on available-for-sale securities and from foreign exchange adjustments as a separate component of shareholders' equity. A reclassification adjustment to other comprehensive income (loss) is made for gains or losses during the period included in net income (loss).
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Fair Value Measurements |
Fair Value Measurements: The Company provides disclosures related to recurring and non-recurring fair value measurements with separate disclosures for the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements, along with an explanation for the transfers. Additionally, separate disclosures are provided for purchases, sales, issuances and settlements on a gross basis for Level 3 fair value measurements as well as additional clarification for both the level of disaggregation reported for each class of assets or liabilities and disclosures of inputs and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for assets and liabilities categorized as Level 2 or Level 3.
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Insurance Company-Owned Life Insurance |
Insurance Company-Owned Life Insurance: Included within other assets on the consolidated balance sheets at December 31, 2020 and 2019 was $11,458 and $11,049 of company-owned life insurance. The carrying value of the company-owned life insurance policies represents the cash surrender value as reported by the respective insurer, which approximates fair value.
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Recently Adopted Accounting Pronouncements |
Recently Adopted Accounting Pronouncements: In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01. The amendments in ASU 2016-01 changed the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Previously, the Company's equity securities were classified as available-for-sale and changes in fair value were recognized in accumulated other comprehensive income (loss) as a component of shareholders' equity. The Company adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective approach and recorded a cumulative-effect adjustment to reclassify unrealized gains on equity securities of $71,012 ($46,157, net of tax) from other comprehensive income (loss) to retained earnings within the consolidated balance sheet as of December 31, 2018. Unrealized gains or losses on equity securities are now recognized in the consolidated statements of operations within net unrealized gains (losses) on equity securities and limited partnership investments.
In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), or ASU 2016-02. ASU 2016-02 superseded the prior lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The guidance provided for a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, or ASU 2018-11, which provided adopters an additional transition method by allowing entities to initially apply ASU 2016-02, and subsequent related standards, at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the new guidance on January 1, 2019 utilizing the transition method allowed per ASU 2018-11, and accordingly, comparative period financial information was not adjusted for the effects of the new guidance. No cumulative-effect adjustment was required to the opening balance of retained earnings on the adoption date. The Company's adoption of the new standard did not have any impact on the Company's consolidated statements of operations or cash flows. As of December 31, 2020 the Company had a right-of-use asset and a lease liability recorded within the consolidated balance sheet, each of approximately $120, which are included within other assets and accounts payable and other liabilities.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. This update provided clarification, corrected errors in and made minor improvements to various ASC topics. Many of the amendments in this update had transition guidance with effective dates for annual periods beginning after December 15, 2018, and some amendments in this update did not require transition guidance and were effective upon issuance of this update. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 introduced a current expected credit loss (CECL) model for measuring expected credit losses for certain types of financial instruments held at the reporting date requiring significant judgment in application based on historical experience, current conditions and reasonable supportable forecasts, but is not prescriptive about certain aspects of estimating expected losses. The guidance replaced the current incurred loss model for measuring expected credit losses and provided for additional disclosure requirements. Subsequently, the FASB issued additional ASUs on Topic 326 that did not change the core principle of the guidance in ASU 2016-13, but provided clarification and implementation guidance on certain aspects of ASU 2016-13, and have the same effective date and transition requirements as ASU 2016-13. The Company adopted the guidance using a modified retrospective approach as of January 1, 2020 and recognized an pre-tax cumulative effect adjustment of $15,545 ($12,281, net of tax), to the opening balance of retained earnings. The adjustment was primarily related to estimating credit losses on the Company’s accounts receivable balances, reinsurance recoverable balances and commercial mortgage loans at the date of adoption with $15,000 ($11,850, net of tax) attributed to the ongoing litigation with Personnel Staffing Group ("PSG") discussed in Note T - Litigation, Commitments and Contingencies.
The updated guidance in ASU 2016-13 also amended the previous other-than-temporary impairment (“OTTI”) model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. This update removed the disclosure requirements for the amounts of and the reasons for transfers between Level 1 and Level 2 and disclosure of the policy for timing of transfers between levels. This update also removed disclosure requirements for the valuation processes for Level 3 fair value measurements. Additionally, this update added disclosure requirements for the changes in unrealized gains and losses for recurring Level 3 fair value measurements and quantitative information for certain unobservable inputs in Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. As the requirements of this guidance are applicable to disclosure only, the adoption of ASU 2018-13 had no material impact on the Company's consolidated financial statements.
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Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 became effective on January 1, 2021 and is not expected to have a material effect on the Company's consolidated financial statements.
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Investments (Tables) |
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Available-for-Sale Securities |
The following is a summary of available-for-sale securities at December 31:
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Fixed Income Securities in Unrealized Loss Position |
The following table summarizes, for available-for-sale fixed income securities in an unrealized loss position at December 31, 2020 and December 31, 2019, the aggregate fair value and gross unrealized loss categorized by the duration individual securities have been continuously in an unrealized loss position.
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Fixed Income Investments by Contractual Maturity |
The fair value and the cost or amortized costs of fixed income investments at December 31, 2020, organized by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.
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Major Categories of Investment Income |
Major categories of investment income for the years ended December 31, 2020, 2019 and 2018 are summarized as follows:
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Gains (Losses) on Investments |
Following is a summary of the components of net realized and unrealized gains (losses) for the years ended December 31, 2020, 2019 and 2018:
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Adjustments for Other-than-temporary Impairment |
Gain and loss activity for fixed income securities, as shown in the previous table, includes adjustments for impairment losses on investments for the years ended December 31, 2020, 2019 and 2018 summarized as follows:
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Loss and Loss Expense Reserves (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss and Loss Expense Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Reserves for Losses and Loss Expenses |
Activity in the reserves for losses and loss expenses for the years ended December 31, 2020, 2019 and 2018 is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.
The following table reconciles the triangles presented in this note to the total (savings) / deficiency for the Company of $311 shown in the table above:
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Incurred Claims Development, Net of Reinsurance |
The following is information about incurred and paid claims development as of December 31, 2020, net of reinsurance, as well as cumulative claim frequency and the total of incurred‐but‐not‐reported liabilities plus expected development on reported claims included within the net incurred claims amounts.
Workers' Compensation
Commercial Liability
Professional Liability Reinsurance Assumed (in runoff)
Occupational Accident
Physical Damage (1)
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Reconciliation of Net Incurred and Paid Claims Development |
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheet at December 31, 2020 and 2019 is as follows.
