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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 0-5534

PROTECTIVE INSURANCE CORPORATION

(Exact name of registrant as specified in its charter)

Indiana		35-0160330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

111 Congressional Boulevard, Carmel, Indiana		46032
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (317) 636-9800

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, No Par Value	PTVCA	The Nasdaq Stock Market LLC
Class B Common Stock, No Par Value	PTVCB	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ 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.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of August 4, 2020:

Common Stock, No Par Value:	Class A (voting)	2,603,350
	Class B (non-voting)	11,610,062
		14,213,412

- 1 -

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)

	June 30 2020		December 31 2019
Assets
Investments:
Fixed income securities	$	812,001	$	795,538
Equity securities		46,009		76,812
Limited partnerships		7,393		23,292
Commercial mortgage loans		11,875		11,782
Short-term and other		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 recoverable		4,611		4,878
Deferred federal income taxes		5,708		2,035
Total Assets	$	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
Reinsurance payable		55,021		65,835
Short-term borrowings		20,000		20,000
Accounts payable and other liabilities		113,658		121,094
Total Liabilities		1,264,230		1,270,044

Shareholders' equity:
Common stock-no par value:
Class A voting -- authorized 3,000,000 shares; outstanding -- 2020 - 2,603,350; 2019 - 2,603,350		111		111
Class B non-voting -- authorized 20,000,000 shares; outstanding -- 2020 - 11,610,062; 2019 - 11,675,956		496		499
Additional paid-in capital		53,692		53,349
Accumulated other comprehensive income		7,893		9,369
Retained earnings		273,846		300,988
Total Shareholders' Equity		336,038		364,316
Total Liabilities and Shareholders' Equity	$	1,600,268	$	1,634,360

See notes to condensed consolidated financial statements.

- 2 -

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended June 30						Six Months Ended 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

Net income (loss) per share:
Basic	$	0.81		$	0.11		$	(0.76	)	$	0.28
Diluted	$	0.80		$	0.11		$	(0.76	)	$	0.28

Weighted average number of shares outstanding:
Basic		14,117			14,616			14,143			14,731
Dilutive effect of share equivalents		62			63			0			60
Diluted		14,179			14,679			14,143			14,791

See notes to condensed consolidated financial statements.

- 3 -

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020			2019
Net income (loss)	$	11,367	$	1,535	$	(10,789	)	$	4,283

Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on fixed income securities		19,851		6,517		(1,010	)		14,973

Foreign currency translation adjustments		221		284		(466	)		591

Other comprehensive income (loss)		20,072		6,801		(1,476	)		15,564

Comprehensive income (loss)	$	31,439	$	8,336	$	(12,265	)	$	19,847

See notes to condensed consolidated financial statements.

- 4 -

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Shareholders' Equity

(in thousands)

	Common Stock										Additional			Accumulated Other
	Class A				Class B						Paid-in			Comprehensive			Retained			Total
Description	Shares		Amount		Shares			Amount			Capital			Income (Loss)			Earnings			Equity
Balance at December 31, 2019		2,603	$	111		11,676		$	499		$	53,349		$	9,369		$	300,988		$	364,316
Cumulative effect of the adoption of updated accounting guidance for credit losses, net of tax		–		–		–			–			–			–			(12,281	)		(12,281	)
Net loss		–		–		–			–			–			–			(10,789	)		(10,789	)
Foreign currency translation adjustment, net of tax		–		–		–			–			–			(466	)		–			(466	)
Change in unrealized gain (loss) on investments, net of tax		–		–		–			–			–			(1,010	)		–			(1,010	)
Common stock dividends		–		–		–			–			–			–			(2,858	)		(2,858	)
Repurchase of common shares		–		–		(127	)		(5	)		(563	)		–			(1,214	)		(1,782	)
Restricted stock grants		–		–		61			2			906			–			–			908
Balance at June 30, 2020		2,603	$	111		11,610		$	496		$	53,692		$	7,893		$	273,846		$	336,038

	Common Stock								Additional		Accumulated Other
	Class A				Class B				Paid-in		Comprehensive			Retained			Total
Description	Shares		Amount		Shares		Amount		Capital		Income (Loss)			Earnings			Equity
Balance at March 31, 2020		2,603	$	111		11,580	$	495	$	53,045	$	(12,179	)	$	263,911		$	305,383
Net income		–		–		–		–		–		–			11,367			11,367
Foreign currency translation adjustment, net of tax		–		–		–		–		–		221			–			221
Change in unrealized gain (loss) on investments, net of tax		–		–		–		–		–		19,851			–			19,851
Common stock dividends		–		–		–		–		–		–			(1,432	)		(1,432	)
Repurchase of common shares		–		–		–		–		–		–			–			–
Restricted stock grants		–		–		30		1		647		–			–			648
Balance at June 30, 2020		2,603	$	111		11,610	$	496	$	53,692	$	7,893		$	273,846		$	336,038

See notes to condensed consolidated financial statements.

- 5 -

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Shareholders' Equity

(in thousands)

	Common Stock											Additional			Accumulated Other
	Class A					Class B						Paid-in			Comprehensive			Retained			Total
Description	Shares			Amount		Shares			Amount			Capital			Income (Loss)			Earnings			Equity
Balance at December 31, 2018		2,615		$	112		12,254		$	522		$	54,720		$	(7,347	)	$	308,075		$	356,082
Net income		–			–		–			–			–			–			4,283			4,283
Foreign currency translation adjustment, net of tax		–			–		–			–			–			591			–			591
Change in unrealized gain (loss) on investments, net of tax		–			–		–			–			–			14,973			–			14,973
Common stock dividends		–			–		–			–			–			–			(2,987	)		(2,987	)
Repurchase of common shares		(3	)		–		(371	)		(15	)		(1,614	)		–			(4,858	)		(6,487	)
Restricted stock grants		–			–		49			2			959			–			–			961
Balance at June 30, 2019		2,612		$	112		11,932		$	509		$	54,065		$	8,217		$	304,513		$	367,416

	Common Stock											Additional			Accumulated Other
	Class A					Class B						Paid-in			Comprehensive		Retained			Total
Description	Shares			Amount		Shares			Amount			Capital			Income (Loss)		Earnings			Equity
Balance at March 31, 2019		2,615		$	112		12,249		$	522		$	55,049		$	1,416	$	308,971		$	366,070
Net income		–			–		–			–			–			–		1,535			1,535
Foreign currency translation adjustment, net of tax		–			–		–			–			–			284		–			284
Change in unrealized gain (loss) on investments, net of tax		–			–		–			–			–			6,517		–			6,517
Common stock dividends		–			–		–			–			–			–		(1,494	)		(1,494	)
Repurchase of common shares		(3	)		–		(346	)		(15	)		(1,506	)		–		(4,499	)		(6,020	)
Restricted stock grants		–			–		29			2			522			–		–			524
Balance at June 30, 2019		2,612		$	112		11,932		$	509		$	54,065		$	8,217	$	304,513		$	367,416

See notes to condensed consolidated financial statements.

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Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended June 30
	2020			2019
Operating activities
Net income (loss)	$	(10,789	)	$	4,283
Adjustments to reconcile net income (loss) to net cash provided by operating activities		22,467			34,113
Net cash provided by operating activities		11,678			38,396

Investing activities
Purchases of fixed income and equity securities		(164,518	)		(245,099	)
Distributions from limited partnerships		14,636			20,231
Proceeds from maturities		60,811			38,917
Proceeds from sales of fixed income securities		67,922			71,839
Proceeds from sales of equity securities		44,395			14,449
Purchase of commercial mortgage loans		(410	)		(2,213	)
Proceeds from commercial mortgage loans		121			–
Purchases of property and equipment		(712	)		(1,346	)
Proceeds from disposals of property and equipment		–			3
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

See notes to condensed consolidated financial statements.

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Notes to Unaudited Condensed Consolidated Financial Statements

(All dollar amounts presented in these notes are in thousands, except share and per share data)

(1) Summary of Significant Accounting Policies:

Description of Business: Protective Insurance Corporation (the "Company"), based in Carmel, Indiana, is a property-casualty insurer specializing in marketing and underwriting property, liability and workers' compensation coverage for trucking and public transportation fleets, as well as coverage for trucking industry independent contractors. The Company offers a range of products and services, the most significant being commercial automobile and workers' compensation insurance products. The Company operates as one reportable property and casualty insurance segment based on how its operating results are regularly reviewed by its chief operating decision maker when making decisions about how resources are allocated and assessing performance.

The term “Insurance Subsidiaries,” as used throughout this document, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd.

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Interim financial statements should be read in conjunction with the Company's annual audited financial statements and other disclosures included in the Company's most recent Annual Report on Form 10-K. Operating results for interim periods are not necessarily indicative of results that may be expected for the year ending December 31, 2020 or any other future period.

Accounting Policies

Investments: Carrying amounts for fixed income securities represent fair value and are based on quoted market prices, where available, or broker/dealer quotes for specific securities where quoted market prices are not available. Equity securities are carried at quoted market prices (fair value).

Commercial mortgage loans are carried primarily at amortized cost along with an allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The Company recorded an allowance of $195 on its commercial mortgage loans as of June 30, 2020 in conjunction with the adoption of the new credit losses accounting standard discussed below.

The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to record its proportionate share of the limited partnership's net income. To the extent the limited partnerships include both realized and unrealized investment gains or losses in the determination of net income or loss, then the Company would also recognize, through its condensed consolidated statements of operations, its proportionate share of the investee's unrealized, as well as realized, investment gains or losses within net unrealized gains (losses) on equity securities and limited partnership investments.

Short-term and other investments are carried at cost, which approximates their fair values.

Fixed income securities are considered to be available-for-sale. The related unrealized net gains or losses (net of applicable tax effects) on fixed income securities are reflected directly in other comprehensive income (loss) within shareholders' equity. Included within available-for-sale fixed income securities are convertible debt securities. A portion of the changes in the fair values of convertible debt securities is reflected as a component of net realized gains (losses) on investments, excluding impairment losses within the condensed consolidated statements of operations. Realized gains and losses on disposals of fixed income securities are recorded on the trade date. Realized gains and losses on fixed income securities are determined by the specific identification of the cost of investments sold and are included in net realized gains (losses) on investments, excluding impairment losses.

Equity securities are recorded at fair value, with unrealized net gains or losses reflected as a component of net unrealized gains (losses) on equity securities and limited partnership investments within the condensed consolidated statements of operations. Realized gains and losses on disposals of equity securities are recorded on the trade date and included in net realized gains (losses) on investments, excluding impairment losses.

- 8 -

Recognition of Revenue and Costs: Premiums are earned over the period for which insurance protection is provided. A reserve for unearned premiums is established to reflect amounts applicable to subsequent accounting periods. Commissions to unaffiliated companies and premium taxes applicable to unearned premiums are deferred and expensed as the related premiums are earned. The Company does not defer acquisition costs that are not directly variable with the production of premiums. If it is determined that expected losses and deferred expenses will likely exceed the related unearned premiums, the asset representing deferred policy acquisition costs is reduced and an expense is charged against current operations to reflect any such premium deficiency. In the event that the expected premium deficiency exceeds deferred policy acquisition costs, an additional liability would be recorded with a corresponding expense to current operations for the amount of the excess premium deficiency. Anticipated investment income is considered in determining recoverability of deferred acquisition costs. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded on its condensed consolidated balance sheet at June 30, 2020.

The following accounting policies have been updated effective January 1, 2020 to reflect the Company's adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, as described below.

Investment Impairments: For a fixed income security in an unrealized loss position where the Company has the intent to sell the fixed income security, or it is more likely than not that the Company will have to sell the fixed income security before recovery of its amortized cost basis, the decline in value is recorded within impairment losses on investments in the condensed consolidated statements of operations. The new cost basis of the investment is the previous amortized cost basis less the impairment recognized. The new cost basis is not adjusted for any subsequent recoveries in fair value.

For a fixed income security that the Company does not intend to sell or in cases where it is more likely than not that the Company will not have to sell the security, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the condensed consolidated statements of operations. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income (loss). The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted.

The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, focusing on those below investment grade, with emphasis on securities downgraded below investment grade. The credit loss is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed income security. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the appropriate effective interest rate. Additionally, the Company may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost.

The Company reports investment income due and accrued separately from available-for-sale fixed income securities and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments, excluding impairment losses at the time the issuer defaults or is expected to default on payments.

Deductible Receivables: Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a net of allowance basis in the condensed consolidated balance sheets within accounts receivable. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors. A probability-of-default methodology, which reflects current and forecasted economic conditions, is used to estimate the allowance for expected credit losses for deductible receivables. As of January 1, 2020, in conjunction with the adoption of ASU 2016-13, the Company recorded an allowance for expected credit losses of $15,000 ($11,850, net of tax). See Note 10 – Litigation, Commitments and Contingencies for further discussion.

- 9 -

Recently Adopted Accounting Pronouncements: Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02. Under the new guidance, lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The Company's adoption of the new standard did not have any impact on its condensed consolidated statements of operations or cash flows; however, the impact of adopting the new guidance resulted in a right-of-use asset and a lease liability being recorded on the condensed consolidated balance sheet as of June 30, 2020, each of approximately $65, which are included within other assets and accounts payable and other liabilities.

