Segment Information

6 Months Ended

Jun. 30, 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 maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities. The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents. All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Texas, Michigan, Oklahoma and Indiana. For the six months ended June 30, 2024 and 2023, gross written premiums attributable to these four states were 85.1% and 47.1%, 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 June 30, 2024	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	6,782		$	12,189		$	18,971		$	—	$	—		$	—		$	18,971
Net written premiums	$	4,285		$	8,962		$	13,247		$	—	$	—		$	—		$	13,247
Net earned premiums	$	8,681		$	7,985		$	16,666		$	—	$	—		$	—		$	16,666
Agency commission income		—			—			—			13,688		—			(4,857	)		8,831
Other income		19			20			39			83		38			—			160
Segment revenue		8,700			8,005			16,705			13,771		38			(4,857	)		25,657
Losses and LAE, net		6,906			8,375			15,281			—		—			—			15,281
Policy acquisition costs		1,155			2,236			3,391			11,005		—			(3,916	)		10,480
Operating expenses		1,050			926			1,976			2,046		234			—			4,256
Segment expenses		9,111			11,537			20,648			13,051		234			(3,916	)		30,017
Segment gain (loss)	$	(411	)	$	(3,532	)	$	(3,943	)	$	720	$	(196	)	$	(941	)	$	(4,360	)
Investment income													1,505						1,505
Net realized investment gains (losses)													(118	)					(118	)
Change in fair value of equity securities													(196	)					(196	)
Interest expense													(869	)					(869	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(411	)	$	(3,532	)	$	(3,943	)	$	720	$	126		$	(941	)	$	(4,038	)

Three months ended June 30, 2023	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	34,761		$	9,913		$	44,674		$	—		$	—		$	—		$	44,674
Net written premiums	$	20,485		$	8,843		$	29,328		$	—		$	—		$	—		$	29,328
Net earned premiums	$	17,487		$	5,696		$	23,183		$	—		$	—		$	—		$	23,183
Agency commission income		—			—			—			560			—			(349	)		211
Other income		56			23			79			34			74			—			187
Segment revenue		17,543			5,719			23,262			594			74			(349	)		23,581
Losses and LAE, net		13,597			5,722			19,319			—			—			—			19,319
Policy acquisition costs		2,966			1,453			4,419			349			—			(355	)		4,413
Operating expenses		3,600			792			4,392			365			357			—			5,114
Segment expenses		20,163			7,967			28,130			714			357			(355	)		28,846
Segment gain (loss)	$	(2,620	)	$	(2,248	)	$	(4,868	)	$	(120	)	$	(283	)	$	6		$	(5,265	)
Investment income														1,354						1,354
Change in fair value of equity securities														(12	)					(12	)
Interest expense														(820	)					(820	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(2,620	)	$	(2,248	)	$	(4,868	)	$	(120	)	$	239		$	6		$	(4,743	)

Six months ended June 30, 2024	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	19,544		$	23,740		$	43,284		$	—	$	—		$	—		$	43,284
Net written premiums	$	12,572		$	16,066		$	28,638		$	—	$	—		$	—		$	28,638
Net earned premiums	$	17,478		$	16,075		$	33,553		$	—	$	—		$	—		$	33,553
Agency commission income	$	—		$	—		$	—		$	24,282	$	—		$	(11,115	)	$	13,167
Other income		69			48			117			194		109			—			420
Segment revenue		17,547			16,123			33,670			24,476		109			(11,115	)		47,140
Losses and LAE, net		13,672			12,129			25,801			—		—			—			25,801
Policy acquisition costs		2,302			4,249			6,551			20,124		—			(9,182	)		17,493
Operating expenses		2,798			1,897			4,695			3,679		377			—			8,751
Segment expenses		18,772			18,275			37,047			23,803		377			(9,182	)		52,045
Segment gain (loss)	$	(1,225	)	$	(2,152	)	$	(3,377	)	$	673	$	(268	)	$	(1,933	)	$	(4,905	)
Investment income													3,057						3,057
Net realized investment gains (losses)													(118	)					(118	)
Change in fair value of equity securities													(153	)					(153	)
Interest expense													(1,746	)					(1,746	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(1,225	)	$	(2,152	)	$	(3,377	)	$	673	$	772		$	(1,933	)	$	(3,865	)

Six months ended June 30, 2023	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	63,736		$	17,152		$	80,888		$	—		$	—		$	—		$	80,888
Net written premiums	$	32,726		$	14,944		$	47,670		$	—		$	—		$	—		$	47,670
Net earned premiums	$	34,610		$	10,525		$	45,135		$	—		$	—		$	—		$	45,135
Agency commission income	$	—		$	—		$	—		$	1,390		$	—		$	(749	)	$	641
Other income		108			46			154			83			146			—			383
Segment revenue		34,718			10,571			45,289			1,473			146			(749	)		46,159
Losses and LAE, net		24,144			8,888			33,032			—			—			—			33,032
Policy acquisition costs		6,162			2,842			9,004			897			—			(767	)		9,134
Operating expenses		6,628			1,384			8,012			717			664			—			9,393
Segment expenses		36,934			13,114			50,048			1,614			664			(767	)		51,559
Segment gain (loss)	$	(2,216	)	$	(2,543	)	$	(4,759	)	$	(141	)	$	(518	)	$	18		$	(5,400	)
Investment income														2,661						2,661
Change in fair value of equity securities														682						682
Interest expense														(1,506	)					(1,506	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(2,216	)	$	(2,543	)	$	(4,759	)	$	(141	)	$	1,319		$	18		$	(3,563	)