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Supplementary Information about Average Historical Claims Duration |
The following is supplementary information about average historical claims duration as of December 31, 2020:
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Reinsurance (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Reinsurance Ceded and Assumed on the Company's Net Premium Written and Earned |
The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premiums written and earned for the most recent three years:
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Components of Reinsurance Recoverable |
Components of reinsurance recoverable at December 31, 2020 and 2019 are as follows:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Components of Deferred Tax Assets and Liabilities |
Deferred income taxes are calculated to account for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
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Difference between Federal Income Taxes Expense (Benefit) Computed at Statutory Rate |
A summary of the difference between federal income tax expense (benefit) computed at the statutory rate and that reported in the consolidated financial statements as of December 31, 2020, 2019 and 2018 is as follows:
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Federal Income Tax Expense (Benefit) |
Federal income tax expense (benefit) as of December 31, 2020, 2019 and 2018 consists of the following:
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Provision for Deferred Federal Income Tax |
The provision for deferred federal income taxes as of December 31, 2020, 2019 and 2018 consists of the following:
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Shareholders' Equity (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Components of Accumulated Other Comprehensive Income (Loss) |
A reconciliation of the components of accumulated other comprehensive income (loss) at December 31, 2020 and 2019 is as follows:
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Details of Changes in Net Unrealized Gains (Losses) on Investments |
Details of changes in net unrealized gains (losses) on investments for the years ended December 31, 2020, 2019 and 2018 are as follows:
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Other Operating Expenses (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Operating Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Details of Other Operating Expenses |
Details of other operating expenses for the years ended December 31:
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Stock Based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Detail of Restricted Stock Issuances |
The Company issues shares of restricted Class B Common Stock to the Company's outside directors as part of their annual retainer compensation. The shares are distributed to the outside directors on the vesting date, which, with the exception of pro-rated annual retainers granted to outside directors, is one year following the date of grant. On May 17, 2019, the Company granted shares of restricted Class B Common Stock in connection with the election of a new outside director, reflecting such director’s pro-rated annual retainer compensation, which shares vested and were distributed on May 7, 2020. Additionally, effective May 22, 2019, John D. Nichols, Jr. ceased serving as the Company's Interim Chief Executive Officer and principal executive officer, but continued to serve as Chairman of the Company's Board of Directors. On May 22, 2019, the Company granted shares of restricted Class B Common Stock to Mr. Nichols in connection with this transition, reflecting his pro-rated annual retainer compensation, which shares also vested and were distributed on May 7, 2020. The table below provides details of the restricted stock issuances to directors for 2020, 2019 and 2018:
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Segment Information (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Revenues |
The following table summarizes segment revenues for the years ended December 31:
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Earnings (Loss) Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the Denominators used in the Calculation of Basic and Diluted Earnings (Loss) per Share |
The following is a reconciliation of the denominators used in the calculation of basic and diluted earnings (loss) per share for the years ended December 31:
|
Fair Value (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets Measured at Fair Value on Recurring Basis |
Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:
As of December 31, 2020:
As of December 31, 2019:
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Carrying Value and Fair Value by Level of Financial Instruments |
A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheets at December 31, 2020 and 2019 is as follows:
|
Quarterly Results of Operations (Unaudited) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results of Operations (Unaudited) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results of Operations |
Quarterly results of operations are as follows:
|
Leases (Tables) |
12 Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||
Future Lease Payments for Operating Leases with Initial or Remaining Noncancelable Terms of One Year or More |
The Company leases certain computer and related equipment using noncancelable operating leases. Lease expense for 2020, 2019 and 2018 was $135, $302 and $204, respectively. At December 31, 2020, future lease payments for operating leases with initial or remaining noncancelable terms of one year or more consisted of the following:
|
Summary of Significant Accounting Policies, Significant Accounting Policies (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2020
USD ($)
Segment
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Description of Business [Abstract] | ||||
Number of reportable segments | Segment | 1 | |||
Deductible Receivables [Abstract] | ||||
Allowance for credit losses, net of tax | $ 1,035 | |||
Goodwill and Other Intangible Assets [Abstract] | ||||
Goodwill impairment loss | $ 3,152 | 0 | $ 0 | $ 3,152 |
Insurance Company-Owned Life Insurance [Abstract] | ||||
Insurance company-owned life insurance | 11,458 | 11,049 | ||
Commercial Mortgage Loans [Member] | ||||
Investments [Abstract] | ||||
Commercial mortgage loans, valuation allowance | 195 | |||
ASU 2016-13 [Member] | ||||
Deductible Receivables [Abstract] | ||||
Allowance for credit losses, before tax | 16,500 | 15,000 | ||
Allowance for credit losses, net of tax | $ 13,035 | $ 11,850 |
Investments, Fixed Income Securities in Unrealized Loss Position (Details) $ in Thousands |
Dec. 31, 2020
USD ($)
Security
|
Dec. 31, 2019
USD ($)
Security
|
---|---|---|
Fixed Income Securities, Unrealized Loss Position, Number of Securities [Abstract] | ||
Number of securities, 12 months or less | Security | 100 | 88 |
Number of securities, Greater than 12 months | Security | 24 | 69 |
Number of securities, total | Security | 124 | 157 |
Fixed Income Securities, Unrealized Loss Position, Fair Value [Abstract] | ||
Fair value, 12 months or less | $ 120,630 | $ 108,387 |
Fair value, Greater than 12 months | 33,065 | 66,860 |
Fair value, total | 153,695 | 175,247 |
Fixed Income Securities, Unrealized Loss Position, Gross Unrealized Loss [Abstract] | ||
Gross unrealized loss, 12 months or less | (3,405) | (2,452) |
Gross unrealized loss, Greater than 12 months | (1,333) | (1,100) |
Gross unrealized loss, total | $ (4,738) | $ (3,552) |
Investments, Major Categories of Investment Income (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Investment Income, Net [Abstract] | |||
Investment Income | $ 27,812 | $ 28,916 | $ 25,001 |
Investment expenses | (2,390) | (2,667) | (2,953) |
Net investment income | 25,422 | 26,249 | 22,048 |
Interest on Fixed Income Securities [Member] | |||
Investment Income, Net [Abstract] | |||
Investment Income | 24,874 | 24,620 | 19,092 |
Dividends on Equity Securities [Member] | |||
Investment Income, Net [Abstract] | |||
Investment Income | 1,868 | 2,320 | 4,380 |
Money Market Funds, Short term and Other [Member] | |||
Investment Income, Net [Abstract] | |||
Investment Income | $ 1,070 | $ 1,976 | $ 1,529 |
