Segment Information

9 Months Ended

Sep. 30, 2024

Segment Reporting [Abstract]

Segment Information

14. Segment Information

The Company has historically been engaged in the sale of property and casualty insurance products and had organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offered various insurance products and insurance agency services. Such insurance businesses were engaged in underwriting and marketing insurance coverages, and administered claims processing for such policies. The Company viewed the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provided non-risk bearing revenue through commissions and policy fees. The wholesale agency business increased 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. As a result of the CIS Sale, the Company is no longer operating a wholesale agency business. The Company determined that the wholesale agency segment qualifies for discontinued operations reporting. All periods presented now exclude the wholesale agency segment as well as related eliminations from the segment information provided below.

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 agents and a network of independent agents. All of the Company’s insurance activities are conducted in the U.S. with a concentration of activity in Texas, Michigan, Oklahoma and Indiana. In mid-2024, the Company exited the Oklahoma business. As part of the strategic shift described earlier, the Company has also significantly reduced its writings in commercial lines. For the nine months ended September 30, 2024 and 2023, gross written premiums attributable to these four states were 84.2% and 49.8%, respectively, of the Company’s total gross written premiums.

The wholesale agency business is now reported as a discontinued operation and is no longer reflected in the segment information. Historically, it sold 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 were reflected as commission revenue for the wholesale agency business and were previously eliminated before the disposal of the agency business.

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 September 30, 2024	Commercial Lines			Personal Lines			Total Underwriting			Corporate			Total
Gross written premiums	$	4,018		$	11,068		$	15,086		$	—		$	15,086
Net written premiums	$	1,481		$	9,693		$	11,174		$	—		$	11,174
Net earned premiums	$	6,428		$	8,173		$	14,601		$	—		$	14,601
Other income		—			—			—			61			61
Segment revenue		6,428			8,173			14,601			61			14,662
Losses and LAE, net		10,798			4,354			15,152			—			15,152
Policy acquisition costs		929			2,320			3,249			—			3,249
Operating expenses		939			1,555			2,494			1,100			3,594
Segment expenses		12,666			8,229			20,895			1,100			21,995
Segment gain (loss)	$	(6,238	)	$	(56	)	$	(6,294	)	$	(1,039	)	$	(7,333	)
Investment income											1,391			1,391
Net realized investment gains (losses)											(7	)		(7	)
Change in fair value of equity securities											(29	)		(29	)
Interest expense											(2,275	)		(2,275	)
Income (loss) from continuing operations before income taxes	$	(6,238	)	$	(56	)	$	(6,294	)	$	(1,959	)	$	(8,253	)

Three months ended September 30, 2023	Commercial Lines			Personal Lines			Total Underwriting			Corporate			Total
Gross written premiums	$	28,492		$	10,056		$	38,548		$	—		$	38,548
Net written premiums	$	(3,155	)	$	8,844		$	5,689		$	—		$	5,689
Net earned premiums	$	17,315		$	6,664		$	23,979		$	—		$	23,979
Other income		61			24			85			24			109
Segment revenue		17,376			6,688			24,064			24			24,088
Losses and LAE, net		15,424			5,487			20,911			—			20,911
Policy acquisition costs		2,587			1,813			4,400			—			4,400
Operating expenses		2,928			845			3,773			320			4,093
Segment expenses		20,939			8,145			29,084			320			29,404
Segment gain (loss)	$	(3,563	)	$	(1,457	)	$	(5,020	)	$	(296	)	$	(5,316	)
Investment income											1,439			1,439
Change in fair value of equity securities											(87	)		(87	)
Interest expense											(855	)		(855	)
Income (loss) from continuing operations before income taxes	$	(3,563	)	$	(1,457	)	$	(5,020	)	$	201		$	(4,819	)

Nine months ended September 30, 2024	Commercial Lines			Personal Lines			Total Underwriting			Corporate			Total
Gross written premiums	$	23,562		$	34,808		$	58,370		$	—		$	58,370
Net written premiums	$	14,053		$	25,759		$	39,812		$	—		$	39,812
Net earned premiums	$	23,906		$	24,248		$	48,154		$	—		$	48,154
Other income		69			48			117			170			287
Segment revenue		23,975			24,296			48,271			170			48,441
Losses and LAE, net		24,470			16,483			40,953			—			40,953
Policy acquisition costs		3,231			6,569			9,800			—			9,800
Operating expenses		3,737			3,452			7,189			1,477			8,666
Segment expenses		31,438			26,504			57,942			1,477			59,419
Segment gain (loss)	$	(7,463	)	$	(2,208	)	$	(9,671	)	$	(1,307	)	$	(10,978	)
Investment income											4,411			4,411
Net realized investment gains (losses)											(125	)		(125	)
Change in fair value of equity securities											(182	)		(182	)
Interest expense											(4,021	)		(4,021	)
Income (loss) from continuing operations before income taxes	$	(7,463	)	$	(2,208	)	$	(9,671	)	$	(1,224	)	$	(10,895	)

Nine months ended September 30, 2023	Commercial Lines			Personal Lines			Total Underwriting			Corporate			Total
Gross written premiums	$	92,228		$	27,208		$	119,436		$	—		$	119,436
Net written premiums	$	29,571		$	23,788		$	53,359		$	—		$	53,359
Net earned premiums	$	51,925		$	17,189		$	69,114		$	—		$	69,114
Other income		169			70			239			169			408
Segment revenue		52,094			17,259			69,353			169			69,522
Losses and LAE, net		39,568			14,375			53,943			—			53,943
Policy acquisition costs		8,750			4,655			13,405			—			13,405
Operating expenses		9,556			2,229			11,785			984			12,769
Segment expenses		57,874			21,259			79,133			984			80,117
Segment gain (loss)	$	(5,780	)	$	(4,000	)	$	(9,780	)	$	(815	)	$	(10,595	)
Investment income											4,036			4,036
Change in fair value of equity securities											595			595
Interest expense											(2,361	)		(2,361	)
Income (loss) from continuing operations before income taxes	$	(5,780	)	$	(4,000	)	$	(9,780	)	$	1,455		$	(8,325	)