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13. ASU 2016-13 introduced a current expected credit loss ("CECL") model for measuring expected credit losses for certain types of financial instruments held at the reporting date requiring significant judgment in application based on historical experience, current conditions and reasonable supportable forecasts, but is not prescriptive about certain aspects of estimating expected losses. The guidance replaced the current incurred loss model for measuring expected credit losses and provided for additional disclosure requirements. Subsequently, the FASB issued additional ASUs on Topic 326 that did not change the core principle of the guidance in ASU 2016-13, but provided clarification and implementation guidance on certain aspects of ASU 2016-13, and have the same effective date and transition requirements as ASU 2016-13. The Company adopted the guidance using a modified retrospective approach as of January 1, 2020 and recognized a cumulative effect adjustment of $15,545 ($12,281, net of tax), to the opening balance of retained earnings. The adjustment was primarily related to estimating credit losses on the Company’s accounts receivable balances, reinsurance recoverable balances and commercial mortgage loans at the date of adoption.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. This update removed the disclosure requirements for the amounts of and the reasons for transfers between Level 1 and Level 2 and disclosure of the policy for timing of transfers between levels. This update also removed disclosure requirements for the valuation processes for Level 3 fair value measurements. Additionally, this update added disclosure requirements for the changes in unrealized gains and losses for recurring Level 3 fair value measurements and quantitative information for certain unobservable inputs in Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. As the requirements of this guidance are applicable to disclosure only, the adoption of ASU 2018-13 had no material impact on the Company's condensed consolidated financial statements.

Recently Issued Accounting Pronouncements: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the effects the adoption of ASU 2019-12 will have on its condensed consolidated financial statements.

- 10 -

(2) Investments:

The following is a summary of available-for-sale securities at June 30, 2020 and December 31, 2019:

	Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gains (Losses)
June 30, 2020
Fixed income securities
Agency collateralized mortgage obligations	$	11,054	$	10,869	$	428	$	(243	)	$	185
Agency mortgage-backed securities		91,512		88,344		3,192		(24	)		3,168
Asset-backed securities		99,830		104,961		597		(5,728	)		(5,131	)
Bank loans		8,121		9,609		–		(1,488	)		(1,488	)
Certificates of deposit		2,835		2,835		–		–			–
Collateralized mortgage obligations		6,749		7,046		40		(337	)		(297	)
Corporate securities		295,894		284,676		13,318		(2,100	)		11,218
Mortgage-backed securities		45,502		53,106		478		(8,082	)		(7,604	)
Municipal obligations		38,359		36,967		1,421		(29	)		1,392
Non-U.S. government obligations		30,210		29,312		900		(2	)		898
U.S. government obligations		181,935		172,794		9,141		–			9,141
Total fixed income securities	$	812,001	$	800,519	$	29,515	$	(18,033	)	$	11,482

	Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gains (Losses)
December 31, 2019
Fixed income securities
Agency collateralized mortgage obligations	$	12,093	$	11,557	$	536	$	–		$	536
Agency mortgage-backed securities		56,280		54,286		2,005		(11	)		1,994
Asset-backed securities		106,397		107,028		499		(1,130	)		(631	)
Bank loans		14,568		14,932		106		(470	)		(364	)
Certificates of deposit		2,835		2,835		–		–			–
Collateralized mortgage obligations		5,616		5,123		493		–			493
Corporate securities		281,381		274,340		7,492		(451	)		7,041
Mortgage-backed securities		47,463		46,685		1,047		(269	)		778
Municipal obligations		36,286		35,749		684		(147	)		537
Non-U.S. government obligations		24,179		23,889		290		–			290
U.S. government obligations		208,440		206,623		2,891		(1,074	)		1,817
Total fixed income securities	$	795,538	$	783,047	$	16,043	$	(3,552	)	$	12,491

The following table summarizes, for available-for-sale fixed income securities in an unrealized loss position at June 30, 2020 and December 31, 2019, the aggregate fair value and gross unrealized loss categorized by the duration individual securities have been continuously in an unrealized loss position.

	June 30, 2020							December 31, 2019
	Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss
Fixed income securities:
12 months or less		149	$	130,567	$	(14,097	)		88	$	108,387	$	(2,452	)
Greater than 12 months		23		25,739		(3,936	)		69		66,860		(1,100	)
Total fixed income securities		172	$	156,306	$	(18,033	)		157	$	175,247	$	(3,552	)

- 11 -

The fair value and the cost or amortized costs of fixed income investments at June 30, 2020, organized by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

	Fair Value		Cost or Amortized Cost
One year or less	$	96,464	$	95,568
Excess of one year to five years		319,395		306,894
Excess of five years to ten years		132,463		124,972
Excess of ten years		15,781		15,805
Contractual maturities		564,103		543,239
Asset-backed securities		247,898		257,280
Total	$	812,001	$	800,519

Following is a summary of the components of net realized and unrealized gains (losses) on investments for the periods presented in the accompanying condensed consolidated statements of operations.

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Gross gains on available-for-sale fixed income securities sold during the period	$	2,561		$	4,132		$	5,213		$	7,303
Gross losses on available-for-sale fixed income securities sold during the period		(149	)		(3,154	)		(4,890	)		(6,681	)

Impairment losses on investments		(418	)		(86	)		(458	)		(346	)

Change in value of limited partnership investments		(587	)		314			(1,263	)		722

Gains on equity securities:
Realized gains (losses) on equity securities sold during the period		(6,511	)		(265	)		(9,209	)		51
Unrealized gains (losses) on equity securities held at the end of the period		15,719			1,948			(6,534	)		7,867
Realized and unrealized gains (losses) on equity securities during the period		9,208			1,683			(15,743	)		7,918

Net realized and unrealized gains (losses) on investments	$	10,615		$	2,889		$	(17,141	)	$	8,916

As discussed in Note 1, the Company adopted the provisions of the new CECL model for measuring expected credit losses for available-for-sale fixed income securities as of January 1, 2020. The updated guidance amended the previous OTTI model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account on the balance sheet with a corresponding adjustment to earnings and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. For those securities the Company intended to sell as of June 30, 2020, a write down to earnings of $0.4 million and $0.5 million was recorded during the three and six months ended June 30, 2020. The Company reviewed its remaining fixed income securities in an unrealized loss position as of June 30, 2020 and determined that the losses were primarily the result of non-credit factors, such as the increase in market volatility due to the recent disruption in global financial markets as a result of the novel coronavirus COVID-19 pandemic and responses to it. The Company currently does not intend to sell nor does it expect to be required to sell these securities before recovery of their amortized cost. Based on the above factors, the Company did not record any allowance for credit losses related to its available-for-sale fixed income securities under the new guidance in the first six months of 2020.

Shareholders' equity at June 30, 2020 included approximately $3,989, net of federal income tax expense, of reported earnings that remain undistributed by limited partnerships.

- 12 -

(3) Reinsurance:

The following table summarizes the Company's transactions with reinsurers for the three and six months ended June 30, 2020 and 2019 comparative periods.

	2020		2019
Three months ended June 30:
Premiums ceded to reinsurers	$	28,216	$	32,425
Losses and loss expenses ceded to reinsurers		24,394		28,859
Commissions from reinsurers		7,052		8,176

	2020		2019
Six months ended June 30:
Premiums ceded to reinsurers	$	56,683	$	62,598
Losses and loss expenses ceded to reinsurers		47,930		59,648
Commissions from reinsurers		14,580		15,410

(4) Loss and Loss Expense Reserves:

Activity in the reserves for losses and loss expenses for the six months ended June 30, 2020 and 2019 is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.

	Six Months Ended
	June 30
	2020			2019
Reserves, gross of reinsurance recoverable, at the beginning of the year	$	988,305		$	865,339
Reinsurance recoverable on unpaid losses at the beginning of the year		398,305			375,935
Reserves at the beginning of the year		590,000			489,404

Provision for losses and loss expenses:
Claims occurring during the current period		150,366			179,211
Claims occurring during prior periods		(326	)		(1,656	)
Total incurred		150,040			177,555

Loss and loss expense payments:
Claims occurring during the current period		26,246			30,573
Claims occurring during prior periods		103,798			92,822
Total paid		130,044			123,395
Reserves at the end of the period		609,996			543,564

Reinsurance recoverable on unpaid losses at the end of the period		405,364			389,899
Reserves, gross of reinsurance recoverable, at the end of the period	$	1,015,360		$	933,463

The $326 prior accident year favorable development during the six months ended June 30, 2020 was primarily due to favorable loss development in the Company's occupational accident line of business for accident years 2018 and 2019, partially offset by unfavorable loss development in excess automobile liability and public transportation primarily for accident year 2018. This savings compares to a prior accident year savings of $1,656 for the six months ended June 30, 2019, which related to favorable loss development in workers' compensation and independent contractor coverages. Losses incurred from claims occurring during prior years reflect the development from prior accident years, composed of individual claim savings and deficiencies which, in the aggregate, have resulted from the settlement of claims at amounts higher or lower than previously reserved and from changes in estimates of losses incurred but not reported as part of the normal reserving process.

- 13 -

(5) Segment Information:

The Company has one reportable business segment in its operations: Property and Casualty Insurance. The property and casualty insurance segment provides multiple lines of insurance coverage primarily to commercial automobile companies, as well as to independent contractors who contract with commercial automobile companies.

The following table summarizes segment revenues for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30				Six Months Ended 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
Net realized and unrealized gains (losses) on investments		10,615		2,889		(17,141	)		8,916
Commissions and other income		1,889		1,978		3,551			4,043
Total revenues	$	116,613	$	126,998	$	207,415		$	251,335

(6) Debt:

On August 9, 2018, the Company entered into a credit agreement providing a revolving credit facility with a $40,000 limit, with the option for up to an additional $35,000 in incremental loans at the discretion of the lenders. This credit agreement has an expiration date of August 9, 2022. Interest on this revolving credit facility is referenced to the London Interbank Offered Rate and can be fixed for periods of up to one year at the Company's option. Outstanding drawings on this revolving credit facility were $20,000 as of June 30, 2020. At June 30, 2020, the effective interest rate was 1.29%, and the Company had $20,000 remaining available under the revolving credit facility. The current outstanding borrowings were used to repay the Company's previous line of credit. The Company's revolving credit facility has two financial covenants, each of which were met as of June 30, 2020. These covenants require the Company to have a minimum U.S. generally accepted accounting principles net worth and a maximum consolidated debt to equity ratio of 0.35.

(7) Taxes:

The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company’s best estimate of the effective tax rate expected for the full year based on projected annual taxable income (loss). The effective tax rate can fluctuate throughout the year because estimates used in the quarterly tax provision are updated as more information becomes available throughout the year.

The effective federal tax rate on consolidated income for the three months ended June 30, 2020 was 20.0% compared to 21.3% for the three months ended June 30, 2019. The effective federal tax rate on consolidated loss for the six months ended June 30, 2020 was 1.3% compared to 21.6% on consolidated income for the six months ended June 30, 2019. The pre-tax loss for the six months ended June 30, 2020 makes these interim period effective tax rates less comparable year-over-year. The difference in the effective federal income tax rate from the normal statutory rate was primarily related to the recording of a valuation allowance in the current period on our deferred tax assets discussed below, in addition to the effects of tax-exempt investment income and the dividends received deduction.

In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during the periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance, including the Company's current three year cumulative loss through June 30, 2020, the increase in deferred tax assets due to the adoption of CECL at January 1, 2020 discussed in Note 1, the change in unrealized gains and losses and the loss of a high taxable income year from the carryback period. The three year cumulative loss limits the Company's ability to use projected income beyond 2020 in the analysis. Based on this analysis, the Company concluded that a valuation allowance was necessary for its deferred tax assets not supported by either carryback availability or future reversals of existing taxable temporary differences. The Company's valuation allowance was $2,388 as of June 30, 2020, of which $2,176 was recorded in the condensed consolidated statement of operations for the six months ended June 30, 2020 and the balance was recorded in shareholders' equity within accumulated other comprehensive income as of June 30, 2020. This represented a $2,541 reduction to the valuation allowance of $4,929 recorded for the three months ended March 31, 2020. Of this reduction, $130 was recorded in the condensed consolidated statement of operations for the three months ended June 30, 2020 and the balance was recorded in shareholders' equity within accumulated other comprehensive income as of June 30, 2020.

As of June 30, 2020, the Company's calendar years 2018, 2017 and 2016 remain subject to examination by the Internal Revenue Service.

- 14 -

(8) Fair Value:

Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

As of June 30, 2020:

Description	Total		Level 1		Level 2		Level 3
Fixed income securities:
Agency collateralized mortgage obligations	$	11,054	$	–	$	11,054	$	–
Agency mortgage-backed securities		91,512		–		91,512		–
Asset-backed securities		99,830		–		99,830		–
Bank loans		8,121		–		8,121		–
Certificates of deposit		2,835		2,835		–		–
Collateralized mortgage obligations		6,749		–		6,749		–
Corporate securities		290,889		–		290,889		–
Options embedded in convertible securities		5,005		–		5,005		–
Mortgage-backed securities		45,502		–		45,502		–
Municipal obligations		38,359		–		38,359		–
Non-U.S. government obligations		30,210		–		30,210		–
U.S. government obligations		181,935		–		181,935		–
Total fixed income securities		812,001		2,835		809,166		–
Equity securities:
Consumer		10,087		10,087		–		–
Energy		1,333		1,333		–		–
Financial		22,468		22,468		–		–
Industrial		3,483		3,483		–		–
Technology		2,443		2,443		–		–
Funds (e.g., mutual funds, closed end funds, ETFs)		–		–		–		–
Other		6,195		6,195		–		–
Total equity securities		46,009		46,009		–		–
Short-term investments		1,000		1,000		–		–
Cash equivalents		94,039		–		94,039		–
Total	$	953,049	$	49,844	$	903,205	$	–

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As of December 31, 2019:

Description	Total		Level 1		Level 2		Level 3
Fixed income securities:
Agency collateralized mortgage obligations	$	12,093	$	–	$	12,093	$	–
Agency mortgage-backed securities		56,280		–		56,280		–
Asset-backed securities		106,397		–		106,397		–
Bank loans		14,568		–		14,568		–
Certificates of deposit		2,835		2,835		–		–
Collateralized mortgage obligations		5,616		–		5,616		–
Corporate securities		276,087		–		276,087		–
Options embedded in convertible securities		5,294		–		5,294		–
Mortgage-backed securities		47,463		–		47,463		–
Municipal obligations		36,286		–		36,286		–
Non-U.S. government obligations		24,179		–		24,179		–
U.S. government obligations		208,440		–		208,440		–
Total fixed income securities		795,538		2,835		792,703		–
Equity securities:
Consumer		16,707		16,707		–		–
Energy		3,074		3,074		–		–
Financial		31,577		31,577		–		–
Industrial		4,927		4,927		–		–
Technology		2,817		2,817		–		–
Funds (e.g., mutual funds, closed end funds, ETFs)		9,460		9,460		–		–
Other		8,250		8,250		–		–
Total equity securities		76,812		76,812		–		–
Short-term investments		1,000		1,000		–		–
Cash equivalents		59,780		–		59,780		–
Total	$	933,130	$	80,647	$	852,483	$	–

Level inputs, as defined by the FASB guidance, are as follows:

Level Input:		Input Definition:

Level 1		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2		Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3		Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Company did not have any Level 3 assets at June 30, 2020 or December 31, 2019. Level 3 assets, when present, are valued using various unobservable inputs, including extrapolated data, proprietary models and indicative quotes.