Investments, Gains (Losses) on Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||
Gains (Losses) on Investments [Abstract] | |||||||||||||
Impairment losses on investments | $ (2,861) | $ (497) | $ (19) | ||||||||||
Change in value of limited partnership investments | (1,442) | 1,644 | (9,343) | ||||||||||
Gains (losses) on equity securities [Abstract] | |||||||||||||
Realized gains (losses) on equity securities sold during the period | [1] | (8,058) | 1,938 | (3,072) | |||||||||
Unrealized gains (losses) on equity securities held at the end of the period | 1,943 | 9,287 | (9,697) | ||||||||||
Total realized and unrealized gains (losses) on equity securities | (6,115) | 11,225 | (12,769) | ||||||||||
Net realized and unrealized gains (losses) on investments | $ 7,761 | $ 144 | $ 10,615 | $ (27,756) | $ 3,848 | $ 125 | $ 2,889 | $ 6,027 | (9,236) | 12,889 | (25,691) | ||
Proceeds from sales of equity securities | 51,713 | 21,621 | 149,195 | ||||||||||
Realized gains on equity securities | 51,900 | ||||||||||||
Recorded write down to earnings | 1,826 | ||||||||||||
Allowance for credit losses | $ 1,035 | 1,035 | |||||||||||
Fixed Income Securities [Member] | |||||||||||||
Gains (Losses) on Investments [Abstract] | |||||||||||||
Gross gains on available-for-sale investments during the period | 11,125 | 11,009 | 10,807 | ||||||||||
Gross losses on available-for-sale investments during the period | $ (9,943) | $ (10,492) | $ (14,367) | ||||||||||
|
Investments, Adjustments for Other-than-temporary Impairment (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Adjustments for other-than-temporary impairment [Roll Forward] | |||
Cumulative charges to income at beginning of year | $ 889 | $ 930 | $ 4,209 |
Writedowns based on objective and subjective criteria | 1,826 | 497 | 19 |
Recovery of prior writedowns upon sale or disposal | (909) | (538) | (3,298) |
Net pre-tax realized gain (loss) | (917) | 41 | 3,279 |
Cumulative charges to income at end of year | $ 1,806 | $ 889 | $ 930 |
Investments, Limited Partnerships and Investments (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020
USD ($)
Investment
|
Dec. 31, 2019
USD ($)
|
|
Limited Partners' Capital Account [Abstract] | ||
Regulatory deposits with various insurance departments in United States and Canada, fair value | $ 122,896 | $ 99,763 |
Time certificate of deposit included in short-term investments | $ 1,000 | |
Percentage of fixed income securities invested in investment grade fixed income | 93.00% | |
Number of fixed income investments issued with guarantees | Investment | 0 | |
Fixed income investment below investment grade | $ 63,660 | |
Percentage of fixed income investment to total invested assets | 6.10% | |
Net unrealized gain position of investments | $ 2,230 | |
Limited Partnerships [Member] | ||
Limited Partners' Capital Account [Abstract] | ||
Commitment to make additional contributions to various limited partnerships | $ 350 |
Loss and Loss Expense Reserves, Reconciliation of Net Incurred and Paid Claims Development (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|||
---|---|---|---|---|---|
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | $ 641,131 | $ 567,630 | |||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | 424,368 | 398,305 | |||
Unallocated claims adjustment expenses | 24,170 | 22,370 | |||
Total gross liability for unpaid claims and claims adjustment expense | 1,089,669 | 988,305 | |||
Workers' Compensation [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 168,859 | 154,409 | |||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | 211,421 | 182,908 | |||
Occupational Accident [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 15,039 | 19,840 | |||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | 500 | 1,979 | |||
Physical Damage [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 14,561 | [1] | 11,676 | ||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | 1,054 | 655 | |||
Commercial Liability [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 420,698 | 355,148 | |||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | 209,126 | 209,152 | |||
Professional Liability Assumed [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 11,958 | 16,079 | |||
Other Short-duration Insurance Lines [Member] | |||||
Net outstanding liabilities [Abstract] | |||||
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance | 10,016 | 10,478 | |||
Reinsurance recoverable on unpaid claims [Abstract] | |||||
Reinsurance recoverable on unpaid losses at the end of the year | $ 2,267 | $ 3,611 | |||
|
Loss and Loss Expense Reserves, Supplementary Information about Average Historical Claims Duration (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020
qtr
yr
| |
Minimum [Member] | |
Reserve Methodologies for Incurred But Not Reported Losses [Abstract] | |
Number of running accident quarters used | qtr | 12 |
Number of accident years included in loss development triangles | yr | 15 |
Workers' Compensation [Member] | |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [Abstract] | |
Year One | 16.90% |
Year Two | 26.50% |
Year Three | 16.10% |
Year Four | 10.10% |
Year Five | 6.20% |
Year Six | 3.80% |
Year Seven | 3.10% |
Year Eight | 2.00% |
Year Nine | 1.10% |
Year Ten | 0.60% |
Occupational Accident [Member] | |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [Abstract] | |
Year One | 36.20% |
Year Two | 40.70% |
Year Three | 11.20% |
Year Four | 4.10% |
Year Five | 1.00% |
Year Six | 1.60% |
Year Seven | (0.10%) |
Year Eight | 0.40% |
Year Nine | 0.60% |
Year Ten | 0.30% |
Physical Damage [Member] | |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [Abstract] | |
Year One | 81.60% |
Year Two | 16.30% |
Year Three | (0.40%) |
Commercial Liability [Member] | |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [Abstract] | |
Year One | 8.80% |
Year Two | 25.20% |
Year Three | 22.80% |
Year Four | 19.80% |
Year Five | 8.90% |
Year Six | 5.40% |
Year Seven | 3.30% |
Year Eight | 0.80% |
Year Nine | 1.10% |
Year Ten | 0.00% |
Professional Liability Assumed [Member] | |
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [Abstract] | |
Year One | 1.40% |
Year Two | 3.20% |
Year Three | 11.80% |
Year Four | 27.60% |
Year Five | 16.90% |
Year Six | 14.90% |
Year Seven | 9.00% |
Year Eight | 4.10% |
Year Nine | 2.60% |
Year Ten | 1.70% |
Reinsurance (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||
Premiums Written [Abstract] | |||||||||||||
Direct | $ 546,708 | $ 574,181 | $ 581,070 | ||||||||||
Ceded on direct | (106,561) | (122,676) | (138,102) | ||||||||||
Net direct | 440,147 | 451,505 | 442,968 | ||||||||||
Assumed | 853 | 737 | 1,430 | ||||||||||
Ceded on assumed | 0 | 0 | 0 | ||||||||||
Net assumed | 853 | 737 | 1,430 | ||||||||||
Net | 441,000 | 452,242 | 444,398 | ||||||||||
Premiums Earned [Abstract] | |||||||||||||
Direct | 557,795 | 570,959 | 562,364 | ||||||||||
Ceded on direct | [1] | (113,125) | (124,446) | (131,080) | |||||||||
Net direct | 444,670 | 446,513 | 431,284 | ||||||||||
Assumed | 845 | 775 | 1,596 | ||||||||||
Ceded on assumed | 0 | 0 | 0 | ||||||||||
Net assumed | 845 | 775 | 1,596 | ||||||||||
Net | $ 120,273 | $ 117,853 | $ 97,730 | $ 109,659 | $ 111,357 | $ 110,288 | $ 115,631 | $ 110,012 | 445,515 | 447,288 | 432,880 | ||
Net losses and loss expenses incurred reduced by ceded reinsurance recoveries | 105,895 | 121,927 | 148,173 | ||||||||||
Net losses and loss expenses incurred from reinsurance assumed from non-affiliates | 432 | 193 | $ 1,300 | ||||||||||
Components of reinsurance recoverable [Abstract] | |||||||||||||
Case unpaid losses, net of allowance for reinsurance | 166,171 | 166,675 | 166,171 | 166,675 | |||||||||
Incurred but not reported unpaid losses and loss expenses | 257,225 | 230,459 | 257,225 | 230,459 | |||||||||
Paid losses and loss expenses | 24,133 | 20,334 | 24,133 | 20,334 | |||||||||
Unearned premiums | 8,035 | 14,599 | 8,035 | 14,599 | |||||||||
Reinsurance recoverable | $ 455,564 | $ 432,067 | $ 455,564 | $ 432,067 | |||||||||
|
Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes [Abstract] | ||||
Corporate income tax rate | 21.00% | 35.00% | ||
Deferred tax liabilities [Abstract] | ||||
Unrealized gain on fixed income and equity security investments | $ 8,159 | $ 5,327 | ||
Deferred acquisition costs | 2,538 | 2,821 | ||
