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Indiana
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0-5534
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35-0160330
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(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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111 Congressional Boulevard, Carmel IN |
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46032
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(Address of Principal Executive Offices)
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(Zip Code)
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☐ |
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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||||||
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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||||
Class A Common Stock, No Par Value
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PTVCA
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The Nasdaq Stock Market LLC
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Class B Common Stock, No Par Value
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PTVCB
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The Nasdaq Stock Market LLC
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||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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(d) |
Exhibits.
|
•
|
Accident Year combined ratios were 101.4% for the second quarter
of 2020 and 102.9% for the first six months of 2020, an improvement of 5.6 points and 5.0 points over the comparative 2019 periods.
|
•
|
Net investment income increased to $13.6 million for the first six
months of 2020 driven by a continued asset allocation shift to fixed income and higher investment balances.
|
•
|
As a result of actions to improve underwriting profitability and
the impact of the COVID-19 pandemic, gross premiums written declined from $147.2 million in the second quarter of 2019 to $115.4 million in the second quarter of 2020. For the first six months of 2020, gross premiums written were $249.6
million compared to $296.0 million for the 2019 period.
|
•
|
Prior period loss development was $0.3 million favorable for the
quarter compared to $0.6 million favorable for the prior year quarter.
|
•
|
Realized and unrealized investment gains recognized through the statement of
operations were $10.6 million (pre-tax) for the second quarter of 2020. For the first six months of 2020, realized and unrealized investment losses totaled $17.1 million (pre-tax).
|
•
|
Book value per share increased $2.19 in value during the second quarter due to
valuation gains on our investment holdings, including gains recognized through comprehensive income, and positive income from core business operations. Book value per share was $23.64 at June 30, 2020.
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Three months ended
|
Six months ended
|
|||||||
June 30, 2020
|
June 30, 2020
|
|||||||
Net realized losses on investment, including impairments, within statements of operations
|
$ |
(4,517
|
)
|
$ |
(9,344
|
)
|
||
Net unrealized gains (losses) on equity securities and limited partnership investments within statements of operations
|
15,132
|
(7,797
|
)
|
|||||
Net unrealized gains (losses) on fixed income securities recorded within other comprehensive income (loss)
|
22,077
|
(1,010
|
)
|
|||||
Total realized and unrealized investment gains (losses) (pre-tax)
|
$ |
32,692
|
$ |
(18,151
|
)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Income (loss) before federal income tax expense (benefit)
|
$
|
14,207
|
$
|
1,950
|
$
|
(10,932
|
)
|
$
|
5,464
|
|||||||
Less: Net realized gains (losses) on investments
|
(4,517
|
)
|
627
|
(9,344
|
)
|
327
|
||||||||||
Less: Net unrealized gains (losses) - equity securities and limited partnerships
|
15,132
|
2,262
|
(7,797
|
)
|
8,589
|
|||||||||||
Less: Corporate charges included in Other operating expense
|
(1,700
|
)
|
-
|
(1,700
|
)
|
-
|
||||||||||
Income (loss) from core business operations
|
$
|
5,292
|
$
|
(939
|
)
|
$
|
7,909
|
$
|
(3,452
|
)
|
||||||
Less: Net investment income
|
6,379
|
6,500
|
13,616
|
12,732
|
||||||||||||
Underwriting loss
|
$
|
(1,087
|
)
|
$
|
(7,439
|
)
|
$
|
(5,707
|
)
|
$
|
(16,184
|
)
|
Unaudited Condensed Consolidated Balance Sheets
|
||||||||
(in thousands, except per share data)