Quoted market prices are obtained whenever possible. Where quoted market prices are not available, fair values are estimated using broker/dealer quotes for specific securities. These techniques are significantly affected by the Company's assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs have not been considered in estimating fair values.

Transfers between levels, if any, are recorded as of the beginning of the reporting period. There were no significant transfers of assets between Level 1 and Level 2 during the six months ended June 30, 2020.

In addition to the preceding disclosures on assets recorded at fair value in the condensed consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the condensed consolidated balance sheets.

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Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine the underlying economic value of the Company. The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:

Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity. The underlying assets of the Company's investments in limited partnerships are carried primarily at fair value; therefore, the Company's carrying value of limited partnerships approximates fair value. As these investments are not actively traded and the corresponding inputs are based on data provided by the investees, they are classified as Level 3.

Commercial mortgage loans: Commercial mortgage loans are carried primarily at amortized cost along with a valuation allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The fair value of the Company’s investment in these commercial mortgage loans is based on expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk. These investments are classified as Level 3.

Short-term borrowings: The fair value of the Company's short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to the Company for debt of similar terms and remaining maturities.

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's condensed consolidated balance sheets at June 30, 2020 and December 31, 2019 is as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
June 30, 2020
Assets:
Limited partnerships	$	7,393	$	–	$	–	$	7,393	$	7,393
Commercial mortgage loans		11,875		–		–		12,514		12,514
Liabilities:
Short-term borrowings		20,000		–		20,000		–		20,000

December 31, 2019
Assets:
Limited partnerships	$	23,292	$	–	$	–	$	23,292	$	23,292
Commercial mortgage loans		11,782		–		–		12,068		12,068
Liabilities:
Short-term borrowings		20,000		–		20,000		–		20,000

(9) Stock-Based Compensation:

The Company issues shares of restricted Class B Common Stock to the Company's outside directors as part of their annual retainer compensation. The shares are distributed to the outside directors on the vesting date, which, with the exception of pro-rated annual retainers granted to outside directors, is one year following the date of grant. On May 17, 2019, the Company granted shares of restricted Class B Common Stock in connection with the election of a new outside director, reflecting such director’s pro-rated annual retainer compensation, which shares vested and were distributed on May 7, 2020. Additionally, effective May 22, 2019, John D. Nichols, Jr. ceased serving as the Company's Interim Chief Executive Officer and principal executive officer, but continued to serve as Chairman of the Company's Board of Directors. On May 22, 2019, the Company granted shares of restricted Class B Common Stock to Mr. Nichols in connection with this transition, reflecting his pro-rated annual retainer compensation, which shares also vested and were distributed on May 7, 2020. The table below provides detail of the restricted stock issuances to directors for 2019 and 2020:

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Grant Date	Number of Shares Issued	Vesting Date	Service Period	Grant Date Fair Value Per Share
5/8/2018	19,085	5/8/2019	7/1/2018 - 6/30/2019	$	23.05

5/7/2019	29,536	5/7/2020	7/1/2019 - 6/30/2020	$	16.25

5/17/2019	3,591	5/7/2020	7/1/2019 - 6/30/2020	$	16.25

5/22/2019	3,541	5/7/2020	7/1/2019 - 6/30/2020	$	16.25

5/5/2020	42,220	5/5/2021	7/1/2020 - 6/30/2021	$	14.21

Compensation expense related to the above stock grants is recognized over the period in which the directors render services.

In March 2018, the Company's Compensation Committee granted equity-based awards pursuant to the Long-Term Incentive Plan. Certain participants under the Long-Term Incentive Plan were granted equity awards (the "2018 LTIP Awards"), with the number of shares of Class B Common Stock earned pursuant to such awards determined by applying a performance matrix consisting of a measurement of the combined results of the Company's 2018 growth in gross premiums earned and the Company's 2018 combined ratio. The combined ratio is calculated as a ratio of (A) losses and loss expenses incurred, plus other operating expenses, less commission and other income to (B) net premiums earned. No 2018 LTIP Awards were earned based on the Company's performance in 2018, and therefore no shares were issued pursuant to the 2018 LTIP Awards. In addition to the 2018 LTIP Awards, in March 2018 the Company's Compensation Committee also granted Value Creation Incentive Plan awards (the "2018 VCIP Awards") to certain participants under the Long-Term Incentive Plan. The 2018 VCIP Awards are performance-based equity awards that will be earned based on the Company's cumulative operating income, as defined above, over a three-year performance period from January 1, 2018 through December 31, 2020 relative to a cumulative operating income goal for the period set by the Compensation Committee in March 2018. Any 2018 VCIP Awards that are earned will be paid in unrestricted shares of the Company's Class B Common Stock at the end of the three-year performance period, but no later than March 15, 2021. No shares are eligible to be issued under the 2018 VCIP Awards as of June 30, 2020.

On November 13, 2018, the Company entered into an employment agreement with its Interim Chief Executive Officer, John D. Nichols, Jr. Pursuant to the terms of this employment agreement, on November 13, 2018, Mr. Nichols was granted 85,000 restricted shares of the Company's Class B Common Stock (the "Nichols Stock Grant"), of which 42,500 shares vested as of October 17, 2019; 21,250 shares will vest as of October 17, 2020, and 21,250 shares will vest as of October 17, 2021. The Company incurred $128 of expense during the six months ended June 30, 2020 related to the Nichols Stock Grant.

In March 2019, the Company's Compensation Committee granted equity-based awards pursuant to the Long-Term Incentive Plan. Certain participants under the Long-Term Incentive Plan were granted equity awards (the "2019 LTIP Awards"), with the number of shares of Class B Common Stock earned pursuant to such awards determined by applying a performance matrix consisting of a corporate performance component as well as a personal performance component. The corporate performance component of the 2019 LTIP Awards was determined based on the Company's achievement of 2019 underwriting income compared to the plan target. The Company's underwriting income was calculated as income (loss) before federal income tax expense (benefit), less net realized and unrealized gains (losses) on investments, less net investment income. The personal performance component of the 2019 LTIP Awards was determined based on the achievement of personal goals that align with departmental and corporate objectives for 2019. 2019 LTIP Awards earned were paid in shares of restricted Class B Common Stock in early 2020. One-third of such shares will vest annually over the three-year period beginning one year from the date of issue. The Company incurred $40 of expense during the six months ended June 30, 2020 related to the 2019 LTIP Awards.

On May 22, 2019, the Company entered into an employment agreement with its new Chief Executive Officer, Jeremy D. Edgecliffe-Johnson. Pursuant to the terms of this employment agreement, on May 22, 2019, Mr. Edgecliffe-Johnson was granted 70,000 restricted shares of the Company's Class B Common Stock (the "Edgecliffe-Johnson Stock Grant"), of which 35,000 shares will vest as of June 1, 2022, 21,000 shares will vest as of June 1, 2023, and 14,000 shares will vest as of June 1, 2024. The Company incurred $135 of expense during the six months ended June 30, 2020 related to the Edgecliffe-Johnson Stock Grant.

On November 5, 2019, the Board of the Company, upon the recommendation of the Compensation Committee, approved equity compensation awards to be granted to seven members of senior management as of November 12, 2019 under the Company’s Long-Term Incentive Plan. The Board approved a total of $1,100 in grants of restricted shares of the Company’s Class B Common Stock, which will vest on January 1, 2023, subject to the recipient’s continued employment with the Company through the vesting date. The Company incurred $176 of expense during the six months ended June 30, 2020 related to this grant.

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(10) Litigation, Commitments and Contingencies:

In the ordinary, regular and routine course of their business, the Company and its Insurance Subsidiaries are frequently involved in various matters of litigation relating principally to claims for insurance coverage provided. No currently pending matter is deemed by management to be material to the Company, other than as noted below.

Personnel Staffing Group Litigation

In July 2019, Protective Insurance Company (“Protective”) was named as a defendant in an action brought by a former insured, Personnel Staffing Group d/b/a MVP Staffing (“PSG”), in the U.S. District Court for the Central District of California (the “California Action”) alleging that Protective had breached its workers’ compensation insurance policy and had breached the duties of good faith and fair dealing. Protective provided workers’ compensation insurance to PSG from January 1, 2017 through June 30, 2018, which was subject to a $500 per claim deductible to be paid by PSG. No specific damages were included in the complaint. In August 2019, Protective filed a motion to dismiss or stay the action.

In August 2019, Protective filed a lawsuit against PSG in Marion County Superior Court, in Indianapolis, Indiana (the “Indiana Court”) alleging breach of contract, breach of the parties' collateral agreement, breach of the parties' indemnity agreement, and seeking a declaratory judgment regarding PSG’s obligation to fund its ongoing claim deductible obligations and adequately collateralize Protective’s current and ongoing claims exposure pursuant to terms of the parties' agreements (the “Indiana Action”). In October 2019, Protective amended the complaint to include allegations of misrepresentation as to source of coverage, negligent misrepresentation, fraud and racketeering and seeking injunctive relief. In November 2019, PSG filed a motion to dismiss the Indiana Action on the basis of comity with the California Action, claiming that California was the proper forum for Protective’s claims.

In February 2020, the Indiana Court issued an order dismissing the Indiana Action without prejudice; the Indiana Court declined to rule on the legal effect of the forum selection clause in the parties’ agreements, finding that any interpretation should be addressed by the court in the California Action. On April 28, 2020, Protective’s motion to dismiss the California Action was granted without prejudice on grounds that Indiana is the more appropriate forum. On May 4, 2020, PSG filed a notice of appeal of the order of dismissal in the California Action. On May 1, 2020, Protective filed a motion with the Indiana Court to re-open the Indiana Action, which remains pending. Protective intends to vigorously pursue its claims against PSG, however, the ultimate outcome cannot be presently determined.

Pursuant to the terms of the workers’ compensation policies, Protective has a duty to adjust and pay claims arising under the policies regardless of whether PSG makes payments to Protective for deductible obligations under the policies. Under its contractual obligations to Protective, PSG is required to maintain a “loss fund” for the payment of claims, the balance of which is to remain at or above $4,000; in addition, PSG is required to provide collateral in an amount equal to 110% of Protective’s current open case reserves on workers’ compensation claims arising under the policies.

As of June 30, 2020, Protective had approximately $17,338 in deductible receivables on claims arising under PSG’s workers’ compensation policies and had exhausted all collateral provided by PSG. Protective continues to pay claims settlements under the policies without reimbursement from PSG. For the past six months, the average monthly deductible invoices have been approximately $1,085. PSG’s estimated ultimate obligation under the agreements is approximately $46,730 as of June 30, 2020 (inclusive of the $17,338 in deductible receivables noted above). At June 30, 2020, based on the Company's assessment that PSG will continue to operate as a business and that the terms of the agreement with PSG will be legally enforceable, the Company believes that it will fully collect all current and future amounts due from PSG relating to this matter.

The Company included this matter in its assessment of the impact of adopting ASU 2016-13, the new guidance for measuring CECL, which is discussed in Note 1. A probability-of-default methodology was applied to projected estimated cash flows to estimate the allowance for expected credit losses for this matter. The Company considered the delay in reimbursement for claims paid as well as probability of default assumptions when analyzing the credit loss related to this matter. As of January 1, 2020, in conjunction with the adoption of ASU 2016-13, the Company recorded an allowance for expected credit losses of $15,000 ($11,850, net of tax) as a reduction to equity. In the event of a PSG bankruptcy with no recovery, the Company would incur a charge to the condensed consolidated statement of operations of $31,730 ($25,067, net of tax), which represents the estimated ultimate obligation discussed above less the CECL allowance. There was no change to the allowance during the first six months of 2020, as the ultimate obligation and projected cash flows had not materially changed since January 1, 2020 when the initial measurement of the credit risk was conducted.

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(11) Shareholders' Equity:

On August 31, 2017, the Company's Board of Directors authorized the reinstatement of its share repurchase program for up to 2,464,209 shares of the Company's Class A or Class B Common Stock. On August 6, 2019, the Company's Board of Directors reaffirmed its share repurchase program, but also provided that the aggregate dollar amount of shares of the Company's common stock that may be repurchased under the share repurchase program between August 6, 2019 and August 6, 2020 may not exceed $25,000, including a limit of up to $6,250 per quarter. No duration has been placed on the Company's share repurchase program, and the Company reserves the right to amend, suspend or discontinue it at any time. The share repurchase program does not commit the Company to repurchase any shares of its common stock.

During the six months ended June 30, 2020, the Company paid $1,782 to repurchase 126,764 shares of Class B Common Stock under the share repurchase program.

