Segment Information

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Information

12. Segment Information

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

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision makers in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, review a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities. The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents. All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Michigan, Texas, Oklahoma and Ohio. For the three months ended March 31, 2024 and 2023, gross written premiums attributable to these four states were 83.1% and 52.4%, respectively, of the Company’s total gross written premiums.

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

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

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

Three months ended March 31, 2024	Commercial Lines			Personal Lines		Total Underwriting		Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	12,762		$	11,551	$	24,313	$	—		$	—		$	—		$	24,313
Net written premiums	$	8,287		$	7,104	$	15,391	$	—		$	—		$	—		$	15,391
Net earned premiums	$	8,797		$	8,090	$	16,887	$	—		$	—		$	—		$	16,887
Agency commission income		—			—		—		4,336			—			—			4,336
Other income		50			28		78		6,369			71			(6,258	)		260
Segment revenue		8,847			8,118		16,965		10,705			71			(6,258	)		21,483
Losses and LAE, net		6,766			3,754		10,520		—			—			—			10,520
Policy acquisition costs		1,147			2,013		3,160		9,119			—			(5,266	)		7,013
Operating expenses		1,748			971		2,719		1,633			143			—			4,495
Segment expenses		9,661			6,738		16,399		10,752			143			(5,266	)		22,028
Segment gain (loss)	$	(814	)	$	1,380	$	566	$	(47	)	$	(72	)	$	(992	)	$	(545	)
Investment income												1,552						1,552
Change in fair value of equity securities												43						43
Interest expense												(877	)					(877	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(814	)	$	1,380	$	566	$	(47	)	$	646		$	(992	)	$	173

Three months ended March 31, 2023	Commercial Lines		Personal Lines			Total Underwriting		Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	28,975	$	7,239		$	36,214	$	—		$	—		$	—		$	36,214
Net written premiums	$	12,241	$	6,101		$	18,342	$	—		$	—		$	—		$	18,342
Net earned premiums	$	17,123	$	4,829		$	21,952	$	—		$	—		$	—		$	21,952
Agency commission income		—		—			—		430			—			—			430
Other income		52		23			75		449			72			(400	)		196
Segment revenue		17,175		4,852			22,027		879			72			(400	)		22,578
Losses and LAE, net		10,547		3,166			13,713		—			—			—			13,713
Policy acquisition costs		3,196		1,389			4,585		548			—			(412	)		4,721
Operating expenses		3,028		592			3,620		352			307			—			4,279
Segment expenses		16,771		5,147			21,918		900			307			(412	)		22,713
Segment gain (loss)	$	404	$	(295	)	$	109	$	(21	)	$	(235	)	$	12		$	(135	)
Investment income												1,307						1,307
Change in fair value of equity securities												694						694
Interest expense												(686	)					(686	)
Income (loss) before equity earnings in Affiliate and income taxes	$	404	$	(295	)	$	109	$	(21	)	$	1,080		$	12		$	1,180