|
||||||||
June 30
|
December 31
|
|||||||
2020
|
2019
|
|||||||
Assets
|
||||||||
Investments 1:
|
||||||||
Fixed income securities (2020: $800,519; 2019:
$783,047)
|
$
|
812,001
|
$
|
795,538
|
||||
Equity securities
|
46,009
|
76,812
|
||||||
Limited partnerships, at equity
|
7,393
|
23,292
|
||||||
Commercial mortgage loans
|
11,875
|
11,782
|
||||||
Short-term 2
|
1,000
|
1,000
|
||||||
878,278
|
908,424
|
|||||||
Cash and cash equivalents
|
107,925
|
67,851
|
||||||
Restricted cash and cash equivalents
|
9,780
|
21,037
|
||||||
Accounts receivable
|
85,225
|
111,762
|
||||||
Reinsurance recoverable
|
421,757
|
432,067
|
||||||
Other assets
|
86,984
|
86,306
|
||||||
Current federal income taxes
|
4,611
|
4,878
|
||||||
Deferred federal income taxes
|
5,708
|
2,035
|
||||||
$
|
1,600,268
|
$
|
1,634,360
|
|||||
Liabilities and shareholders' equity
|
||||||||
Reserves for losses and loss expenses
|
$
|
1,015,360
|
$
|
988,305
|
||||
Reserves for unearned premiums
|
60,191
|
74,810
|
||||||
Borrowings under line of credit
|
20,000
|
20,000
|
||||||
Accounts payable and other liabilities
|
168,679
|
186,929
|
||||||
1,264,230
|
1,270,044
|
|||||||
Shareholders' equity:
|
||||||||
Common stock-no par value
|
607
|
610
|
||||||
Additional paid-in capital
|
53,692
|
53,349
|
||||||
Accumulated other comprehensive income
|
7,893
|
9,369
|
||||||
Retained earnings
|
273,846
|
300,988
|
||||||
336,038
|
364,316
|
|||||||
$
|
1,600,268
|
$
|
1,634,360
|
|||||
Number of common and common
|
||||||||
equivalent shares outstanding
|
14,213
|
14,279
|
||||||
Book value per outstanding share
|
$
|
23.64
|
$
|
25.51
|
||||
1 2020 & 2019 cost in parentheses
|
||||||||
2 Approximates cost
|
Unaudited Condensed Consolidated Statements of Operations
|
|||||||||||||||||
(in thousands, except per share data)
|
|||||||||||||||||
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
June 30
|
June 30
|
||||||||||||||||
2020
|
2019
|
2020
|
2019
|
||||||||||||||
Revenues
|
|||||||||||||||||
Net premiums earned
|
$
|
97,730
|
$
|
115,631
|
$
|
207,389
|
$
|
225,644
|
|||||||||
Net investment income
|
6,379
|
6,500
|
13,616
|
12,732
|
|||||||||||||
Commissions and other income
|
1,889
|
1,978
|
3,551
|
4,043
|
|||||||||||||
Net realized gains (losses) on investments, excluding impairment losses
|
(4,099
|
)
|
713
|
(8,886
|
)
|
673
|
|||||||||||
Impairment losses on investments
|
(418
|
)
|
(86
|
)
|
(458
|
)
|
(346
|
)
|
|||||||||
Net unrealized gains (losses) on equity securities and limited partnership investments
|
15,132
|
2,262
|
(7,797
|
)
|
8,589
|
||||||||||||
Net realized and unrealized gains (losses) on investments
|
10,615
|
2,889
|
(17,141
|
)
|
8,916
|
||||||||||||
116,613
|
126,998
|
207,415
|
251,335
|
||||||||||||||
Expenses
|
|||||||||||||||||
Losses and loss expenses incurred
|
68,208
|
90,433
|
150,040
|
177,555
|
|||||||||||||
Other operating expenses
|
34,198
|
34,615
|
68,307
|
68,316
|
|||||||||||||
102,406
|
125,048
|
218,347
|
245,871
|
||||||||||||||
Income (loss) before federal income tax expense (benefit)
|
14,207
|
1,950
|
(10,932
|
)
|
5,464
|
||||||||||||
Federal income tax expense (benefit)
|
2,840
|
415
|
(143
|
)
|
1,181
|
||||||||||||
Net income (loss)
|
$
|
11,367
|
$
|
1,535
|
$
|
(10,789
|
)
|
$
|
4,283
|
||||||||
Per share data - diluted:
|
|||||||||||||||||
Income (loss) before net gains (losses) on investments
|
$
|
.21
|
$
|
(.05
|
)
|
$
|
.19
|
$
|
(.19
|
)
|
|||||||
Net gains (losses) on investments
|
.59
|
.16
|
(.95
|
)
|
.47
|
||||||||||||
Net income (loss)
|
$
|
.80
|
$
|
.11
|
$
|
(.76
|
)
|
$
|
.28
|
||||||||
Weighted average number of shares outstanding:
|
|||||||||||||||||
Basic
|
14,117
|
14,616
|
14,143
|
14,731
|
|||||||||||||
Dilutive effect of share equivalents
|
62
|
63
|
-
|
60
|
|||||||||||||
Diluted
|
14,179
|
14,679
|
14,143
|
14,791
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
||||||||
(in thousands)
|
||||||||
Six Months Ended
|
||||||||
June 30
|
||||||||
2020
|
2019
|
|||||||
Net cash provided by operating activities
|
$
|
11,678
|
$
|
38,396
|
||||
Investing activities:
|
||||||||
Purchases of available-for-sale investments
|
(164,518
|
)
|
(245,099
|
)
|
||||
Proceeds from sales or maturities
|
||||||||
of available-for-sale investments
|
128,733
|
110,756
|
||||||
Proceeds from sales of equity securities
|
44,395
|
14,449
|
||||||
Purchase of commercial mortgage loans
|
(410
|
)
|