The following table illustrates changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2020:

	Foreign Currency			Unrealized Holding Gains (Losses) on Available-for-sale Securities			Total
Beginning balance at December 31, 2019	$	(494	)	$	9,863		$	9,369

Other comprehensive income (loss) before reclassifications		(466	)		(853	)		(1,319	)
Amounts reclassified from accumulated other comprehensive income (loss)		–			(157	)		(157	)

Net current-period other comprehensive income (loss)		(466	)		(1,010	)		(1,476	)

Ending balance at June 30, 2020	$	(960	)	$	8,853		$	7,893

The following table illustrates changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2019:

	Foreign Currency			Unrealized Holding Gains (Losses) on Available-for-sale Securities			Total
Beginning balance at December 31, 2018	$	(1,139	)	$	(6,208	)	$	(7,347	)

Other comprehensive income (loss) before reclassifications		591			14,758			15,349
Amounts reclassified from accumulated other comprehensive income (loss)		–			215			215

Net current-period other comprehensive income (loss)		591			14,973			15,564

Ending balance at June 30, 2019	$	(548	)	$	8,765		$	8,217

(12) Related Parties:

The Company utilizes the services of an investment firm of which one director of the Company is a partial owner. This investment firm manages equity securities and fixed income portfolios held by the Company with an aggregate market value of approximately $6,946 at June 30, 2020. Total commissions and net fees earned by this investment firm and its affiliates on these portfolios were $67 and $71 for the six months ended June 30, 2020 and 2019.

(13) Subsequent Events:

On August 4, 2020, the Company's Board of Directors declared a regular quarterly dividend of $0.10 per share on the Company's Class A and Class B Common Stock. The dividend per share will be payable September 1, 2020 to shareholders of record on August 18, 2020.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Protective Insurance Corporation is a property-casualty insurer specializing in marketing and underwriting property, liability and workers' compensation coverage for trucking and public transportation fleets, as well as coverage for trucking industry independent contractors. We operate as one reportable property and casualty insurance segment, offering a range of products and services, the most significant being commercial automobile and workers' compensation insurance products.

The term “Protective,” as used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), refers to Protective Insurance Corporation, the parent company. The terms the “Company,” “we,” “us” and “our,” as used throughout this MD&A, refer to Protective and all of its subsidiaries, unless the context clearly indicates otherwise. The term “Insurance Subsidiaries,” as used throughout this MD&A, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd.

Impact of Stockholder Support and Contingent Sale Agreement

On May 5, 2020, the Board of Directors (the “Board”) of Protective Insurance Corporation formed a special committee of independent directors (the “Special Committee”) to evaluate a Stockholder Support and Contingent Sale Agreement (the “Contingent Sale Agreement”) entered into by and among certain prospective third party purchasers (the “Offering Parties”), certain of Protective’s shareholders and the other parties thereto. We received notice of the Contingent Sale Agreement on April 23, 2020, the date of filing of amendments to Schedule 13Ds relating to our Class A Common Stock, Subject to the satisfaction of certain conditions under the Contingent Sale Agreement, the Offering Parties may commence a tender offer to purchase all of the outstanding shares of Protective’s Class A Common Stock at a price per share of $18.30 per share (equal to 85% of our first quarter 2020 book value per share as reported by us on May 5, 2020).

In June 2020, Protective announced that the Board determined that the transactions contemplated by the Contingent Sale Agreement are not in the best interests of Protective and our stakeholders. As part of this evaluation, the Board determined that it would also recommend against the potential tender offer contemplated by the Contingent Sale Agreement if it were commenced, and that if the transactions contemplated by the Contingent Sale Agreement were consummated, it expects to take the necessary actions to redeem all or certain of the Class A shares of Protective purchased by the Offering Parties pursuant to Protective’s Code of By-laws. Protective also announced that the Special Committee of the Board is exploring, with the assistance of its independent financial and legal advisors, strategic alternatives that may be available to Protective. There can be no assurance that the Special Committee or Board will determine that a strategic alternative is in the best interest of the Company and its stakeholders, or that a transaction will be entered into or, if entered into, the timing, terms or conditions thereof.

During the second quarter of 2020, we incurred $1.7 million ($1.3 million, net of tax) of expenses in conjunction with the Board’s review of the Contingent Sale Agreement and the activities of the Special Committee.

Expected Credit Losses Standard (CECL) Adoption

On January 1, 2020, we adopted the provisions of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 introduced a current expected credit loss ("CECL") model for measuring expected credit losses for certain types of financial instruments held at the reporting date requiring significant judgment in application based on historical experience, current conditions and reasonable supportable forecasts, but is not prescriptive about certain aspects of estimating expected losses. We adopted the guidance using a modified retrospective approach as of January 1, 2020 and recognized a cumulative effect adjustment of $15.5 million ($12.3 million net of tax), to the opening balance of retained earnings. The adjustment was primarily related to estimating credit losses on our accounts receivable balances, reinsurance recoverable balances and commercial mortgage loans at the date of adoption. We did not record any significant additional impact to the statement of operations in the first six months of 2020.

The updated guidance in ASU 2016-13 also amended the previous other-than-temporary impairment ("OTTI") model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. We adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date. For those securities we intended to sell as of June 30, 2020, we recorded a write down to earnings of $0.4 million and $0.5 million during the three and six months ended June 30, 2020. We reviewed our remaining fixed income securities in an unrealized loss position as of June 30, 2020 and determined that the losses were primarily the result of non-credit factors, such as the increase in market volatility due to the recent disruption in global financial markets as a result of the novel coronavirus COVID-19 ("COVID-19") pandemic and responses to it. We currently do not intend to sell nor do we expect to be required to sell these securities before recovery of their amortized cost. Based on the above factors, we did not record any allowance for credit losses under the new guidance related to our available-for-sale securities under the new guidance in the first six months of 2020.

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COVID-19 Impacts

Beginning in March 2020 and continuing through the date of this Quarterly Report on Form 10-Q, the global pandemic associated with COVID-19 and related economic conditions have impacted the global economy and our results of operations. For the three and six months ended June 30, 2020, net premiums earned within our commercial automobile products, specifically public transportation, were negatively impacted due to a reduction in miles driven, which are the basis for premiums we receive, as well as an overall reduction in public transportation units insured. However, losses and loss expenses incurred during those same periods reflected favorable impacts within all commercial automobile products as a result of declines in accident frequency due to lower traffic density. In addition to these impacts on our underwriting loss, as defined below, we incurred net realized and unrealized gains on investments of $10.6 million during the three months ended June 30, 2020, reflecting an improvement in the global financial markets during the quarter; however, we incurred net realized and unrealized losses on investments of $17.1 million for the six months ended June 30, 2020 due to investment losses of $27.8 million during the three months ended March 31, 2020 as a result of the significant decline in the global financial markets experienced in that quarter due to the COVID-19 pandemic. These gains and losses were primarily driven by the impact of changes in the fair value of our equity investments as a result of the recent fluctuations in the global financial markets driven primarily by the COVID-19 pandemic. Additionally, insurance departments throughout the country have issued bulletins and regulations urging or requiring insurers to extend grace periods for the payment of policy premiums and to refrain from canceling or non-renewing policies for the non-payment of policy premiums for policyholders adversely affected by COVID-19; however, we have not seen a material decrease or slowdown in premium collection to date. We have also taken additional steps, including a temporary freeze on hiring in most areas of the company and reductions to discretionary spending in response to COVID-19. We expect this impact will persist for the remainder of 2020 and beyond, but the degree of the impact will depend on the extent and duration of the challenging economic circumstances. For further discussion regarding the potential impacts of COVID-19 and related economic conditions on us, see Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q and of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Liquidity and Capital Resources

Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first six months of 2020. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions, see "Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q.

The primary sources of our liquidity are (1) funds generated from insurance operations, including net investment income, (2) proceeds from the sale of investments, and (3) proceeds from maturing investments.

We generally experience positive cash flow from operations. Premiums are collected on insurance policies in advance of the disbursement of funds for payment of claims. Operating costs of our property/casualty Insurance Subsidiaries, other than loss and loss expense payments and commissions paid to related agency companies, average less than one-third of net premiums earned on a consolidated basis, and the remaining amount is available for investment for varying periods of time depending on the type of insurance coverage provided and the timing of claim payments. Because losses are often settled in periods subsequent to when they are incurred, operating cash flows may, at times, become negative as loss settlements on claim reserves established in prior years exceed current revenues. Our cash flow relating to premiums is significantly affected by reinsurance programs in effect, whereby we cede both premium and risk to other insurance and reinsurance companies. These programs vary significantly among products, and certain contracts call for reinsurance payment patterns, which do not coincide with the collection of premiums by us from our insureds.

On August 31, 2017, our Board of Directors authorized the reinstatement of our share repurchase program for up to 2,464,209 shares of our Class A or Class B Common Stock. On August 6, 2019, our Board of Directors reaffirmed our share repurchase program, but also provided that the aggregate dollar amount of shares of our common stock that may be repurchased under the share repurchase program between August 6, 2019 and August 6, 2020 may not exceed $25.0 million and added a limit of no more than $6.25 million in repurchases per quarter. The repurchases may be made in the open market or through privately negotiated transactions, from time-to-time, and in accordance with applicable laws, rules and regulations. The share repurchase program may be amended, suspended or discontinued at any time and does not commit us to repurchase any shares of our common stock. We have funded, and intend to continue to fund, the share repurchase program from cash on hand. The actual number and value of the shares to be purchased will depend on the performance of our stock price, market volume and other market conditions. During the six months ended June 30, 2020, we paid $1.8 million to repurchase 126,764 shares of Class B Common Stock under the share repurchase program.

For several years, our investment philosophy has emphasized the purchase of short-term bonds with high quality and liquidity. If there was a hypothetical increase in interest rates of 100 basis points, the price of our fixed income portfolio, including cash, at June 30, 2020 would be expected to fall by approximately 2.4%. The credit quality of our fixed income securities remains high with a weighted average rating of AA-, including cash. The average contractual life of our fixed income and short-term investment portfolio was 7.0 years and 6.9 years at June 30, 2020 and December 31, 2019. The average duration of our fixed income portfolio remains shorter than the average duration of our liabilities. We also remain an active participant in the equity securities markets, using capital in excess of amounts considered necessary to fund our current operations. The long-term horizon for our equity investments allows us to invest in positions where ultimate value, and not short-term market fluctuation, is the primary focus. Investments made by our domestic property/casualty Insurance Subsidiaries are regulated by guidelines promulgated by the National Association of Insurance Commissioners (the "NAIC"), which are designed to provide protection for both policyholders and shareholders.

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Net cash from operations was $11.7 million during the six months ended June 30, 2020 compared to $38.4 million for the six months ended June 30, 2019. The decrease in operating cash flows during the six months ended June 30, 2020 reflected lower premium volume and higher claim payments when compared to the same period of 2019. Net cash from operations for the six months ended June 30, 2019 benefited from the impact of growth in premiums and the timing of related claims payments. Additionally, for the six months ended June 30, 2020, loss reserve increases were lower when compared to the same period in 2019 due to lower premium writings and an increase in losses paid.

Net cash provided by investing activities was $22.2 million for the six months ended June 30, 2020 compared to cash used in investing activities of $103.2 million for the six months ended June 30, 2019. The $125.4 million change was primarily due to a decrease in the investment of cash and cash equivalent investments into fixed income securities and an increase in net proceeds from maturities and sales of fixed income and equity securities, partially offset by $5.6 million less in limited partnership distributions, during the six months ended June 30, 2020 when compared to the same period in 2019.

Net cash used in financing activities for the six months ended June 30, 2020 consisted of regular cash dividend payments to shareholders of $2.9 million ($0.20 per share) and $1.8 million to repurchase shares of our Class B Common Stock. Financing activities for the six months ended June 30, 2019 consisted of regular cash dividend payments to shareholders of $3.0 million ($0.20 per share) and $6.5 million to repurchase shares of our Class A and B Common Stock.

Our assets at June 30, 2020 included $94.0 million of investments included within cash and cash equivalents on the condensed consolidated balance sheet that are readily convertible to cash without market penalty and an additional $96.5 million of fixed income investments maturing in less than one year. We believe these liquid investments, plus the expected cash flow from premium collections, are sufficient to provide for projected claim payments and operating cost demands. In the event competitive conditions produce inadequate premium rates and we choose to further restrict volume or our premiums are further restricted due to market conditions, including related to the impact of COVID-19, we believe the liquidity of our investment portfolio would permit us to continue to pay claims as settlements are reached without requiring the disposal of investments at a loss, regardless of interest rates in effect at the time. In addition, our reinsurance program is structured to avoid significant cash outlays that accompany large losses.

We maintain a revolving credit facility with a $40.0 million limit, with the option for up to an additional $35.0 million in incremental loans at the discretion of the lenders, which has an expiration date of August 9, 2022. Interest on this revolving credit facility is referenced to the London Interbank Offered Rate and can be fixed for periods of up to one year at our option. Outstanding drawings on this revolving credit facility were $20.0 million as of June 30, 2020. At June 30, 2020, the effective interest rate was 1.29% and we had $20.0 million remaining under the revolving credit facility. The current outstanding borrowings were used to repay our previous line of credit. Our revolving credit facility has two financial covenants, each of which were met as of June 30, 2020. These covenants require us to have a minimum U.S. generally accepted accounting principles ("GAAP") net worth and a maximum consolidated debt to equity ratio of 0.35.

Annualized net premiums written by our Insurance Subsidiaries for the second quarter of 2020 equaled approximately 117% of the combined statutory surplus of these subsidiaries. According to the NAIC, acceptable ranges for the ratio of net premiums written to statutory surplus include results of up to 300%. This ratio is designed to measure our ability to absorb above-average losses and our financial strength. Additionally, the statutory capital of each of our Insurance Subsidiaries substantially exceeded minimum risk-based capital requirements set by the NAIC as of June 30, 2020. As a result, we have the ability to increase our business without seeking additional capital to meet regulatory guidelines.

Consolidated shareholders' equity is composed largely of GAAP shareholders' equity of our Insurance Subsidiaries. As such, there are statutory restrictions on the transfer of substantial portions of this equity to Protective. At June 30, 2020, $56.9 million may be transferred by dividend or loan to Protective during the remainder of 2020 without approval by, or prior notification to, regulatory authorities. An additional $150.3 million of shareholders' equity of our Insurance Subsidiaries could be advanced or loaned to Protective with prior notification to, and approval from, regulatory authorities, although transfers of this size would not be practical. We believe these restrictions pose no material liquidity concerns for us. We also believe the financial strength and stability of our Insurance Subsidiaries would permit access by Protective to short-term and long-term sources of credit when needed. Protective had cash and marketable securities valued at $18.3 million at June 30, 2020.