Loss and loss expense reserves | 2,222 | 2,701 | ||
Limited partnership investments | 0 | 2,587 | ||
Accelerated depreciation | 669 | 687 | ||
Other | 1,495 | 1,361 | ||
Total deferred tax liabilities | 15,083 | 15,484 | ||
Deferred tax assets [Abstract] | ||||
Loss and loss expense reserves | 12,923 | 11,460 | ||
Limited partnership investments | 822 | 0 | ||
Unearned premiums discount | 2,339 | 2,529 | ||
Impairment related investment declines | 435 | 39 | ||
Deferred compensation | 1,999 | 1,181 | ||
Deferred ceding commission | 492 | 1,037 | ||
Allowance for credit losses | 3,580 | 0 | ||
Other | 1,473 | 1,273 | ||
Total deferred tax assets | 24,063 | 17,519 | ||
Net deferred tax assets | 8,980 | 2,035 | ||
Difference between federal income tax expense (benefit) computed at statutory rate [Abstract] | ||||
Statutory federal income rate applied to pre-tax income (loss) | 1,336 | 1,821 | $ (9,213) | |
Tax effect of (deduction) [Abstract] | ||||
Tax-exempt investment income | (239) | (402) | (253) | |
Valuation allowance | 1,264 | 0 | 0 | |
Other | (461) | (93) | (331) | |
Federal income tax expense (benefit) | 1,900 | 1,326 | (9,797) | |
Tax expense (benefit) on pre-tax income (loss) [Abstract] | ||||
Current | 7,144 | 1,377 | 8,997 | |
Deferred | (5,244) | (51) | (18,794) | |
Federal income tax expense (benefit) | 1,900 | 1,326 | (9,797) | |
Provisions for deferred federal income taxes [Abstract] | ||||
Limited partnerships | (3,409) | 1,143 | (2,383) | |
Discounts of loss and loss expense reserves | (1,944) | (2,269) | (2,704) | |
Reserves - salvage and subrogation and other | 1 | (74) | 427 | |
Unearned premium discount | 190 | (208) | (484) | |
Deferred compensation | (818) | (600) | 305 | |
Impairment related investment declines | (1,400) | (411) | 695 | |
Deferred acquisitions costs and ceding commission | 262 | 405 | 201 | |
Unrealized gains / losses | (59) | 1,837 | (13,876) | |
Valuation allowance | 1,264 | 0 | 0 | |
Other | 669 | 126 | (975) | |
Provision for deferred federal income taxes | (5,244) | (51) | (18,794) | |
Deferred tax assets, valuation allowance | 0 | 0 | ||
Valuation allowance recorded in statement of operations | 1,264 | |||
Uncertain tax positions | 0 | 0 | ||
Accrued interest | $ 0 | $ 0 | $ 0 |
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||
Increase (Decrease) in Common Stock Outstanding and Additional Paid-In Capital [Roll Forward] | ||||||
Dividends paid to shareholders | $ 5,692 | $ 5,857 | $ 16,835 | |||
Cash dividends paid (in dollars per share) | $ 0.40 | $ 0.40 | $ 1.12 | |||
Stock repurchase program, shares authorized (in shares) | 2,464,209 | |||||
Repurchase of common shares | $ 1,782 | $ 11,501 | $ 4,596 | |||
Investments [Abstract] | ||||||
Total unrealized gain before federal income tax expense (benefit) | 26,259 | 12,491 | ||||
Deferred tax benefit (liability) | (4,255) | [1] | (2,628) | |||
Net unrealized gains on investments | 22,004 | 9,863 | ||||
Foreign exchange adjustment [Abstract] | ||||||
Total unrealized losses | (310) | (625) | ||||
Deferred tax benefit | 65 | 131 | ||||
Net unrealized losses on foreign exchange adjustment | (245) | (494) | ||||
Accumulated other comprehensive income | 21,759 | 9,369 | ||||
Investments [Abstract] | ||||||
Pre-tax holding gains (losses) on fixed income securities arising during period | 10,501 | 19,182 | (12,253) | |||
Less: applicable federal income tax expense (benefit) | 941 | [1] | 4,028 | (2,573) | ||
Net unrealized gains (losses) on investments | 9,560 | 15,154 | (9,680) | |||
Pre-tax gains (losses) on fixed income securities included in net income (loss) during period | (3,267) | [1] | (1,161) | (3,560) | ||
Less: applicable federal income tax expense (benefit) | (686) | (244) | (748) | |||
Other comprehensive income (loss), reclassification adjustment for sale of securities included in net income, net of tax | (2,581) | (917) | (2,812) | |||
Change in unrealized gains (losses) on investments | 12,141 | 16,071 | (6,868) | |||
Valuation allowance | $ 1,264 | $ 0 | $ 0 | |||
Class A [Member] | ||||||
Increase (Decrease) in Common Stock Outstanding and Additional Paid-In Capital [Roll Forward] | ||||||
Stated value of common stock (in dollars per share) | $ 0.04 | |||||
Class B [Member] | ||||||
Increase (Decrease) in Common Stock Outstanding and Additional Paid-In Capital [Roll Forward] | ||||||
Stated value of common stock (in dollars per share) | $ 0.04 | |||||
Repurchase of common stock (in shares) | 126,764 | |||||
Average share price (in dollars per share) | $ 14.07 | |||||
|
Other Operating Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Other Operating Expenses [Abstract] | ||||
Amortization of gross deferred policy acquisition costs | $ 79,947 | $ 81,734 | $ 78,105 | |
Other underwriting expenses | 66,005 | 59,975 | 46,638 | |
Reinsurance ceded credits | (24,764) | (25,932) | (23,124) | |
Total underwriting expenses | 121,188 | 115,777 | 101,619 | |
Operating expenses of non-insurance companies | 22,240 | 22,679 | 32,406 | |
Goodwill impairment charge | $ 3,152 | 0 | 0 | 3,152 |
Total other operating expenses | $ 143,428 | $ 138,456 | $ 137,177 |
Employee Benefit Plans (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
401(k) Employee Savings and Profit Sharing Plan [Member] | |||
Defined Contribution Plan [Abstract] | |||
Company's contribution to the plan | $ 3,274 | $ 3,213 | $ 3,486 |
Stock Based Compensation (Details) $ / shares in Units, $ in Thousands |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jul. 06, 2020
shares
|
Nov. 05, 2019
USD ($)
Manager
|
May 22, 2019
shares
|
Nov. 13, 2018
shares
|
Dec. 31, 2020
USD ($)
$ / shares
shares
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
shares
|
|
Share-based Compensation [Abstract] | |||||||
Shares distribution period from grant date | 1 year | ||||||
Summary of stock Issuances [Abstract] | |||||||
Stock based compensation expense | $ | $ 1,789 | $ 1,529 | $ 475 | ||||
2/9/2018 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 408 | ||||||
Vesting date | May 09, 2018 | ||||||
Service period, beginning | Feb. 09, 2018 | ||||||
Service period, ending | Jun. 30, 2018 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 24.20 | ||||||
5/8/2018 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 19,085 | ||||||
Vesting date | May 08, 2019 | ||||||
Service period, beginning | Jul. 01, 2018 | ||||||
Service period, ending | Jun. 30, 2019 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 23.05 | ||||||
5/7/2019 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 29,536 | ||||||
Vesting date | May 07, 2020 | ||||||
Service period, beginning | Jul. 01, 2019 | ||||||
Service period, ending | Jun. 30, 2020 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 16.25 | ||||||
5/17/2019 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 3,591 | ||||||
Vesting date | May 07, 2020 | ||||||
Service period, beginning | May 17, 2019 | ||||||
Service period, ending | Jun. 30, 2020 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 16.25 | ||||||
5/22/2019 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 3,541 | ||||||
Vesting date | May 07, 2020 | ||||||
Service period, beginning | May 22, 2019 | ||||||
Service period, ending | Jun. 30, 2020 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 16.25 | ||||||
5/5/2020 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 42,220 | ||||||
Vesting date | May 05, 2021 | ||||||
Service period, beginning | Jul. 01, 2020 | ||||||
Service period, ending | Jun. 30, 2021 | ||||||
Grant date fair value per share (in dollars per share) | $ / shares | $ 14.21 | ||||||
Director [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Compensation cost charged against income | $ | $ 598 | $ 518 | $ 464 | ||||
Restricted [Member] | John D. Nichols, Jr. [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 85,000 | ||||||
Stock based compensation expense | $ | 193 | ||||||
Restricted [Member] | John D. Nichols, Jr. [Member] | Tranche One [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 42,500 | ||||||
Restricted [Member] | John D. Nichols, Jr. [Member] | Tranche Two [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 21,250 | ||||||
Restricted [Member] | John D. Nichols, Jr. [Member] | Tranche Three [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 21,250 | ||||||
