Segment Information

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Information

13. 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 co-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 co-chief operating decision makers, the Co-Chief Executive Officers, 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, Florida, Texas and California. For the three months ended March 31, 2022 and 2021, gross written premiums attributable to these four states were 59.2% and 53.5%, 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 operating segments, the Company maintains a Corporate category to reconcile segment results to the consolidated totals. The Corporate category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team and 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, 2022	Commercial Lines			Personal Lines		Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	28,586		$	4,378	$	32,964		$	—	$	—		$	—		$	32,964
Net written premiums	$	14,340		$	3,681	$	18,021		$	—	$	—		$	—		$	18,021
Net earned premiums	$	20,524		$	3,431	$	23,955		$	—	$	—		$	—		$	23,955
Other income		71			6		77			1,112		147			(638	)		698
Segment revenue		20,595			3,437		24,032			1,112		147			(638	)		24,653
Losses and LAE, net		16,610			1,408		18,018			—		—			—			18,018
Policy acquisition costs		4,357			1,093		5,450			758		—			(744	)		5,464
Operating expenses		3,161			402		3,563			292		305			—			4,160
Segment expenses		24,128			2,903		27,031			1,050		305			(744	)		27,642
Segment gain (loss)	$	(3,533	)	$	534	$	(2,999	)	$	62	$	(158	)	$	106		$	(2,989	)
Investment income												507						507
Net realized investment gains (losses)												(69	)					(69	)
Change in fair value of equity securities												280						280
Other gains (losses)												(5	)					(5	)
Interest expense												(711	)					(711	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(3,533	)	$	534	$	(2,999	)	$	62	$	(156	)	$	106		$	(2,987	)

Three months ended March 31, 2021	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	27,221		$	3,152		$	30,373		$	—		$	—		$	—		$	30,373
Net written premiums	$	21,557		$	2,926		$	24,483		$	—		$	—		$	—		$	24,483
Net earned premiums	$	20,706		$	2,129		$	22,835		$	—		$	—		$	—		$	22,835
Other income		56			40			96			1,726			43			(1,309	)		556
Segment revenue		20,762			2,169			22,931			1,726			43			(1,309	)		23,391
Losses and LAE, net		16,955			2,407			19,362			—			—			—			19,362
Policy acquisition costs		6,318			600			6,918			1,127			—			(1,295	)		6,750
Operating expenses		2,955			349			3,304			744			301			—			4,349
Segment expenses		26,228			3,356			29,584			1,871			301			(1,295	)		30,461
Segment gain (loss)	$	(5,466	)	$	(1,187	)	$	(6,653	)	$	(145	)	$	(258	)	$	(14	)	$	(7,070	)
Investment income														532						532
Net realized investment gains														2,924						2,924
Change in fair value of equity securities														(540	)					(540	)
Other gains														—						—
Interest expense														(721	)					(721	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(5,466	)	$	(1,187	)	$	(6,653	)	$	(145	)	$	1,937		$	(14	)	$	(4,875	)