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Non-GAAP Measures

We believe investors’ understanding of our performance is enhanced by our disclosure of underwriting income (loss), which is a measure that is not calculated in accordance with GAAP. Underwriting income (loss) represents the pre-tax profitability or loss of our insurance operations and is derived by subtracting net realized and unrealized gains (losses) on investments and net investment income from income (loss) before federal income tax expense (benefit). For the three and six months ended June 30, 2020, we also excluded corporate charges incurred in conjunction with the Board's review of the Contingent Sale Agreement and activities of the Special Committee discussed above from the calculation of underwriting income (loss). We believe the exclusion of these corporate charges more accurately reflects our operational results. We use underwriting income (loss) as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations, our underlying business performance and our ongoing operating trends. Underwriting income (loss) should not be viewed as a substitute for income (loss) before federal income tax expense (benefit) calculated in accordance with GAAP, and other companies may define underwriting income (loss) differently.

The ratio of consolidated other operating expenses, less commissions and other income, to net premiums earned, or our expense ratio, and the ratio of losses and loss expenses incurred, plus other operating expenses, less commissions and other income, to net premiums earned, or our combined ratio, are measures of our profitability that we believe increase the period-to-period comparability of our operational results. For the three and six months ended June 30, 2020, we also excluded the corporate charges discussed above from other operating expenses when calculating our expense ratio and our combined ratio, as these ratios are intended to depict our underlying business performance and ongoing operating trends. We also believe the exclusion of these charges improves the comparability of our expense and combined ratio with our ratios in prior years. Our management uses these ratios to evaluate performance, allocate resources and forecast future operating periods. While expense ratios and combined ratios are widely used within our industry, our use of such ratios may not be directly comparable to similarly titled measures reported by other companies.

	Three Months Ended						Six Months Ended
	June 30						June 30
(dollars in thousands)	2020			2019			2020			2019
Income (loss) before federal income tax expense (benefit)	$	14,207		$	1,950		$	(10,932	)	$	5,464
Less: Net realized and unrealized gains (losses) on investments		10,615			2,889			(17,141	)		8,916
Less: Net investment income		6,379			6,500			13,616			12,732
Less: Corporate charges included in other operating expenses ¹		(1,700	)		-			(1,700	)		-
Underwriting loss	$	(1,087	)	$	(7,439	)	$	(5,707	)	$	(16,184	)

Other operating expenses		34,198			34,615			68,307			68,316
Less: Corporate charges ¹		1,700			-			1,700			-
Other operating expenses, excluding corporate charges		32,498			34,615			66,607			68,316

Ratios
Losses and loss expenses incurred	$	68,208		$	90,433		$	150,040		$	177,555
Net premiums earned		97,730			115,631			207,389			225,644
Loss ratio		69.8	%		78.2	%		72.3	%		78.7	%

Other operating expenses	$	34,198		$	34,615		$	68,307		$	68,316
Less: Commissions and other income		1,889			1,978			3,551			4,043
Other operating expenses, less commissions and other income		32,309			32,637			64,756			64,273
Net premiums earned		97,730			115,631			207,389			225,644
Expense ratio		33.0	%		28.2	%		31.2	%		28.5	%

Impact of corporate charges		(1.7	)%		-			(0.8	)%		-
Expense ratio, excluding corporate charges		31.3	%		28.2	%		30.4	%		28.5	%

Combined ratio		102.8	%		106.4	%		103.5	%		107.2	%
Combined ratio, excluding corporate charges		101.1	%		106.4	%		102.7	%		107.2	%

¹ Represents the corporate charges incurred in conjunction with the Board's review of the Contingent Sale Agreement and activities of the Special Committee discussed above.

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Results of Operations

Comparison of Second Quarter 2020 to Second Quarter 2019 (in thousands)

	2020			2019			Change			% Change
Gross premiums written	$	115,449		$	147,152		$	(31,703	)		(21.5	)%
Ceded premiums written		(26,170	)		(31,457	)		5,287			(16.8	)%
Net premiums written	$	89,279		$	115,695		$	(26,416	)		(22.8	)%

Net premiums earned	$	97,730		$	115,631		$	(17,901	)		(15.5	)%
Net investment income		6,379			6,500			(121	)		(1.9	)%
Commissions and other income		1,889			1,978			(89	)		(4.5	)%
Net realized and unrealized gains on investments		10,615			2,889			7,726			267.4	%
Total revenue		116,613			126,998
Losses and loss expenses incurred		68,208			90,433			(22,225	)		(24.6	)%
Other operating expenses		34,198			34,615			(417	)		(1.2	)%
Total expenses		102,406			125,048
Income before federal income tax expense		14,207			1,950			12,257
Federal income tax expense		2,840			415			2,425
Net income	$	11,367		$	1,535		$	9,832

Gross premiums written during the second quarter of 2020 decreased $31.7 million (21.5%), while net premiums earned decreased $17.9 million (15.5%), as compared to the second quarter of 2019. The lower net premiums earned in the second quarter of 2020 were primarily the result of declines in premiums within our commercial automobile products, specifically public transportation, as a result of COVID-19 due to a reduction in miles driven, which are the basis for premiums we receive, as well as an overall reduction in public transportation units insured. Additionally, we had reduced premiums associated with lower retention rates as we continue to take actions to improve profitability, including rate increases and non-renewal of certain risks. These decreases were partially offset by rate increases and new business policies sold. The difference in the percentage change for premiums written compared to earned was reflective of the normal differences in the financial statement recognition of earned premiums compared to written, as well as differences in reinsurance ceding rates on the mix of business in-force.

Premiums ceded to reinsurers on our insurance business averaged 22.7% of gross premiums written for the second quarter of 2020 compared to 21.4% in the second quarter of 2019. The increase in the percentage of premiums ceded was primarily due to an increase in facultative reinsurance placements during the quarter as a percentage of our direct premiums written for public transportation.

Losses and loss expenses incurred during the second quarter of 2020 decreased $22.2 million (24.6%) compared to the second quarter of 2019, resulting in a loss ratio of 69.8% during the second quarter of 2020 compared to a loss ratio of 78.2% during the second quarter of 2019. The loss ratio is calculated as the percentage of losses and loss expenses incurred to net premiums earned. The lower losses and loss expenses and lower loss ratio in the second quarter of 2020 reflected results of our underwriting actions, including non-renewal of unprofitable business as well as significant rate increases in commercial automobile. Additionally, losses and loss expenses incurred reflected favorable impacts from COVID-19 within all commercial automobile products as a result of declines in accident frequency due to lower traffic density.

Net investment income for the second quarter of 2020 decreased 1.9% to $6.4 million compared to $6.5 million for the second quarter of 2019. The decrease reflected lower interest rates earned on cash and cash equivalent balances in the current period, partially offset by an increase in average funds invested compared to the second quarter of 2019.

Net realized and unrealized gains on investments of $10.6 million during the second quarter of 2020 were primarily driven by $15.7 million in unrealized gains on equity securities during the period as a result of the improvement in the global financial markets following sharp declines related to COVID-19 during the first quarter of 2020. These gains were partially offset by $4.1 million in net realized losses on sales of securities, excluding impairment losses, a $0.6 million decrease in the value of our limited partnership investments and impairments on our fixed income securities of $0.4 million recognized during the period. Comparative second quarter 2019 net realized and unrealized gains on investments of $2.9 million were primarily driven by $2.0 million in unrealized gains on equity securities, net realized gains on sales of securities, excluding impairment losses, of $0.7 million and a $0.3 million increase in the value of our limited partnership investments, partially offset by impairments on our fixed income securities of $0.1 million recognized during the period. Realized investment gains and losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in the aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

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Other operating expenses for the second quarter of 2020 decreased $0.4 million, or 1.2%, to $34.2 million compared to the second quarter of 2019. The decrease was driven primarily by lower commission expenses as a result of the mix of premium written during the second quarter of 2020, partially offset by $1.7 million of corporate charges paid during the second quarter of 2020 to third party advisors of a special committee of the board of directors in connection with the special committee's review of the Contingent Sale Agreement, as well as other strategic alternatives as discussed above. The expense ratio was 33.0% during the second quarter of 2020, or 31.3% excluding the corporate charges discussed above, compared to 28.2% for the second quarter of 2019. The increase in the expense ratio was primarily related to the decrease in net premiums earned during the period.

Federal income tax expense was $2.8 million for the second quarter of 2020 compared to $0.4 million for the second quarter of 2019. The effective tax rate on consolidated income for the second quarter of 2020 was 20.0% compared to 21.3% in the second quarter of 2019. The difference in the effective federal income tax rate from the normal statutory rate was primarily related to the effects of tax-exempt investment income and the dividends received deduction. The effective tax rate can fluctuate throughout the year because estimates used in the quarterly tax provision are updated as more information becomes available throughout the year.

As a result of the factors mentioned above, net income increased $9.8 million to $11.4 million during the second quarter of 2020 compared to net income of $1.5 million during the second quarter of 2019.

Comparison of Six Months Ended June 30, 2020 to Six Months Ended June 30, 2019 (in thousands)

	2020			2019			Change			% Change
Gross premiums written	$	249,455		$	296,045		$	(46,590	)		(15.7	)%
Ceded premiums written		(50,942	)		(65,028	)		14,086			(21.7	)%
Net premiums written	$	198,513		$	231,017		$	(32,504	)		(14.1	)%

Net premiums earned	$	207,389		$	225,644		$	(18,255	)		(8.1	)%
Net investment income		13,616			12,732			884			6.9	%
Commissions and other income		3,551			4,043			(492	)		(12.2	)%
Net realized and unrealized gains (losses) on investments		(17,141	)		8,916			(26,057	)		(292.2	)%
Total revenue		207,415			251,335
Losses and loss expenses incurred		150,040			177,555			(27,515	)		(15.5	)%
Other operating expenses		68,307			68,316			(9	)		0.0	%
Total expenses		218,347			245,871
Income (loss) before federal income tax expense (benefit)		(10,932	)		5,464			(16,396	)
Federal income tax expense (benefit)		(143	)		1,181			(1,324	)
Net income (loss)	$	(10,789	)	$	4,283		$	(15,072	)

Gross premiums written during the six months ended June 30, 2020 decreased $46.6 million (15.7%), while net premiums earned decreased $18.3 million (8.1%), as compared to the same period in 2019. The lower net premiums earned in 2020 were primarily the result of declines in premiums within our commercial automobile products, specifically public transportation, as a result of COVID-19 due to a reduction in miles driven, which are the basis for premiums we receive, as well as an overall reduction in public transportation units insured. Additionally, we had reduced premiums associated with lower retention rates as we continue to take actions to improve profitability, including rate increases and non-renewal of certain risks. These decreases were partially offset by rate increases and new business policies sold. The difference in the percentage change for premiums written compared to earned was reflective of the normal differences in the financial statement recognition of earned premiums compared to written, as well as differences in reinsurance ceding rates on the mix of business in-force.

Premiums ceded to reinsurers on our insurance business averaged 20.4% of gross premiums written for the six months ended June 30, 2020 compared to 22.0% for the same period of 2019. The decrease in premiums ceded was primarily due to a mix shift toward more commercial automobile business (specifically Independent Contractor lines that carry no reinsurance coverage) and less workers' compensation business.

Losses and loss expenses incurred during the six months ended June 30, 2020 decreased $27.5 million (15.5%) compared to the same period of 2019, resulting in a loss ratio of 72.3% during the period. This compares to a loss ratio of 78.7% during the same period of 2019. The loss ratio is calculated as the percentage of losses and loss expenses incurred to net premiums earned. The lower losses and loss expenses and lower loss ratio for the six months ended June 30, 2020 reflected results of our underwriting actions, including non-renewal of unprofitable business as well as significant rate increases in commercial automobile. Additionally, losses and loss expenses incurred reflected favorable impacts from COVID-19 within all commercial automobile products as a result of declines in accident frequency due to lower traffic density.

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Net investment income for the six months ended June 30, 2020 increased 6.9% to $13.6 million compared to $12.7 million for the same period of 2019. The increase reflected an increase in average funds invested resulting from positive cash flow, as well as the continued reallocation from equity investments in limited partnerships and cash and cash equivalent investments into short-duration, high-quality bonds, partially offset by lower interest rates earned on cash and cash equivalent balances in the current period.

Net realized and unrealized losses on investments of $17.1 million during the six months ended June 30, 2020 were primarily driven by $8.9 million in net realized losses on sales of securities, excluding impairment losses, $6.5 million in unrealized losses on equity securities, which were largely attributable to disruptions in the global financial markets related to COVID-19, and a $1.3 million decrease in the value of our limited partnership investments. Comparative six months ended June 30, 2019 net realized and unrealized gains on investments of $8.9 million were primarily driven by $7.9 million in unrealized gains on equity securities during the period, a $0.7 million increase in the value of our limited partnership investments and net realized gains on sales of securities, excluding impairment losses, of $0.6 million, partially offset by impairments on our fixed income securities of $0.3 million recognized during the period. Realized investment gains and losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in the aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

Other operating expenses for the six months ended June 30, 2020 were flat at $68.3 million compared to the same period of 2019. The $1.7 million of corporate charges paid in the second quarter of 2020 to third party advisors of a special committee of the board of directors were offset by lower salary and benefit expense and commission expense. The expense ratio was 31.2% during the six months ended June 30, 2020, or 30.4% excluding the corporate charges discussed above, compared to 28.5% for the same period of 2019. The increase in the expense ratio was primarily related to the decrease in net premiums earned during the period.