Restricted [Member] | Edgecliffe-Johnson Stock Grant [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 70,000 | ||||||
Stock based compensation expense | $ | 240 | ||||||
Restricted [Member] | Edgecliffe-Johnson Stock Grant [Member] | Tranche One [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 35,000 | ||||||
Restricted [Member] | Edgecliffe-Johnson Stock Grant [Member] | Tranche Two [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 21,000 | ||||||
Restricted [Member] | Edgecliffe-Johnson Stock Grant [Member] | Tranche Three [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares vested and expected to vest (in shares) | 14,000 | ||||||
Restricted [Member] | Senior Management [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 101,400 | ||||||
Stock based compensation expense | $ | 352 | ||||||
Shares granted in period | $ | $ 1,100 | ||||||
Number of members awarded equity compensation | Manager | 7 | ||||||
Restricted [Member] | Senior Management [Member] | 7/6/2020 [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Stock based compensation expense | $ | $ 221 | ||||||
2018 LTIP Awards [Member] | Performance Based Equity Award [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 0 | ||||||
2018 VCIP Awards [Member] | Performance Based Equity Award [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Number of shares issued (in shares) | 0 | ||||||
Performance period | 3 years | ||||||
2019 LTIP Awards [Member] | Performance Based Equity Award [Member] | |||||||
Summary of stock Issuances [Abstract] | |||||||
Vesting period | 3 years | ||||||
Stock based compensation expense | $ | $ 110 | ||||||
Annual vesting percentage of shares in year one | 33.30% | ||||||
Annual vesting percentage of shares in year two | 33.30% | ||||||
Annual vesting percentage of shares in year three | 33.30% |
Segment Information (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Sep. 30, 2020
USD ($)
|
Jun. 30, 2020
USD ($)
|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
Sep. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2020
USD ($)
Segment
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Segment Information [Abstract] | |||||||||||
Number of reportable segments | Segment | 1 | ||||||||||
Revenues [Abstract] | |||||||||||
Net premiums earned | $ 120,273 | $ 117,853 | $ 97,730 | $ 109,659 | $ 111,357 | $ 110,288 | $ 115,631 | $ 110,012 | $ 445,515 | $ 447,288 | $ 432,880 |
Net investment income | 6,321 | 5,486 | 6,379 | 7,236 | 6,815 | 6,703 | 6,500 | 6,231 | 25,422 | 26,249 | 22,048 |
Net realized and unrealized gains (losses) on investments | $ 7,761 | $ 144 | $ 10,615 | $ (27,756) | $ 3,848 | $ 125 | $ 2,889 | $ 6,027 | (9,236) | 12,889 | (25,691) |
Commissions and other income | 7,048 | 9,171 | 9,932 | ||||||||
Total revenues | 468,749 | 495,597 | 439,169 | ||||||||
Property and Casualty Insurance [Member] | |||||||||||
Revenues [Abstract] | |||||||||||
Net premiums earned | 445,515 | 447,288 | 432,880 | ||||||||
Net investment income | 25,422 | 26,249 | 22,048 | ||||||||
Net realized and unrealized gains (losses) on investments | (9,236) | 12,889 | (25,691) | ||||||||
Commissions and other income | 7,048 | 9,171 | 9,932 | ||||||||
Total revenues | $ 468,749 | $ 495,597 | $ 439,169 |
Earnings (Loss) Per Share (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Reconciliation of the denominators used in the calculation of basic and diluted earnings (loss) per share [Abstract] | |||
Average shares outstanding for basic earnings (loss) per share (in shares) | 14,140,178 | 14,520,815 | 14,964,812 |
Dilutive effect of share equivalents (in shares) | 129,806 | 99,118 | 0 |
Diluted (in shares) | 14,269,984 | 14,619,933 | 14,964,812 |
Concentrations of Credit Risk (Details) $ in Thousands |
Dec. 31, 2020
USD ($)
|
---|---|
Concentrations of Credit Risk [Abstract] | |
Collateral held that is equal to the ultimate losses that would be paid or due in the event of insured's default | 100.00% |
First largest estimated amounts due from individual reinsurers | $ 55,097 |
Second largest estimated amounts due from individual reinsurers | $ 46,488 |
Acquisition and Related Goodwill and Intangibles (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Oct. 31, 2008 |
Dec. 31, 2018 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Business Combination [Abstract] | |||||
Goodwill impairment loss | $ 3,152 | $ 0 | $ 0 | $ 3,152 | |
Commercial Lines Specialty Insurance Agency [Member] | |||||
Business Combination [Abstract] | |||||
Cash purchase price | $ 3,500 | ||||
Recorded goodwill | 3,152 | ||||
Intangible assets acquired | $ 179 | ||||
Accumulated amortization on intangible assets | $ 179 | $ 179 | |||
Goodwill impairment loss | $ 3,152 |
Fair Value, Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Fixed income securities [Abstract] | ||
Total, Fair Value | $ 919,692 | $ 795,538 |
Equity securities [Abstract] | ||
Total equity securities | 58,169 | 76,812 |
Transfers Between Levels [Abstract] | ||
Transfers of assets from Level 1 to Level 2 | 0 | 0 |
Transfers of assets from Level 2 to Level 1 | 0 | 0 |
Recurring [Member] | ||
Fixed income securities [Abstract] | ||
Agency collateralized mortgage obligations | 11,931 | 12,093 |
Agency mortgage-backed securities | 102,107 | 56,280 |
Asset-backed securities | 107,696 | 106,397 |
Bank loans | 11,361 | 14,568 |
Certificates of deposit | 2,835 | |
Collateralized mortgage obligations | 5,118 | 5,616 |
Corporate securities | 352,837 | 276,087 |
Options embedded in convertible securities | 7,404 | 5,294 |
Mortgage-backed securities | 38,056 | 47,463 |
Municipal obligations | 45,143 | 36,286 |
Non-U.S. government obligations | 30,600 | 24,179 |
U.S. government obligations | 207,439 | 208,440 |
Total, Fair Value | 919,692 | 795,538 |
Equity securities [Abstract] | ||
Consumer | 11,598 | 16,707 |
Energy | 1,227 | 3,074 |
Financial | 29,064 | 31,577 |
Industrial | 5,180 | 4,927 |
Technology | 2,851 | 2,817 |
Funds (e.g., mutual funds, closed end funds, ETFs) | 9,460 | |
Other | 8,249 | 8,250 |
Total equity securities | 58,169 | 76,812 |
Short-term investments | 1,000 | 1,000 |
Cash equivalents | 47,026 | 59,780 |
Total | 1,025,887 | 933,130 |
Recurring [Member] | Level 1 [Member] | ||
Fixed income securities [Abstract] | ||
Agency collateralized mortgage obligations | 0 | 0 |
Agency mortgage-backed securities | 0 | 0 |
Asset-backed securities | 0 | 0 |
Bank loans | 0 | 0 |
Certificates of deposit | 2,835 | |
Collateralized mortgage obligations | 0 | 0 |
Corporate securities | 0 | 0 |
Options embedded in convertible securities | 0 | 0 |
Mortgage-backed securities | 0 | 0 |
Municipal obligations | 0 | 0 |
Non-U.S. government obligations | 0 | 0 |
U.S. government obligations | 0 | 0 |
Total, Fair Value | 0 | 2,835 |
Equity securities [Abstract] | ||
Consumer | 11,598 | 16,707 |
Energy | 1,227 | 3,074 |
Financial | 29,064 | 31,577 |
Industrial | 5,180 | 4,927 |
Technology | 2,851 | 2,817 |
Funds (e.g., mutual funds, closed end funds, ETFs) | 9,460 | |
Other | 8,249 | 8,250 |
Total equity securities | 58,169 | 76,812 |
Short-term investments | 1,000 | 1,000 |
Cash equivalents | 0 | 0 |
Total | 59,169 | 80,647 |
Recurring [Member] | Level 2 [Member] | ||
Fixed income securities [Abstract] | ||
Agency collateralized mortgage obligations | 11,931 | 12,093 |
Agency mortgage-backed securities | 102,107 | 56,280 |
Asset-backed securities | 107,696 | 106,397 |
Bank loans | 11,361 | 14,568 |
Certificates of deposit | 0 | |
Collateralized mortgage obligations | 5,118 | 5,616 |
Corporate securities | 352,837 | 276,087 |
Options embedded in convertible securities | 7,404 | 5,294 |
Mortgage-backed securities | 38,056 | 47,463 |
Municipal obligations | 45,143 | 36,286 |
Non-U.S. government obligations | 30,600 | 24,179 |
U.S. government obligations | 207,439 | 208,440 |
Total, Fair Value | 919,692 | 792,703 |
Equity securities [Abstract] | ||
Consumer | 0 | 0 |
Energy | 0 | 0 |
Financial | 0 | 0 |
Industrial | 0 | 0 |
Technology | 0 | 0 |
Funds (e.g., mutual funds, closed end funds, ETFs) | 0 | |
Other | 0 | 0 |
Total equity securities | 0 | 0 |
Short-term investments | 0 | 0 |
Cash equivalents | 47,026 | 59,780 |
Total | 966,718 | 852,483 |
Recurring [Member] | Level 3 [Member] | ||
Fixed income securities [Abstract] | ||
