Segment Information

9 Months Ended

Sep. 30, 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 nine months ended September 30, 2022 and 2021, gross written premiums attributable to these four states were 56.2% and 51.4%, 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 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 September 30, 2022	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	27,635		$	5,453		$	33,088		$	—	$	—		$	—		$	33,088
Net written premiums	$	18,730		$	4,963		$	23,693		$	—	$	—		$	—		$	23,693
Net earned premiums	$	20,789		$	4,169		$	24,958		$	—	$	—		$	—		$	24,958
Other income		57			26			83			793		113			(386	)		603
Segment revenue		20,846			4,195			25,041			793		113			(386	)		25,561
Losses and LAE, net		13,348			3,323			16,671			—		—			—			16,671
Policy acquisition costs		4,950			1,214			6,164			498		—			(432	)		6,230
Operating expenses		3,297			519			3,816			245		319			—			4,380
Segment expenses		21,595			5,056			26,651			743		319			(432	)		27,281
Segment gain (loss)	$	(749	)	$	(861	)	$	(1,610	)	$	50	$	(206	)	$	46		$	(1,720	)
Investment income													860						860
Net realized investment gains (losses)													—						—
Change in fair value of equity securities													(151	)					(151	)
Other gains (losses)													66						66
Interest expense													(778	)					(778	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(749	)	$	(861	)	$	(1,610	)	$	50	$	(209	)	$	46		$	(1,723	)

Three months ended September 30, 2021	Commercial Lines			Personal Lines		Total Underwriting			Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	29,849		$	3,855	$	33,704		$	—		$	—		$	—		$	33,704
Net written premiums	$	22,456		$	3,613	$	26,069		$	—		$	—		$	—		$	26,069
Net earned premiums	$	21,975		$	2,966	$	24,941		$	—		$	—		$	—		$	24,941
Other income		50			29		79			1,235			148			(710	)		752
Segment revenue		22,025			2,995		25,020			1,235			148			(710	)		25,693
Losses and LAE, net		14,697			1,462		16,159			—			—			—			16,159
Policy acquisition costs		6,458			838		7,296			778			—			(901	)		7,173
Operating expenses		2,954			336		3,290			500			287			—			4,077
Segment expenses		24,109			2,636		26,745			1,278			287			(901	)		27,409
Segment gain (loss)	$	(2,084	)	$	359	$	(1,725	)	$	(43	)	$	(139	)	$	191		$	(1,716	)
Investment income													514						514
Net realized investment gains (losses)													(101	)					(101	)
Change in fair value of equity securities													(2,169	)					(2,169	)
Other gains													2,778						2,778
Interest expense													(701	)					(701	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(2,084	)	$	359	$	(1,725	)	$	(43	)	$	182		$	191		$	(1,395	)

Nine months ended September 30, 2022	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency		Corporate			Eliminations			Total
Gross written premiums	$	88,297		$	15,173		$	103,470		$	—	$	—		$	—		$	103,470
Net written premiums	$	55,456		$	13,524		$	68,980		$	—	$	—		$	—		$	68,980
Net earned premiums	$	62,097		$	11,392		$	73,489		$	—	$	—		$	—		$	73,489
Other income		195			58			253			2,969		407			(1,665	)		1,964
Segment revenue		62,292			11,450			73,742			2,969		407			(1,665	)		75,453
Losses and LAE, net		49,864			7,076			56,940			—		—			—			56,940
Policy acquisition costs		13,717			3,530			17,247			2,026		—			(1,854	)		17,419
Operating expenses		9,966			1,405			11,371			811		828			—			13,010
Segment expenses		73,547			12,011			85,558			2,837		828			(1,854	)		87,369
Segment gain (loss)	$	(11,255	)	$	(561	)	$	(11,816	)	$	132	$	(421	)	$	189		$	(11,916	)
Investment income													1,931						1,931
Net realized investment gains (losses)													(1,505	)					(1,505	)
Change in fair value of equity securities													446						446
Other gains													60						60
Interest expense													(2,216	)					(2,216	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(11,255	)	$	(561	)	$	(11,816	)	$	132	$	(1,705	)	$	189		$	(13,200	)

Nine months ended September 30, 2021	Commercial Lines			Personal Lines			Total Underwriting			Wholesale Agency			Corporate			Eliminations			Total
Gross written premiums	$	88,017		$	11,041		$	99,058		$	—		$	—		$	—		$	99,058
Net written premiums	$	68,685		$	10,399		$	79,084		$	—		$	—		$	—		$	79,084
Net earned premiums	$	64,869		$	7,745		$	72,614		$	—		$	—		$	—		$	72,614
Other income		158			113			271			4,932			219			(3,448	)		1,974
Segment revenue		65,027			7,858			72,885			4,932			219			(3,448	)		74,588
Losses and LAE, net		48,592			4,855			53,447			—			—			—			53,447
Policy acquisition costs		19,102			2,178			21,280			3,147			—			(3,608	)		20,819
Operating expenses		8,761			1,076			9,837			2,060			871			—			12,768
Segment expenses		76,455			8,109			84,564			5,207			871			(3,608	)		87,034
Segment gain (loss)	$	(11,428	)	$	(251	)	$	(11,679	)	$	(275	)	$	(652	)	$	160		$	(12,446	)
Investment income														1,549						1,549
Net realized investment gains (losses)														3,883						3,883
Change in fair value of equity securities														(3,234	)					(3,234	)
Other gains														11,688						11,688
Interest expense														(2,154	)					(2,154	)
Income (loss) before equity earnings in Affiliate and income taxes	$	(11,428	)	$	(251	)	$	(11,679	)	$	(275	)	$	11,080		$	160		$	(714	)