(2,213
|
)
|
||||
Proceeds from commercial mortgage loans
|
121
|
-
|
||||||
Distributions from limited partnerships
|
14,636
|
20,231
|
||||||
Other investing activities
|
(712
|
)
|
(1,343
|
)
|
||||
Net cash provided by (used in) investing activities
|
22,245
|
(103,219
|
)
|
|||||
Financing activities:
|
||||||||
Dividends paid to shareholders
|
(2,858
|
)
|
(2,987
|
)
|
||||
Repurchase of common shares
|
(1,782
|
)
|
(6,487
|
)
|
||||
Net cash used in financing activities
|
(4,640
|
)
|
(9,474
|
)
|
||||
Effect of foreign exchange rates on cash and cash equivalents
|
(466
|
)
|
591
|
|||||
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents
|
28,817
|
(73,706
|
)
|
|||||
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
|
88,888
|
170,811
|
||||||
Cash, cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
117,705
|
$
|
97,105
|
Protective Insurance Corporation and Subsidiaries
|
||||||||||||||||
(In thousands, except share and per share data)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
June 30
|
June 30
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Annualized
|
||||||||||||||||
Book value per share beginning of period
|
$
|
21.53
|
$
|
24.63
|
$
|
25.51
|
$
|
23.95
|
||||||||
Book value per share end of period
|
23.64
|
25.26
|
23.64
|
25.26
|
||||||||||||
Change in book value per share
|
$
|
2.11
|
$
|
0.63
|
$
|
(1.87
|
)
|
$
|
1.31
|
|||||||
Dividends paid
|
0.10
|
0.10
|
0.20
|
0.20
|
||||||||||||
Change in book value per share plus dividends paid
|
$
|
2.21
|
$
|
0.73
|
$
|
(1.67
|
)
|
$
|
1.51
|
|||||||
Total value creation 1
|
10.3
|
%
|
3.0
|
%
|
(6.5
|
%)
|
6.3
|
%
|
||||||||
Return on average shareholders' equity:
|
||||||||||||||||
Average shareholders' equity
|
320,711
|
366,743
|
350,177
|
361,749
|
||||||||||||
Net income (loss)
|
11,367
|
1,535
|
(10,789
|
)
|
4,283
|
|||||||||||
Less: Tax valuation allowance recognized in net income (loss)
|
130
|
-
|
(2,176
|
)
|
-
|
|||||||||||
Less: Net realized and unrealized gains (losses) on investments, net of tax
|
8,386
|
2,282
|
(13,541
|
)
|
7,044
|
|||||||||||
Less: Corporate charges included in Other operating expenses, net of tax 3
|
(1,343
|
)
|
-
|
(1,343
|
)
|
-
|
||||||||||
Income (loss) from core business operations, net of tax
|
4,194
|
(747
|
)
|
6,271
|
(2,761
|
)
|
||||||||||
Return on net income (loss)
|
3.5
|
%
|
0.4
|
%
|
(3.1
|
%)
|
1.2
|
%
|
||||||||
Return on income (loss) from core business operations, net of tax
|
1.3
|
%
|
(0.2
|
%)
|
1.8
|
%
|
(0.8
|
%)
|
||||||||
Loss and LAE expenses incurred
|
$
|
68,208
|
$
|
90,433
|
$
|
150,040
|
$
|
177,555
|
||||||||
Less: Prior period loss development
|
(318
|
)
|
(598
|
)
|
(326
|
)
|
(1,656
|
)
|
||||||||
Loss and LAE expenses incurred, less prior period loss development
|
$
|
68,526
|
$
|
91,031
|
$
|
150,366
|
$
|
179,211
|
||||||||
Net premiums earned
|
97,730
|
115,631
|
207,389
|
225,644
|
||||||||||||
Accident year loss and LAE ratio
|
70.1
|
%
|
78.7
|
%
|
72.5
|
%
|
79.4
|
%
|
||||||||
Other operating expenses
|
$
|
34,198
|
$
|
34,615
|
$
|
68,307
|
$
|
68,316
|
||||||||
Less: Commissions and other income
|
1,889
|
1,978
|
3,551
|
4,043
|
||||||||||||
Less: Corporate charges 2
|
1,700
|
-
|
1,700
|
-
|
||||||||||||
Other operating expenses, excluding coerporate charges, less commissions and other income
|
$
|
30,609
|
$
|
32,637
|
$
|
63,056
|
$
|
64,273
|
||||||||
Net premiums earned
|
97,730
|
115,631
|
207,389
|
225,644
|
||||||||||||
Expense ratio
|
31.3
|
%
|
28.2
|
%
|
30.4
|
%
|
28.5
|
%
|
||||||||
Accident year combined ratio 3
|
101.4
|
%
|
107.0
|
%
|
102.9
|
%
|
107.9
|
%
|
||||||||
Gross premiums written
|
$
|
115,449
|
$
|
147,152
|
$
|
249,455
|
$
|
296,045
|
||||||||
Net premiums written
|
89,279
|
115,695
|
198,513
|
231,017
|
||||||||||||
1 Total Value Creation equals change in book value plus dividends paid, divided by beginning book value.
|
||||||||||||||||
2 Represents the corporate charges incurred in conjunction with the Board's review of a third party contingent sale
agreement and activities of the special committee of the Board of Directors.
|
||||||||||||||||
3 The accident year combined ratio is calculated as ratio of losses and loss expenses incurred, excluding prior
period development, plus other operating expenses excluding corporate charges, less commission and other income to net premiums earned.
|
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