Agency collateralized mortgage obligations | 0 | 0 |
Agency mortgage-backed securities | 0 | 0 |
Asset-backed securities | 0 | 0 |
Bank loans | 0 | 0 |
Certificates of deposit | 0 | |
Collateralized mortgage obligations | 0 | 0 |
Corporate securities | 0 | 0 |
Options embedded in convertible securities | 0 | 0 |
Mortgage-backed securities | 0 | 0 |
Municipal obligations | 0 | 0 |
Non-U.S. government obligations | 0 | 0 |
U.S. government obligations | 0 | 0 |
Total, Fair Value | 0 | 0 |
Equity securities [Abstract] | ||
Consumer | 0 | 0 |
Energy | 0 | 0 |
Financial | 0 | 0 |
Industrial | 0 | 0 |
Technology | 0 | 0 |
Funds (e.g., mutual funds, closed end funds, ETFs) | 0 | |
Other | 0 | 0 |
Total equity securities | 0 | 0 |
Short-term investments | 0 | 0 |
Cash equivalents | 0 | 0 |
Total | $ 0 | $ 0 |
Fair Value, Carrying Value and Fair Value by Level of Financial Instruments (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets [Abstract] | ||
Limited partnerships | $ 7,214 | $ 23,292 |
Carrying Value [Member] | ||
Assets [Abstract] | ||
Limited partnerships | 7,214 | 23,292 |
Commercial mortgage loans | 10,602 | 11,782 |
Liabilities [Abstract] | ||
Short-term borrowings | 20,000 | 20,000 |
Fair Value [Member] | ||
Assets [Abstract] | ||
Limited partnerships | 7,214 | 23,292 |
Commercial mortgage loans | 11,425 | 12,068 |
Liabilities [Abstract] | ||
Short-term borrowings | 20,000 | 20,000 |
Fair Value [Member] | Level 1 [Member] | ||
Assets [Abstract] | ||
Limited partnerships | 0 | 0 |
Commercial mortgage loans | 0 | 0 |
Liabilities [Abstract] | ||
Short-term borrowings | 0 | 0 |
Fair Value [Member] | Level 2 [Member] | ||
Assets [Abstract] | ||
Limited partnerships | 0 | 0 |
Commercial mortgage loans | 0 | 0 |
Liabilities [Abstract] | ||
Short-term borrowings | 20,000 | 20,000 |
Fair Value [Member] | Level 3 [Member] | ||
Assets [Abstract] | ||
Limited partnerships | 7,214 | 23,292 |
Commercial mortgage loans | 11,425 | 12,068 |
Liabilities [Abstract] | ||
Short-term borrowings | $ 0 | $ 0 |
Quarterly Results of Operations (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Quarterly Results of Operations (Unaudited) [Abstract] | |||||||||||
Net premiums earned | $ 120,273 | $ 117,853 | $ 97,730 | $ 109,659 | $ 111,357 | $ 110,288 | $ 115,631 | $ 110,012 | $ 445,515 | $ 447,288 | $ 432,880 |
Net investment income | 6,321 | 5,486 | 6,379 | 7,236 | 6,815 | 6,703 | 6,500 | 6,231 | 25,422 | 26,249 | 22,048 |
Net realized and unrealized gains (losses) on investments | 7,761 | 144 | 10,615 | (27,756) | 3,848 | 125 | 2,889 | 6,027 | (9,236) | 12,889 | (25,691) |
Losses and loss expenses incurred | 84,246 | 84,673 | 68,208 | 81,831 | 86,132 | 84,781 | 90,433 | 87,122 | 318,958 | 348,468 | 345,864 |
Net income (loss) | $ 11,971 | $ 3,281 | $ 11,367 | $ (22,156) | $ 3,771 | $ (707) | $ 1,535 | $ 2,748 | $ 4,463 | $ 7,347 | $ (34,075) |
Net income (loss) per diluted share (in dollars per share) | $ 0.84 | $ 0.23 | $ 0.80 | $ (1.56) | $ 0.26 | $ (0.05) | $ 0.11 | $ 0.18 | $ 0.31 | $ 0.50 | $ (2.28) |
Statutory (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Statutory [Abstract] | |||
Net income of the insurance subsidiaries in accordance with statutory accounting practices | $ 3,881 | $ 25,302 | $ 36,236 |
Consolidated statutory capital and surplus for subsidiaries | 347,489 | $ 371,793 | |
Amount of statutory surplus transferred by dividend or loan to the parent company | 50,584 | ||
Minimum statutory surplus necessary for the insurance subsidiaries to satisfy statutory risk based capital requirements | 136,544 | ||
Consolidated statutory capital and surplus exceeded requirement | $ 210,946 |
Leases (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Leases [Abstract] | |||
Lease expense | $ 135 | $ 302 | $ 204 |
Future lease payments for operating leases with initial or remaining noncancelable term of one year or more [Abstract] | |||
2021 | 103 | ||
2022 | 18 | ||
2023 | 0 | ||
2024 and thereafter | 0 | ||
Total minimum payments required | 121 | ||
Right-of-use asset | $ 120 | ||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssets | ||
Lease liability | $ 120 | ||
Operating Lease, Liability, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndOtherAccruedLiabilities |
Debt (Details) - Revolving Credit Facility [Member] $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020
USD ($)
Covenant
|
Aug. 09, 2018
USD ($)
|
|
Credit Agreement [Abstract] | ||
Maximum credit limit | $ 40,000 | |
Additional incremental loans limit | $ 35,000 | |
Expiration date | Aug. 09, 2022 | |
Optional period of fixed interest | 1 year | |
Outstanding drawings | $ 20,000 | |
Effective interest rate | 1.25% | |
Amount remaining under credit facility | $ 20,000 | |
Number of financial covenants | Covenant | 2 | |
Net worth and maximum consolidated debt to equity ratio | 0.35 |
Related Parties (Details) - Investment Firm Services [Member] $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020
USD ($)
Director
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Related Party [Abstract] | |||
Management fees and commissions | $ 110 | $ 145 | $ 103 |
Director [Member] | |||
Related Party [Abstract] | |||
Number of related parties | Director | 1 | ||
Market value of equity and fixed maturity securities portfolio | $ 7,796 |
Litigation, Commitments and Contingencies (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Dec. 31, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Loss Contingency [Abstract] | |||||
Estimated recoverable amount | $ 455,564 | $ 455,564 | $ 455,564 | $ 432,067 | |
Allowance for credit losses, net of tax | 1,035 | 1,035 | 1,035 | ||
ASU 2016-13 [Member] | |||||
Loss Contingency [Abstract] | |||||
Allowance for credit losses, before tax | 16,500 | 16,500 | 16,500 | 15,000 | |
Allowance for credit losses, net of tax | 13,035 | $ 13,035 | 13,035 | 11,850 | |
Additional allowance for expected credit losses, gross | $ 0 | $ 1,500 | |||
Additional allowance for expected credit losses, net of tax | $ 1,185 | ||||
Charge incurred to operations, gross | 30,500 | ||||
Charge incurred to operations, net of tax | $ 24,095 | ||||
Personnel Staffing Group d/b/a MVP Staffing [Member] | |||||
Loss Contingency [Abstract] | |||||
Per claim deductible amount | 500 | ||||
Damages sought | $ 0 | ||||
Percentage of required collateral | 110.00% | 110.00% | 110.00% | ||
Deductible receivables | $ 21,780 | $ 21,780 | $ 21,780 | ||
Average monthly deductible invoices | 740 | ||||
Estimated recoverable amount | 47,000 | 47,000 | 47,000 | ||
Personnel Staffing Group d/b/a MVP Staffing [Member] | Minimum [Member] | |||||
Loss Contingency [Abstract] | |||||
Loss fund | $ 4,000 | $ 4,000 | $ 4,000 |
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Feb. 22, 2021 |
Sep. 30, 2021 |
Feb. 14, 2021 |
|
Progressive [Member] | Forecast [Member] | |||
Merger Agreement [Abstract] | |||
Share price (in dollars per share) | $ 23.30 | ||
Total transaction value | $ 338 | ||
Subsequent Event [Member] | |||
Voting and Support Agreement [Abstract] | |||
Dividend payable, date declared | Feb. 22, 2021 | ||
Dividend payable, date to be paid | Mar. 10, 2021 | ||
Dividend payable, date of record | Mar. 05, 2021 | ||
Subsequent Event [Member] | Progressive [Member] | Maximum [Member] | |||
Voting and Support Agreement [Abstract] | |||
Dividend payable (in dollars per share) | $ 0.10 | ||
Subsequent Event [Member] | Class A [Member] | |||
Voting and Support Agreement [Abstract] | |||
Dividend payable (in dollars per share) | $ 0.10 | ||
Subsequent Event [Member] | Class A [Member] | Minimum [Member] | |||
Voting and Support Agreement [Abstract] | |||
Percentage of outstanding common stock for voting | 35.00% | ||
Subsequent Event [Member] | Class B [Member] | |||
Voting and Support Agreement [Abstract] | |||
Dividend payable (in dollars per share) | $ 0.10 |
Schedule I - Summary of Investments Other Than Investments in Related Parties (Details) $ in Thousands |
Dec. 31, 2020
USD ($)
|
|||
---|---|---|---|---|
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Investments classified as cash and cash equivalents | $ 47,026 | |||
Total Investments [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 954,507 | |||
Fair value | 990,286 | |||
Amount at which shown in the consolidated balance sheet | 989,463 | [1] | ||