Federal income tax benefit was $0.1 million for the six months ended June 30, 2020 compared to federal income tax expense of $1.2 million for the same period of 2019. The effective tax rate on consolidated loss for the six months ended June 30, 2020 was a 1.3% tax benefit compared to a 21.6% tax expense on consolidated income in the same period of 2019. The pre-tax loss for the six months ended June 30, 2020 makes these interim period effective tax rates less comparable year-over-year. The difference in the effective federal income tax rate from the normal statutory rate was primarily related to the recording of a valuation allowance in the current period on our deferred tax assets, in addition to the effects of tax-exempt investment income and the dividends received deduction. In assessing the valuation of deferred tax assets, we considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during the period in which those temporary differences become deductible. We considered several factors when analyzing the need for a valuation allowance, including our current three year cumulative loss through June 30, 2020, the increase in deferred tax assets due to the adoption of CECL at January 1, 2020 discussed above, the change in unrealized gains and losses and the loss of a high taxable income year from the carryback period. The three year cumulative loss limits our ability to use projected income beyond 2020 in the analysis. Based on this analysis, we concluded that a valuation allowance was necessary for our deferred tax assets not supported by either carryback availability or future reversals of existing taxable temporary differences. Our valuation allowance was $2.4 million as of June 30, 2020, of which $2.2 million was recorded in the condensed consolidated statement of operations for the six months ended June 30, 2020 and the balance was recorded in shareholders' equity within accumulated other comprehensive income as of June 30, 2020. This represented a $2.5 million reduction to the valuation allowance of $4.9 million recorded for the three months ended March 31, 2020. The effective tax rate can fluctuate throughout the year because estimates used in the quarterly tax provision are updated as more information becomes available throughout the year.

As a result of the factors mentioned above, net income decreased $15.1 million to a loss of $10.8 million during the six months ended June 30, 2020 compared to net income of $4.3 million during the same period of 2019.

Sensitivity Analysis

Management is aware of the potential for variation from the reserves established at any particular point in time. Savings or deficiencies could develop in future valuations of the currently established loss and loss expense reserve estimates under a variety of reasonably possible scenarios. The majority of our reserves for losses and loss expenses, on a net of reinsurance basis, relate to our commercial automobile products. Perhaps the most significant example of sensitivity to variation in the key assumptions is the loss ratio selection for our commercial automobile products for policies subject to certain major reinsurance treaties.

Commercial automobile products covered by our reinsurance treaties from July 2013 through June 2019 are subject to an unlimited aggregate stop-loss provision. Currently each of these treaty years is reserved at or above the attachment level of these treaties. For every $100 of additional loss, we are only responsible for our $25 retention.

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Commercial automobile products covered by our reinsurance treaty from July 2019 through June 2020 are also subject to an unlimited aggregate stop-loss provision. Once the aggregate stop-loss level is reached, for every $100 of additional loss, we are responsible for our $65 retention. This increase in our retention compared to recent years reflects the combination of (1) a decreased need for stop-loss reinsurance protection resulting from a significant decrease in our commercial automobile subject limits profile, (2) a higher cost for this cover and (3) our confidence in profitability improvements given the limit reductions and rate increases on our commercial automobile products.

Forward-Looking Information

The disclosures in this Form 10-Q contain "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995). All statements, trend analyses and other information contained in this Form 10-Q relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as "may," "target," "anticipate," "believe," "plan," "estimate," "expect," "intend," "project," and other similar expressions, constitute forward-looking statements.

Investors are cautioned that such forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements, many of which are difficult to predict and generally beyond our control. Investors are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Investors are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors that affect our business, including "Risk Factors" set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our reports filed with the U.S. Securities and Exchange Commission from time to time. Except to the extent otherwise required by federal securities laws, we do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof.

Factors that could contribute to these differences include, among other things:

●

general economic conditions, including continued volatility of the financial markets, prevailing interest rate levels and stock and credit market performance, which may affect or continue to affect (among other things) our ability to sell our products and to collect amounts due to us, our ability to access capital resources and the costs associated with such access to capital and the market value of our investments;

●

the effects of the COVID-19 pandemic and associated government actions on our operating and financial performance;

●

our ability to obtain adequate premium rates and manage our growth strategy;

●

increasing competition in the sale of our insurance products and services resulting from the entrance of new competitors into, or the expansion of the operations of existing competitors in, our markets and our ability to retain existing customers;

●

other changes in the markets for our insurance products;

●

the impact of technological advances, including those specific to the transportation industry;

●

changes in the legal or regulatory environment, which may affect the manner in which claims are adjusted or litigated, including loss and loss adjustment expense;

●

legal or regulatory changes or actions, including those relating to the regulation of the sale, underwriting and pricing of insurance products and services and capital requirements;

●

the impact of a downgrade in our financial strength rating;

●

technology or network security disruptions or breaches;

●

adequacy of insurance reserves;

●

availability of reinsurance and ability of reinsurers to pay their obligations;

●

our ability to attract and retain qualified employees;

●

tax law and accounting changes; and

●

legal actions brought against us.

- 28 -

Some of the significant risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described more fully in Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q and of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. You should read that information in conjunction with this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our unaudited condensed consolidated financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

A summary of our significant accounting policies that we consider to be the most dependent on the application of estimates and assumptions can be found in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2019. Changes in 2020 to our significant accounting policies, which are dependent upon estimates and assumptions, include the adoption of new accounting guidance for the recognition of credit losses. For discussion of the new guidance and the related changes to our accounting policy, see "Accounting Policies" within Note 1 - Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Concentrations of Credit Risk

Our Insurance Subsidiaries cede portions of their gross premiums to numerous reinsurers under quota share and excess of loss treaties, as well as facultative placements. These reinsurers assume commensurate portions of the risk of loss covered by the contracts. As losses are reported and reserved, portions of the gross losses attributable to reinsurers are established as receivable assets and losses incurred are reduced. At June 30, 2020, amounts due from reinsurers on paid and unpaid losses were estimated to total approximately $405 million. Because of the large policy limits reinsured by us, the ultimate amount of incurred but not reported losses and loss adjustment expenses attributable to reinsurers could vary significantly from this estimate; provided, however, absent the inability to collect from reinsurers, such variance would not result in changes in net claim losses incurred by us.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than as set forth below, there have been no material changes in the Company's exposure to market risk since the disclosure in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Interest Rate Risk

We are exposed to interest rate risk on our fixed income investments. Given the anticipated duration of our liabilities (principally insurance loss and loss expense reserves) relative to investment maturities, a 100 to 200 basis point increase in interest rates would not have a material impact on our ability to conduct daily operations or to meet our obligations and could result in higher investment income in a relatively short period of time, as short-term investments and maturing bonds could be reinvested in higher yielding securities.

The table below summarizes our interest rate risk by illustrating the sensitivity of the fair value of our fixed income investments as of June 30, 2020 to selected hypothetical changes in interest rates (dollars in thousands).

	Fair Value		Estimated Change in Fair Value
200 basis point increase	$	766,148	$	(45,853	)
100 basis point increase		789,074		(22,927	)
Current fair value		812,001		–
100 basis point decrease		834,928		22,927
200 basis point decrease		857,854		45,853

Our selection of the range of values chosen to represent changes in interest rates should not be construed as our prediction of future market events, but rather as an illustration of the impact of such events should they occur. Several other factors, including but not limited to the financial strength of the issuer, prepayment options, relative values of alternative investments, liquidity of the investment, currency fluctuations for non-U.S. debt holdings and other general market conditions, can impact the fair values of fixed income investments and, therefore, significant variations in market interest rates could produce quite different results from the hypothetical estimates presented above.

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation as of June 30, 2020 under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rule 13a-15(e) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or the "Exchange Act". Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded the disclosure controls and procedures were effective in ensuring that information required to be disclosed in reports that the Company files or submits under the Exchange Act is: (a) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms; and (b) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. The Company noted no change in its internal control over financial reporting that occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required with respect to this item can be found in Note 10 - Litigation, Commitments and Contingencies of Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q and is incorporated by reference into this Part II, Item 1.

ITEM 1A. RISK FACTORS

In addition to the information set forth in this Quarterly Report on Form 10-Q and before deciding to invest in, or retain, shares of the Company's common stock, you should carefully review and consider the information contained in the Company's other reports and periodic filings that it makes with the Securities and Exchange Commission, including, without limitation, the information contained under the caption Part I, Item 1A, "Risk Factors" in its Annual Report on Form 10-K for the year ended December 31, 2019. Those risk factors could materially affect the Company's business, financial condition and results of operations. There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, other than as described below.

The following risk factor included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 has been updated as follows:

The impact of COVID-19 and related risks could continue to materially affect our results of operations, financial position and/or liquidity.

Beginning in March 2020, the global pandemic related to the novel coronavirus COVID-19 and related economic conditions began to impact the global economy and our results of operations. A discussion of the impact of the COVID-19 pandemic on our business to date can be found in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. Because of the size and breadth of this pandemic, all of the direct and indirect consequences of COVID-19 are not yet known and may not emerge for some time. Risks presented by the ongoing effects of COVID-19 include the following:

•

Net premiums earned. We expect the impact of COVID-19 on general economic activity will continue to negatively impact our premium volumes. We did not experience a material effect in the first quarter of 2020, but saw a more significant impact in the second quarter of 2020 based primarily on the reduction in miles driven by commercial automobile insureds, which are the basis of premiums we receive, specifically public transportation where we saw a reduction in units insured. This impact could further persist for the remainder of 2020 and beyond, but the degree of the impact will depend on the extent and duration of the economic contraction.

•

Loss and loss expenses incurred. We have seen a favorable impact on our loss and loss expenses incurred in commercial automobile during the first six months of 2020 as a result of declines in accident frequency due to lower traffic density, but in the future we may incur higher claim and claim adjustment expenses in certain lines of business as a result of COVID-19 due to increases in frequency and/or severity of claims. For example, we may experience elevated frequency and severity in our workers’ compensation lines related to compensable claims by workers who demonstrate that the injury or illness arose both out of and in the course of their employment. We may also experience elevated frequency and severity in our liability coverages as a result of plaintiffs’ lawyers seeking to generate COVID-19-related claim activity against our insureds. Additionally, the anticipated and unknown risks related to COVID-19 may cause additional uncertainty in the process of estimating claims and claim adjustment expense reserves. For example, the behavior of claimants and policyholders may change in unexpected ways, the disruption to the court system may impact the timing and amounts of claims settlements and the actions taken by governmental bodies, both legislative and regulatory, in reaction to COVID-19 and their related impacts are hard to predict. As a result, our estimated level of claims and claim adjustment expense reserves may change. We are also subject to credit risk in our insurance operations, which may be exacerbated in times of economic distress.

- 31 -

•

Investments. The volatility in the global financial markets related to COVID-19 has contributed to net realized and unrealized investment losses, primarily due to the impact of changes in fair value on our equity and fixed income investments. Our corporate fixed income portfolio may be further adversely impacted by ratings downgrades, increased bankruptcies and credit spread widening in distressed industries, such as energy, gaming, lodging and leisure, autos, airlines and retail. Our money market investments were impacted by lower interest rates and may continue to be impacted by these lower rates. Our investment portfolio also includes commercial mortgage-backed securities, which could be adversely impacted by declines in real estate valuations and/or financial market disruption. Further volatility in the global financial markets due to the continuing impact of COVID-19 could result in future net realized and unrealized investment losses, including potential impairments in our fixed income portfolio. In addition, declines in fixed income yields would result in decreases in net investment income from future investment activity, including re-investments.

•

Liquidity. Collection of premiums, deductibles or self-insured retentions from our policyholders and reinsurance recoverables from our reinsurers may become increasingly difficult. At the state level, insurance departments throughout the country have issued bulletins and regulations urging or requiring insurers to extend grace periods for the payment of policy premiums and to refrain from canceling or non-renewing policies for the non-payment of policy premiums for policyholders adversely affected by COVID-19. It is uncertain what impact these government mandates may have on our ability to recover unpaid premiums on the affected policies or what our obligations may be for the payment of claims made under policies for which we have not received premium payments.

•

Adverse Legislative and/or Regulatory Action. Federal, state and local government actions to address and contain the impact of COVID-19 may adversely affect us. A number of states have instituted, and other states are considering instituting, changes designed to effectively expand workers' compensation coverage by creating presumptions of compensability of claims for certain types of workers. Regulatory restrictions or requirements could also impact pricing, risk selection and our rights and obligations with respect to our policies and insureds, including our ability to cancel policies or our right to collect premiums.

•

Operational Disruptions and Heightened Cybersecurity Risks. Our operations could be disrupted if key members of our senior management or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or outsourcing providers are unable to continue to work because of illness, government directives or otherwise. In addition, the interruption of our or their system capabilities could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions. Having shifted to primarily remote working arrangements, we also face a heightened risk of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities. We have not experienced any operational interruptions or cybersecurity disruptions during this time.

- 32 -

ITEM 5. OTHER INFORMATION

On August 3, 2020, Protective Insurance Corporation (the "Company") entered into an amendment (the “Amendment”) to the Employment Agreement, dated as of May 22, 2019, by and between the Company and Jeremy D. Edgecliffe-Johnson (the “Employment Agreement”). Pursuant to the Amendment, if Mr. Edgecliffe-Johnson’s employment is terminated (i) by the Company without Cause in anticipation of a Change in Control (each as defined in the Employment Agreement) to be effectuated within 120 days prior to the termination date, or (ii) by either the Company without Cause or Mr. Edgecliffe-Johnson for Good Reason (as defined in the Employment Agreement) on or before the 24-month anniversary of a Change of Control, Mr. Edgecliffe-Johnson will receive the following benefits:

•	A cash lump-sum amount equal to two times his annualized base salary;

•	An amount equal to his target annual cash incentive award and target equity-based award applicable to the year in which the termination occurs;

•	Full vesting for any unvested restricted stock, restricted stock unit award, or any other award granted under the Company’s Long-Term Incentive Plan;

•	The cash payment of any annual, long-term or other incentive award earned in respect to the performance period ending prior to the termination date and payable (but not yet paid) on or prior to the termination date; and

•

A reimbursement of the premiums associated with the continuation of Mr. Edgecliffe-Johnson’s medical, dental and vision benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for a period equal to the earliest of (a) 12 months following the termination date, (b) the date Mr. Edgecliffe-Johnson first becomes eligible to receive health benefits under another employer-provided plan or (c) the date he is no longer eligible for continuation benefits under COBRA.