Fixed Income Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 894,468 | |||
Fair value | 919,692 | |||
Amount at which shown in the consolidated balance sheet | 919,692 | [1] | ||
Equity Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 48,437 | |||
Fair value | 58,169 | |||
Amount at which shown in the consolidated balance sheet | 58,169 | [1] | ||
Bonds [Member] | Agency Collateralized Mortgage Obligations [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 11,448 | |||
Fair value | 11,931 | |||
Amount at which shown in the consolidated balance sheet | 11,931 | [1] | ||
Bonds [Member] | Agency Mortgage-backed Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 99,060 | |||
Fair value | 102,107 | |||
Amount at which shown in the consolidated balance sheet | 102,107 | [1] | ||
Bonds [Member] | Asset-backed Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 108,686 | |||
Fair value | 107,696 | |||
Amount at which shown in the consolidated balance sheet | 107,696 | [1] | ||
Bonds [Member] | Bank Loans [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 11,590 | |||
Fair value | 11,361 | |||
Amount at which shown in the consolidated balance sheet | 11,361 | [1] | ||
Bonds [Member] | Collateralized Mortgage Obligations [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 5,061 | |||
Fair value | 5,118 | |||
Amount at which shown in the consolidated balance sheet | 5,118 | [1] | ||
Bonds [Member] | Corporate Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 344,059 | |||
Fair value | 360,241 | |||
Amount at which shown in the consolidated balance sheet | 360,241 | [1] | ||
Bonds [Member] | Mortgage-backed Securities [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 40,675 | |||
Fair value | 38,056 | |||
Amount at which shown in the consolidated balance sheet | 38,056 | [1] | ||
Bonds [Member] | Municipal Obligations [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 43,353 | |||
Fair value | 45,143 | |||
Amount at which shown in the consolidated balance sheet | 45,143 | [1] | ||
Bonds [Member] | Non-U.S. Government Obligations [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 29,882 | |||
Fair value | 30,600 | |||
Amount at which shown in the consolidated balance sheet | 30,600 | [1] | ||
Bonds [Member] | U.S. Government Obligations [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 200,654 | |||
Fair value | 207,439 | |||
Amount at which shown in the consolidated balance sheet | 207,439 | [1] | ||
Common Stocks [Member] | Consumer [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 9,619 | |||
Fair value | 11,598 | |||
Amount at which shown in the consolidated balance sheet | 11,598 | [1] | ||
Common Stocks [Member] | Energy [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 2,046 | |||
Fair value | 1,227 | |||
Amount at which shown in the consolidated balance sheet | 1,227 | [1] | ||
Common Stocks [Member] | Financial [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 24,007 | |||
Fair value | 29,064 | |||
Amount at which shown in the consolidated balance sheet | 29,064 | [1] | ||
Common Stocks [Member] | Industrial [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 4,066 | |||
Fair value | 5,180 | |||
Amount at which shown in the consolidated balance sheet | 5,180 | [1] | ||
Common Stocks [Member] | Technology [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 1,749 | |||
Fair value | 2,851 | |||
Amount at which shown in the consolidated balance sheet | 2,851 | [1] | ||
Common Stocks [Member] | Other [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 6,950 | |||
Fair value | 8,249 | |||
Amount at which shown in the consolidated balance sheet | 8,249 | [1] | ||
Commercial Mortgage Loans [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 10,602 | |||
Fair value | 11,425 | |||
Amount at which shown in the consolidated balance sheet | 10,602 | [1] | ||
Total Short-term and Other [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 1,000 | |||
Fair value | 1,000 | |||
Amount at which shown in the consolidated balance sheet | 1,000 | [1] | ||
Short-term [Member] | Certificates of Deposit [Member] | ||||
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||
Cost | 1,000 | |||
Fair value | 1,000 | |||
Amount at which shown in the consolidated balance sheet | $ 1,000 | [1] | ||
|
Schedule II - Condensed Financial Information of Registrant, Balance Sheets (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Investments other than subsidiaries [Abstract] | ||||
Fixed income securities | $ 919,692 | $ 795,538 | ||
Limited partnerships | 7,214 | 23,292 | ||
Total Investments | 996,677 | 908,424 | ||
Cash and cash equivalents | 58,301 | 67,851 | ||
OtherAssets | 25,805 | 24,566 | ||
Total Assets | 1,722,827 | 1,634,360 | ||
Liabilities [Abstract] | ||||
Short-term borrowings | 20,000 | 20,000 | ||
Total Liabilities | 1,359,745 | 1,270,044 | ||
Shareholders' equity [Abstract] | ||||
Additional paid-in capital | 54,571 | 53,349 | ||
Accumulated other comprehensive income | 21,759 | 9,369 | ||
Retained earnings | 286,143 | 300,988 | ||
Total Shareholders' Equity | 363,082 | 364,316 | $ 356,082 | $ 418,811 |
Total Liabilities and Shareholders' Equity | 1,722,827 | 1,634,360 | ||
Class A [Member] | ||||
Shareholders' equity [Abstract] | ||||
Common stock | 111 | 111 | ||
Class B [Member] | ||||
Shareholders' equity [Abstract] | ||||
Common stock | 498 | 499 | ||
Protective Insurance Corporation [Member] | ||||
Assets [Abstract] | ||||
Investment in subsidiaries | 389,757 | 398,725 | ||
Due from affiliates | 7,877 | 1,579 | ||
Investments other than subsidiaries [Abstract] | ||||
Fixed income securities | 23,379 | 23,979 | ||
Limited partnerships | 206 | 206 | ||
Total Investments | 23,585 | 24,185 | ||
Cash and cash equivalents | 12,917 | 7,059 | $ 15,185 | $ 26,496 |
Accounts receivable | 7,059 | 5,606 | ||
OtherAssets | 14,316 | 22,153 | ||
Total Assets | 455,511 | 459,307 | ||
Liabilities [Abstract] | ||||
Premiums payable | 16,866 | 20,238 | ||
Deposits from insureds | 44,268 | 42,067 | ||
Short-term borrowings | 20,000 | 20,000 | ||
Other liabilities | 11,295 | 12,686 | ||
Total Liabilities | 92,429 | 94,991 | ||
Shareholders' equity [Abstract] | ||||
Additional paid-in capital | 54,571 | 53,349 | ||
Accumulated other comprehensive income | 21,759 | 9,369 | ||
Retained earnings | 286,143 | 300,988 | ||
Total Shareholders' Equity | 363,082 | 364,316 | ||
Total Liabilities and Shareholders' Equity | 455,511 | 459,307 | ||
Protective Insurance Corporation [Member] | Class A [Member] | ||||
Shareholders' equity [Abstract] | ||||
Common stock | 111 | 111 | ||
Protective Insurance Corporation [Member] | Class B [Member] | ||||
Shareholders' equity [Abstract] | ||||
Common stock | $ 498 | $ 499 |
Schedule II - Condensed Financial Information of Registrant, Statements of Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Revenue [Abstract] | |||||||||||
Net investment income | $ 6,321 | $ 5,486 | $ 6,379 | $ 7,236 | $ 6,815 | $ 6,703 | $ 6,500 | $ 6,231 | $ 25,422 | $ 26,249 | $ 22,048 |
Net realized losses on investments | 7,761 | 144 | 10,615 | (27,756) | 3,848 | 125 | 2,889 | 6,027 | (9,236) | 12,889 | (25,691) |
Total revenues | 468,749 | 495,597 | 439,169 | ||||||||
Expenses [Abstract] | |||||||||||
Other | 143,428 | 138,456 | 137,177 | ||||||||
Total expenses | 462,386 | 486,924 | 483,041 | ||||||||
Federal income tax benefit | 1,900 | 1,326 | (9,797) | ||||||||
Net income (loss) | $ 11,971 | $ 3,281 | $ 11,367 | $ (22,156) | $ 3,771 | $ (707) | $ 1,535 | $ 2,748 | 4,463 | 7,347 | (34,075) |
Protective Insurance Corporation [Member] | |||||||||||
Revenue [Abstract] | |||||||||||
Commissions and service fees | 15,011 | 14,149 | 17,456 | ||||||||
Cash dividends from subsidiaries | 0 | 0 | 5,000 | ||||||||
Net investment income | 453 | 692 | 569 | ||||||||
Net realized losses on investments | (10) | (46) | (192) | ||||||||
Other | 138 | 17 | 51 | ||||||||
Total revenues | 15,592 | 14,812 | 22,884 | ||||||||
Expenses [Abstract] | |||||||||||
Salary and related items | 10,663 | 11,804 | 20,158 | ||||||||
Other | 11,048 | 10,386 | 11,724 | ||||||||
Total expenses | 21,711 | 22,190 | 31,882 | ||||||||
Loss before federal income tax benefit and equity in undistributed income of subsidiaries | (6,119) | (7,378) | (8,998) | ||||||||