The other terms of the Employment Agreement were not amended by the Amendment. The foregoing summary of the Amendment is qualified by reference to the full text of the Amendment, a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.

- 33 -

ITEM 6. EXHIBITS

INDEX TO EXHIBITS

Exhibit No.		Description

3.1		Amended and Restated Articles of Incorporation of Protective Insurance Corporation, incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed August 8, 2018.

3.2		Code of By-Laws of Protective Insurance Corporation, as amended through May 14, 2020, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 14, 2020.

10.1		Amendment to the Employment Agreement, effective as of May 22, 2019, by and between Protective Insurance Corporation and Jeremy D. Edgecliffe-Johnson, dated as of August 3, 2020

10.2		Form of Indemnification Agreement, effective May 5, 2020, by and between Protective Insurance Corporation and members of the Company's Board of Directors, dated as of May 5, 2020, incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on May 6, 2020.

10.3		Long-Term Incentive Plan Award Agreement, effective July 6, 2020, by and between Protective Insurance Corporation and certain Executives, dated as of July 6, 2020.

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from Protective Insurance Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Operations, (3) the Condensed Consolidated Statements of Comprehensive Income (Loss), (4) the Condensed Consolidated Statements of Shareholders' Equity, (5) the Condensed Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

- 34 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PROTECTIVE INSURANCE CORPORATION

Date August 5, 2020

By:	/s/ Jeremy D. Edgecliffe-Johnson
	Jeremy D. Edgecliffe-Johnson
	Chief Executive Officer

Date August 5, 2020

By:	/s/ John R. Barnett
	John R. Barnett
	Chief Financial Officer

- 35 -

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2020	Aug. 04, 2020
Entity Information [Line Items]
Entity Registrant Name	PROTECTIVE INSURANCE CORPORATION
Entity Central Index Key	0000009346
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		14,213,412
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-5534
Entity Tax Identification Number	35-0160330
Entity Incorporation, State or Country Code	IN
Entity Address, Address Line One	111 Congressional Boulevard
Entity Address, City or Town	Carmel
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46032
City Area Code	317
Local Phone Number	636-9800
Common Class A (voting) [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		2,603,350
Title of 12(b) Security	Class A Common Stock, No Par Value
Trading Symbol	PTVCA
Security Exchange Name	NASDAQ
Common Class B (non-voting) [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		11,610,062
Title of 12(b) Security	Class B Common Stock, No Par Value
Trading Symbol	PTVCB
Security Exchange Name	NASDAQ

Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Class A Voting [Member]
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	3,000,000	3,000,000
Common stock, shares outstanding (in shares)	2,603,350	2,603,350
Class B Non-voting [Member]
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares outstanding (in shares)	11,610,062	11,675,956

Summary of Significant Accounting Policies	6 Months Ended
Summary of Significant Accounting Policies	Jun. 30, 2020
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	(1) Summary of Significant Accounting Policies: Description of Business: Protective Insurance Corporation (the "Company"), based in Carmel, Indiana, is a property-casualty insurer specializing in marketing and underwriting property, liability and workers' compensation coverage for trucking and public transportation fleets, as well as coverage for trucking industry independent contractors. The Company offers a range of products and services, the most significant being commercial automobile and workers' compensation insurance products. The Company operates as one reportable property and casualty insurance segment based on how its operating results are regularly reviewed by its chief operating decision maker when making decisions about how resources are allocated and assessing performance. The term “Insurance Subsidiaries,” as used throughout this document, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Interim financial statements should be read in conjunction with the Company's annual audited financial statements and other disclosures included in the Company's most recent Annual Report on Form 10-K. Operating results for interim periods are not necessarily indicative of results that may be expected for the year ending December 31, 2020 or any other future period. Accounting Policies Investments: Carrying amounts for fixed income securities represent fair value and are based on quoted market prices, where available, or broker/dealer quotes for specific securities where quoted market prices are not available. Equity securities are carried at quoted market prices (fair value). Commercial mortgage loans are carried primarily at amortized cost along with an allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans. The Company recorded an allowance of $195 on its commercial mortgage loans as of June 30, 2020 in conjunction with the adoption of the new credit losses accounting standard discussed below. The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to record its proportionate share of the limited partnership's net income. To the extent the limited partnerships include both realized and unrealized investment gains or losses in the determination of net income or loss, then the Company would also recognize, through its condensed consolidated statements of operations, its proportionate share of the investee's unrealized, as well as realized, investment gains or losses within net unrealized gains (losses) on equity securities and limited partnership investments. Short-term and other investments are carried at cost, which approximates their fair values. Fixed income securities are considered to be available-for-sale. The related unrealized net gains or losses (net of applicable tax effects) on fixed income securities are reflected directly in other comprehensive income (loss) within shareholders' equity. Included within available-for-sale fixed income securities are convertible debt securities. A portion of the changes in the fair values of convertible debt securities is reflected as a component of net realized gains (losses) on investments, excluding impairment losses within the condensed consolidated statements of operations. Realized gains and losses on disposals of fixed income securities are recorded on the trade date. Realized gains and losses on fixed income securities are determined by the specific identification of the cost of investments sold and are included in net realized gains (losses) on investments, excluding impairment losses. Equity securities are recorded at fair value, with unrealized net gains or losses reflected as a component of net unrealized gains (losses) on equity securities and limited partnership investments within the condensed consolidated statements of operations. Realized gains and losses on disposals of equity securities are recorded on the trade date and included in net realized gains (losses) on investments, excluding impairment losses. Recognition of Revenue and Costs: Premiums are earned over the period for which insurance protection is provided. A reserve for unearned premiums is established to reflect amounts applicable to subsequent accounting periods. Commissions to unaffiliated companies and premium taxes applicable to unearned premiums are deferred and expensed as the related premiums are earned. The Company does not defer acquisition costs that are not directly variable with the production of premiums. If it is determined that expected losses and deferred expenses will likely exceed the related unearned premiums, the asset representing deferred policy acquisition costs is reduced and an expense is charged against current operations to reflect any such premium deficiency. In the event that the expected premium deficiency exceeds deferred policy acquisition costs, an additional liability would be recorded with a corresponding expense to current operations for the amount of the excess premium deficiency. Anticipated investment income is considered in determining recoverability of deferred acquisition costs. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded on its condensed consolidated balance sheet at June 30, 2020. The following accounting policies have been updated effective January 1, 2020 to reflect the Company's adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, as described below. Investment Impairments: For a fixed income security in an unrealized loss position where the Company has the intent to sell the fixed income security, or it is more likely than not that the Company will have to sell the fixed income security before recovery of its amortized cost basis, the decline in value is recorded within impairment losses on investments in the condensed consolidated statements of operations. The new cost basis of the investment is the previous amortized cost basis less the impairment recognized. The new cost basis is not adjusted for any subsequent recoveries in fair value. For a fixed income security that the Company does not intend to sell or in cases where it is more likely than not that the Company will not have to sell the security, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the condensed consolidated statements of operations. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income (loss). The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted. The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, focusing on those below investment grade, with emphasis on securities downgraded below investment grade. The credit loss is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed income security. The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the appropriate effective interest rate. Additionally, the Company may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. The Company reports investment income due and accrued separately from available-for-sale fixed income securities and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments, excluding impairment losses at the time the issuer defaults or is expected to default on payments. Deductible Receivables: Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a net of allowance basis in the condensed consolidated balance sheets within accounts receivable. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors. A probability-of-default methodology, which reflects current and forecasted economic conditions, is used to estimate the allowance for expected credit losses for deductible receivables. As of January 1, 2020, in conjunction with the adoption of ASU 2016-13, the Company recorded an allowance for expected credit losses of $15,000 ($11,850, net of tax). See Note 10 – Litigation, Commitments and Contingencies for further discussion. Recently Adopted Accounting Pronouncements: Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02. Under the new guidance, lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The Company's adoption of the new standard did not have any impact on its condensed consolidated statements of operations or cash flows; however, the impact of adopting the new guidance resulted in a right-of-use asset and a lease liability being recorded on the condensed consolidated balance sheet as of June 30, 2020, each of approximately $65, which are included within other assets and accounts payable and other liabilities. In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13. ASU 2016-13 introduced a current expected credit loss ("CECL") model for measuring expected credit losses for certain types of financial instruments held at the reporting date requiring significant judgment in application based on historical experience, current conditions and reasonable supportable forecasts, but is not prescriptive about certain aspects of estimating expected losses. The guidance replaced the current incurred loss model for measuring expected credit losses and provided for additional disclosure requirements. Subsequently, the FASB issued additional ASUs on Topic 326 that did not change the core principle of the guidance in ASU 2016-13, but provided clarification and implementation guidance on certain aspects of ASU 2016-13, and have the same effective date and transition requirements as ASU 2016-13. The Company adopted the guidance using a modified retrospective approach as of January 1, 2020 and recognized a cumulative effect adjustment of $15,545 ($12,281, net of tax), to the opening balance of retained earnings. The adjustment was primarily related to estimating credit losses on the Company’s accounts receivable balances, reinsurance recoverable balances and commercial mortgage loans at the date of adoption. The updated guidance in ASU 2016-13 also amended the previous other-than-temporary impairment ("OTTI") model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. This update removed the disclosure requirements for the amounts of and the reasons for transfers between Level 1 and Level 2 and disclosure of the policy for timing of transfers between levels. This update also removed disclosure requirements for the valuation processes for Level 3 fair value measurements. Additionally, this update added disclosure requirements for the changes in unrealized gains and losses for recurring Level 3 fair value measurements and quantitative information for certain unobservable inputs in Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. As the requirements of this guidance are applicable to disclosure only, the adoption of ASU 2018-13 had no material impact on the Company's condensed consolidated financial statements. Recently Issued Accounting Pronouncements: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the effects the adoption of ASU 2019-12 will have on its condensed consolidated financial statements.

Debt	6 Months Ended
Debt	Jun. 30, 2020
Debt [Abstract]
Debt	(6) Debt: On August 9, 2018, the Company entered into a credit agreement providing a revolving credit facility with a $40,000 limit, with the option for up to an additional $35,000 in incremental loans at the discretion of the lenders. This credit agreement has an expiration date of August 9, 2022. Interest on this revolving credit facility is referenced to the London Interbank Offered Rate and can be fixed for periods of up to one year at the Company's option. Outstanding drawings on this revolving credit facility were $20,000 as of June 30, 2020. At June 30, 2020, the effective interest rate was 1.29%, and the Company had $20,000 remaining available under the revolving credit facility. The current outstanding borrowings were used to repay the Company's previous line of credit. The Company's revolving credit facility has two financial covenants, each of which were met as of June 30, 2020. These covenants require the Company to have a minimum U.S. generally accepted accounting principles net worth and a maximum consolidated debt to equity ratio of 0.35.

Taxes	6 Months Ended
Taxes	Jun. 30, 2020
Taxes [Abstract]
Taxes	(7) Taxes: The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company’s best estimate of the effective tax rate expected for the full year based on projected annual taxable income (loss). The effective tax rate can fluctuate throughout the year because estimates used in the quarterly tax provision are updated as more information becomes available throughout the year. The effective federal tax rate on consolidated income for the three months ended June 30, 2020 was 20.0% compared to 21.3% for the three months ended June 30, 2019. The effective federal tax rate on consolidated loss for the six months ended June 30, 2020 was 1.3% compared to 21.6% on consolidated income for the six months ended June 30, 2019. The pre-tax loss for the six months ended June 30, 2020 makes these interim period effective tax rates less comparable year-over-year. The difference in the effective federal income tax rate from the normal statutory rate was primarily related to the recording of a valuation allowance in the current period on our deferred tax assets discussed below, in addition to the effects of tax-exempt investment income and the dividends received deduction. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during the periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance, including the Company's current three year cumulative loss through June 30, 2020, the increase in deferred tax assets due to the adoption of CECL at January 1, 2020 discussed in Note 1, the change in unrealized gains and losses and the loss of a high taxable income year from the carryback period. The three year cumulative loss limits the Company's ability to use projected income beyond 2020 in the analysis. Based on this analysis, the Company concluded that a valuation allowance was necessary for its deferred tax assets not supported by either carryback availability or future reversals of existing taxable temporary differences. The Company's valuation allowance was $2,388 as of June 30, 2020, of which $2,176 was recorded in the condensed consolidated statement of operations for the six months ended June 30, 2020 and the balance was recorded in shareholders' equity within accumulated other comprehensive income as of June 30, 2020. This represented a $2,541 reduction to the valuation allowance of $4,929 recorded for the three months ended March 31, 2020. Of this reduction, $130 was recorded in the condensed consolidated statement of operations for the three months ended June 30, 2020 and the balance was recorded in shareholders' equity within accumulated other comprehensive income as of June 30, 2020. As of June 30, 2020, the Company's calendar years 2018, 2017 and 2016 remain subject to examination by the Internal Revenue Service.