Federal income tax benefit | (1,333) | (1,452) | (2,862) | ||||||||
Loss after federal income tax benefit and equity in undistributed income of subsidiaries | (4,786) | (5,926) | (6,136) | ||||||||
Equity in undistributed income of subsidiaries | 9,249 | 13,273 | (27,939) | ||||||||
Net income (loss) | $ 4,463 | $ 7,347 | $ (34,075) |
Schedule II - Condensed Financial Information of Registrant, Statements of Comprehensive Income (loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Condensed Statements of Comprehensive Income (Loss) [Abstract] | |||||||||||
Net income (loss) | $ 11,971 | $ 3,281 | $ 11,367 | $ (22,156) | $ 3,771 | $ (707) | $ 1,535 | $ 2,748 | $ 4,463 | $ 7,347 | $ (34,075) |
Other comprehensive income (loss), net of tax [Abstract] | |||||||||||
Unrealized net gains (losses) on fixed income securities | 12,141 | 16,071 | (6,868) | ||||||||
Foreign currency translation adjustments | 249 | 645 | (830) | ||||||||
Other comprehensive income (loss) | 12,390 | 16,716 | (7,698) | ||||||||
Comprehensive income (loss) | 16,853 | 24,063 | (41,773) | ||||||||
Protective Insurance Corporation [Member] | |||||||||||
Condensed Statements of Comprehensive Income (Loss) [Abstract] | |||||||||||
Net income (loss) | 4,463 | 7,347 | (34,075) | ||||||||
Other comprehensive income (loss), net of tax [Abstract] | |||||||||||
Unrealized net gains (losses) on fixed income securities | 12,141 | 16,071 | (6,868) | ||||||||
Foreign currency translation adjustments | 249 | 645 | (830) | ||||||||
Other comprehensive income (loss) | 12,390 | 16,716 | (7,698) | ||||||||
Comprehensive income (loss) | $ 16,853 | $ 24,063 | $ (41,773) |
Schedule II - Condensed Financial Information of Registrant, Statements of Cash Flows (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Condensed Statements of Cash Flows [Abstract] | |||
Net cash provided by operating activities | $ 74,862 | $ 86,680 | $ 100,708 |
Investing activities [Abstract] | |||
Distributions from limited partnerships | 14,636 | 33,396 | 6,869 |
Net purchases of property and equipment | (1,470) | (1,953) | (5,439) |
Net cash provided by (used in) investing activities | (86,032) | (151,890) | 23,651 |
Financing activities [Abstract] | |||
Dividends paid to shareholders | (5,692) | (5,857) | (16,835) |
Repurchase of common shares | (1,782) | (11,501) | (4,596) |
Net cash used in financing activities | (7,474) | (17,358) | (21,431) |
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | (18,459) | (81,923) | 102,098 |
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year | 67,851 | ||
Cash, cash equivalents and restricted cash and cash equivalents at end of year | 58,301 | 67,851 | |
Protective Insurance Corporation [Member] | |||
Condensed Statements of Cash Flows [Abstract] | |||
Net cash provided by operating activities | 12,350 | 10,643 | 14,019 |
Investing activities [Abstract] | |||
Purchases of investments | (7,795) | (4,967) | (11,435) |
Sales or maturities of investments | 8,777 | 3,935 | 11,213 |
Distributions from limited partnerships | 0 | 1 | 0 |
Net purchases of property and equipment | 0 | (380) | (3,677) |
Net cash provided by (used in) investing activities | 982 | (1,411) | (3,899) |
Financing activities [Abstract] | |||
Dividends paid to shareholders | (5,692) | (5,857) | (16,835) |
Repurchase of common shares | (1,782) | (11,501) | (4,596) |
Net cash used in financing activities | (7,474) | (17,358) | (21,431) |
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | 5,858 | (8,126) | (11,311) |
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year | 7,059 | 15,185 | 26,496 |
Cash, cash equivalents and restricted cash and cash equivalents at end of year | $ 12,917 | $ 7,059 | $ 15,185 |
Schedule III - Supplementary Insurance Information (Details) - Property/Casualty Insurance [Member] - USD ($) $ in Thousands |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||
Supplementary Insurance Information [Abstract] | |||||||
Deferred policy acquisition costs | $ 9,744 | $ 8,496 | $ 6,568 | ||||
Reserves for unpaid claims and claim adjustment expenses | 1,089,669 | 988,305 | 865,339 | ||||
Unearned premiums | 63,731 | 74,810 | 71,625 | ||||
Other policy claims and benefits payable | 0 | 0 | 0 | ||||
Net premium earned | 445,515 | 447,288 | 432,880 | ||||
Net investment income | [1] | 25,422 | 26,249 | 22,048 | |||
Benefits, claims, losses and settlement expenses | [1] | 318,958 | 348,468 | 345,864 | |||
Amortization of deferred policy acquisition costs | 79,947 | 81,734 | 78,105 | ||||
Other operating expenses | [1],[2] | 41,241 | 34,043 | 23,514 | |||
Net premiums written | $ 441,000 | $ 452,242 | $ 444,398 | ||||
|
Schedule IV - Reinsurance (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||
Schedule IV - Reinsurance [Abstract] | |||||||||||||
Direct premiums | $ 557,795 | $ 570,959 | $ 562,364 | ||||||||||
Ceded to other companies | [1] | 113,125 | 124,446 | 131,080 | |||||||||
Assumed from other companies | 845 | 775 | 1,596 | ||||||||||
Net | $ 120,273 | $ 117,853 | $ 97,730 | $ 109,659 | $ 111,357 | $ 110,288 | $ 115,631 | $ 110,012 | $ 445,515 | $ 447,288 | $ 432,880 | ||
% of amount assumed to net | 0.20% | 0.20% | 0.40% | ||||||||||
Retrocessions associated with premiums assumed from other companies | $ 0 | $ 0 | $ 0 | ||||||||||
|
Schedule V - Valuation Allowances and Qualifying Accounts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1] | $ 3,404 | $ 1,522 | $ 1,849 | |||
Additions, charged to costs and expenses | [1] | 18,980 | 1,960 | 61 | |||
Additions, other additions | [1] | 0 | 0 | 0 | |||
Deductions | [1] | 222 | 78 | 388 | |||
Balance as of end of period | [1] | 22,162 | 3,404 | 1,522 | |||
Fixed Income Securities [Member] | |||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1] | 0 | |||||
Additions, charged to costs and expenses | [1] | 1,035 | |||||
Additions, other additions | [1] | 0 | |||||
Deductions | [1] | 0 | |||||
Balance as of end of period | [1] | 1,035 | 0 | ||||
Accounts Receivable [Member] | |||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1] | 2,233 | 403 | 484 | |||
Additions, charged to costs and expenses | [1] | 1,250 | 1,908 | 29 | |||
Additions, other additions | [1] | 0 | 0 | 0 | |||
Deductions | [1] | 23 | 78 | 110 | |||
Balance as of end of period | [1] | 3,460 | 2,233 | 403 | |||
Reinsurance Recoverable [Member] | |||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1] | 1,171 | 1,119 | 1,365 | |||
Additions, charged to costs and expenses | [1] | 0 | 52 | 32 | |||
Additions, other additions | [1] | 0 | 0 | 0 | |||
Deductions | [1] | 199 | 0 | 278 | |||
Balance as of end of period | [1] | 972 | 1,171 | $ 1,119 | |||
Deductible Receivable Allowance [Member] | |||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1],[2] | 0 | |||||
Additions, charged to costs and expenses | [1],[2] | 16,500 | |||||
Additions, other additions | [1],[2] | 0 | |||||
Deductions | [1],[2] | 0 | |||||
Balance as of end of period | [1],[2] | 16,500 | 0 | ||||
Mortgage Loans [Member] | |||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||||||
Balance as of beginning of period | [1] | 0 | |||||
Additions, charged to costs and expenses | [1] | 195 | |||||
Additions, other additions | [1] | 0 | |||||
Deductions | [1] | 0 | |||||
Balance as of end of period | [1] | $ 195 | $ 0 | ||||
|
Schedule VI - Supplemental Information Concerning Property/Casualty Insurance Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Supplemental Information Concerning Property/Casualty Insurance Operations [Abstract] | |||
Deferred policy acquisition costs | $ 9,744 | $ 8,496 | $ 6,568 |
Reserves for unpaid claims adjustment expenses | 1,089,669 | 988,305 | 865,339 |
Discount if any deducted from reserves | 0 | 0 | 0 |
Unearned premiums | 63,731 | 74,810 | 71,625 |
Earned premiums | 445,515 | 447,288 | 432,880 |
Net investment income | 25,422 | 26,249 | 22,048 |
Claims and claim adjustment expenses incurred related to current year | 319,269 | 349,018 | 329,078 |
Claims and claim adjustment expenses incurred related to prior years | (311) | (550) | 16,786 |
Amortization of deferred policy acquisition costs | 79,947 | 81,734 | 78,105 |
Paid claims and claim adjustment expenses | 243,657 | 247,872 | 228,591 |
Net premiums written | $ 441,000 | $ 452,242 | $ 444,398 |
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