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Investments:
Fixed income securities	$ 812,001	$ 795,538
Equity securities	46,009	76,812
Limited partnerships	7,393	23,292
Commercial mortgage loans	11,875	11,782
Short-term and other	1,000	1,000
Total Investments	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 recoverable	4,611	4,878
Deferred federal income taxes	5,708	2,035
Total Assets	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
Reinsurance payable	55,021	65,835
Short-term borrowings	20,000	20,000
Accounts payable and other liabilities	113,658	121,094
Total Liabilities	1,264,230	1,270,044
Shareholders' equity:
Additional paid-in capital	53,692	53,349
Accumulated other comprehensive income	7,893	9,369
Retained earnings	273,846	300,988
Total Shareholders' Equity	336,038	364,316
Total Liabilities and Shareholders' Equity	1,600,268	1,634,360
Class A Voting [Member]
Shareholders' equity:
Common stock	111	111
Class B Non-voting [Member]
Shareholders' equity:
Common stock	$ 496	$ 499

Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 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
Total revenues	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
Total expenses	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
Net income (loss) per share:
Basic (in dollars per share)	$ 0.81	$ 0.11	$ (0.76)	$ 0.28
Diluted (in dollars per share)	$ 0.80	$ 0.11	$ (0.76)	$ 0.28
Weighted average number of shares outstanding:
Basic (in shares)	14,117	14,616	14,143	14,731
Dilutive effect of share equivalents (in shares)	62	63	0	60
Diluted (in shares)	14,179	14,679	14,143	14,791

Unaudited Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total	Class A [Member] Common Stock [Member]	Class B [Member] Common Stock [Member]	Class B [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Additional Paid-in Capital [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Class A [Member] Common Stock [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Class B [Member] Common Stock [Member]
Beginning balance at Dec. 31, 2018	$ 54,720	$ (7,347)	$ 308,075	$ 356,082	$ 112	$ 522
Beginning balance (in shares) at Dec. 31, 2018					2,615,000	12,254,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (income)	0	0	4,283	4,283	$ 0	$ 0
Foreign currency translation adjustment, net of tax	0	591	0	591	0	0
Change in unrealized gain (loss) on investments, net of tax	0	14,973	0	14,973	0	0
Common stock dividends	0	0	(2,987)	(2,987)	0	0
Repurchase of common shares	(1,614)	0	(4,858)	(6,487)	$ 0	$ (15)
Repurchase of common shares (in shares)					(3,000)	(371,000)
Restricted stock grants	959	0	0	961	$ 0	$ 2
Restricted stock grants (in shares)					0	49,000
Ending balance at Jun. 30, 2019	54,065	8,217	304,513	367,416	$ 112	$ 509
Ending balance (in shares) at Jun. 30, 2019					2,612,000	11,932,000
Beginning balance at Mar. 31, 2019	55,049	1,416	308,971	366,070	$ 112	$ 522
Beginning balance (in shares) at Mar. 31, 2019					2,615,000	12,249,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (income)	0	0	1,535	1,535	$ 0	$ 0
Foreign currency translation adjustment, net of tax	0	284	0	284	0	0
Change in unrealized gain (loss) on investments, net of tax	0	6,517	0	6,517	0	0
Common stock dividends	0	0	(1,494)	(1,494)	0	0
Repurchase of common shares	(1,506)	0	(4,499)	(6,020)	$ 0	$ (15)
Repurchase of common shares (in shares)					(3,000)	(346,000)
Restricted stock grants	522	0	0	524	$ 0	$ 2
Restricted stock grants (in shares)					0	29,000
Ending balance at Jun. 30, 2019	54,065	8,217	304,513	367,416	$ 112	$ 509
Ending balance (in shares) at Jun. 30, 2019					2,612,000	11,932,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of the adoption of updated accounting guidance for credit losses, net of tax \| ASU 2016-13 [Member]								$ 0	$ 0	$ (12,281)	$ (12,281)	$ 0	$ 0
Beginning balance at Dec. 31, 2019	53,349	9,369	300,988	364,316	$ 111	$ 499
Beginning balance (ASU 2016-13 [Member]) at Dec. 31, 2019										$ (12,281)
Beginning balance (in shares) at Dec. 31, 2019					2,603,000	11,676,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (income)	0	0	(10,789)	(10,789)	$ 0	$ 0
Foreign currency translation adjustment, net of tax	0	(466)	0	(466)	0	0
Change in unrealized gain (loss) on investments, net of tax	0	(1,010)	0	(1,010)	0	0
Common stock dividends	0	0	(2,858)	(2,858)	0	0
Repurchase of common shares	(563)	0	(1,214)	(1,782)	$ 0	$ (5)
Repurchase of common shares (in shares)					0	(127,000)	(126,764)
Restricted stock grants	906	0	0	908	$ 0	$ 2
Restricted stock grants (in shares)					0	61,000
Ending balance at Jun. 30, 2020	53,692	7,893	273,846	336,038	$ 111	$ 496
Ending balance (in shares) at Jun. 30, 2020					2,603,000	11,610,000
Beginning balance at Mar. 31, 2020	53,045	(12,179)	263,911	305,383	$ 111	$ 495
Beginning balance (in shares) at Mar. 31, 2020					2,603,000	11,580,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (income)	0	0	11,367	11,367	$ 0	$ 0
Foreign currency translation adjustment, net of tax	0	221	0	221	0	0
Change in unrealized gain (loss) on investments, net of tax	0	19,851	0	19,851	0	0
Common stock dividends	0	0	(1,432)	(1,432)	0	0
Repurchase of common shares	0	0	0	0	$ 0	$ 0
Repurchase of common shares (in shares)					0	0
Restricted stock grants	647	0	0	648	$ 0	$ 1
Restricted stock grants (in shares)					0	30,000
Ending balance at Jun. 30, 2020	$ 53,692	$ 7,893	$ 273,846	$ 336,038	$ 111	$ 496
Ending balance (in shares) at Jun. 30, 2020					2,603,000	11,610,000

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating activities
Net income (loss)	$ (10,789)	$ 4,283
Adjustments to reconcile net income (loss) to net cash provided by operating activities	22,467	34,113
Net cash provided by operating activities	11,678	38,396
Investing activities
Purchases of fixed income and equity securities	(164,518)	(245,099)
Distributions from limited partnerships	14,636	20,231
Proceeds from maturities	60,811	38,917
Proceeds from sales of fixed income securities	67,922	71,839
Proceeds from sales of equity securities	44,395	14,449
Purchase of commercial mortgage loans	(410)	(2,213)
Proceeds from commercial mortgage loans	121	0
Purchases of property and equipment	(712)	(1,346)
Proceeds from disposals of property and equipment	0	3
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

Litigation, Commitments and Contingencies	6 Months Ended
Litigation, Commitments and Contingencies	Jun. 30, 2020
Litigation, Commitments and Contingencies [Abstract]
Litigation, Commitments and Contingencies	(10) Litigation, Commitments and Contingencies: In the ordinary, regular and routine course of their business, the Company and its Insurance Subsidiaries are frequently involved in various matters of litigation relating principally to claims for insurance coverage provided. No currently pending matter is deemed by management to be material to the Company, other than as noted below. Personnel Staffing Group Litigation In July 2019, Protective Insurance Company (“Protective”) was named as a defendant in an action brought by a former insured, Personnel Staffing Group d/b/a MVP Staffing (“PSG”), in the U.S. District Court for the Central District of California (the “California Action”) alleging that Protective had breached its workers’ compensation insurance policy and had breached the duties of good faith and fair dealing. Protective provided workers’ compensation insurance to PSG from January 1, 2017 through June 30, 2018, which was subject to a $500 per claim deductible to be paid by PSG. No specific damages were included in the complaint. In August 2019, Protective filed a motion to dismiss or stay the action. In August 2019, Protective filed a lawsuit against PSG in Marion County Superior Court, in Indianapolis, Indiana (the “Indiana Court”) alleging breach of contract, breach of the parties' collateral agreement, breach of the parties' indemnity agreement, and seeking a declaratory judgment regarding PSG’s obligation to fund its ongoing claim deductible obligations and adequately collateralize Protective’s current and ongoing claims exposure pursuant to terms of the parties' agreements (the “Indiana Action”). In October 2019, Protective amended the complaint to include allegations of misrepresentation as to source of coverage, negligent misrepresentation, fraud and racketeering and seeking injunctive relief. In November 2019, PSG filed a motion to dismiss the Indiana Action on the basis of comity with the California Action, claiming that California was the proper forum for Protective’s claims. In February 2020, the Indiana Court issued an order dismissing the Indiana Action without prejudice; the Indiana Court declined to rule on the legal effect of the forum selection clause in the parties’ agreements, finding that any interpretation should be addressed by the court in the California Action. On April 28, 2020, Protective’s motion to dismiss the California Action was granted without prejudice on grounds that Indiana is the more appropriate forum. On May 4, 2020, PSG filed a notice of appeal of the order of dismissal in the California Action. On May 1, 2020, Protective filed a motion with the Indiana Court to re-open the Indiana Action, which remains pending. Protective intends to vigorously pursue its claims against PSG, however, the ultimate outcome cannot be presently determined. Pursuant to the terms of the workers’ compensation policies, Protective has a duty to adjust and pay claims arising under the policies regardless of whether PSG makes payments to Protective for deductible obligations under the policies. Under its contractual obligations to Protective, PSG is required to maintain a “loss fund” for the payment of claims, the balance of which is to remain at or above $4,000; in addition, PSG is required to provide collateral in an amount equal to 110% of Protective’s current open case reserves on workers’ compensation claims arising under the policies. As of June 30, 2020, Protective had approximately $17,338 in deductible receivables on claims arising under PSG’s workers’ compensation policies and had exhausted all collateral provided by PSG. Protective continues to pay claims settlements under the policies without reimbursement from PSG. For the past six months, the average monthly deductible invoices have been approximately $1,085. PSG’s estimated ultimate obligation under the agreements is approximately $46,730 as of June 30, 2020 (inclusive of the $17,338 in deductible receivables noted above). At June 30, 2020, based on the Company's assessment that PSG will continue to operate as a business and that the terms of the agreement with PSG will be legally enforceable, the Company believes that it will fully collect all current and future amounts due from PSG relating to this matter. The Company included this matter in its assessment of the impact of adopting ASU 2016-13, the new guidance for measuring CECL, which is discussed in Note 1. A probability-of-default methodology was applied to projected estimated cash flows to estimate the allowance for expected credit losses for this matter. The Company considered the delay in reimbursement for claims paid as well as probability of default assumptions when analyzing the credit loss related to this matter. As of January 1, 2020, in conjunction with the adoption of ASU 2016-13, the Company recorded an allowance for expected credit losses of $15,000 ($11,850, net of tax) as a reduction to equity. In the event of a PSG bankruptcy with no recovery, the Company would incur a charge to the condensed consolidated statement of operations of $31,730 ($25,067, net of tax), which represents the estimated ultimate obligation discussed above less the CECL allowance. There was no change to the allowance during the first six months of 2020, as the ultimate obligation and projected cash flows had not materially changed since January 1, 2020 when the initial measurement of the credit risk was conducted.

Related Parties	6 Months Ended
Related Parties	Jun. 30, 2020
Related Parties [Abstract]
Related Parties	(12) Related Parties: The Company utilizes the services of an investment firm of which one director of the Company is a partial owner. This investment firm manages equity securities and fixed income portfolios held by the Company with an aggregate market value of approximately $6,946 at June 30, 2020. Total commissions and net fees earned by this investment firm and its affiliates on these portfolios were $67 and $71 for the six months ended June 30, 2020 and 2019.

Subsequent Events	6 Months Ended
Subsequent Events	Jun. 30, 2020
Subsequent Events [Abstract]
Subsequent Events	(13) Subsequent Events: On August 4, 2020, the Company's Board of Directors declared a regular quarterly dividend of $0.10 per share on the Company's Class A and Class B Common Stock. The dividend per share will be payable September 1, 2020 to shareholders of record on August 18, 2020.

Summary of Significant Accounting Policies (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) Segment	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Description of Business [Abstract]
Number of reportable segments \| Segment	1
Recently Adopted Accounting Pronouncements [Abstract]
Cumulative effect adjustment to opening balance of retained earnings, net of tax	$ (336,038)	$ (305,383)	$ (364,316)	$ (367,416)	$ (366,070)	$ (356,082)
ASU 2016-02 [Member]
Recently Adopted Accounting Pronouncements [Abstract]
Right-of-use asset	65
Lease liability	65
ASU 2016-13 [Member]
Deductible Receivables [Abstract]
Allowance for credit losses, before tax			15,000
Allowance for credit losses, net of tax			11,850
Commercial Mortgage Loans [Member]
Investments [Abstract]
Allowance for credit loss	195
Retained Earnings [Member]
Recently Adopted Accounting Pronouncements [Abstract]
Cumulative effect adjustment to opening balance of retained earnings, net of tax	$ (273,846)	$ (263,911)	(300,988)	$ (304,513)	$ (308,971)	$ (308,075)
Retained Earnings [Member] \| ASU 2016-13 [Member] \| Cumulative Effect, Period of Adoption, Adjustment [Member]
Recently Adopted Accounting Pronouncements [Abstract]
Cumulative effect adjustment to opening balance of retained earnings, before tax			15,545
Cumulative effect adjustment to opening balance of retained earnings, net of tax			$ 12,281

Investments, Summary of Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Available-for-sale Debt Securities [Abstract]
Fair value	$ 812,001	$ 795,538
Cost or amortized cost	800,519	783,047
Gross unrealized gains	29,515	16,043
Gross unrealized losses	(18,033)	(3,552)
Net unrealized gains (losses)	11,482	12,491
Agency Collateralized Mortgage Obligations [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	11,054	12,093
Cost or amortized cost	10,869	11,557
Gross unrealized gains	428	536
Gross unrealized losses	(243)	0
Net unrealized gains (losses)	185	536
Agency Mortgage-backed Securities [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	91,512	56,280
Cost or amortized cost	88,344	54,286
Gross unrealized gains	3,192	2,005
Gross unrealized losses	(24)	(11)
Net unrealized gains (losses)	3,168	1,994
Asset-backed Securities [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	99,830	106,397
Cost or amortized cost	104,961	107,028
Gross unrealized gains	597	499
Gross unrealized losses	(5,728)	(1,130)
Net unrealized gains (losses)	(5,131)	(631)
Bank Loans [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	8,121	14,568
Cost or amortized cost	9,609	14,932
Gross unrealized gains	0	106
Gross unrealized losses	(1,488)	(470)
Net unrealized gains (losses)	(1,488)	(364)
Certificates of Deposit [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	2,835	2,835
Cost or amortized cost	2,835	2,835
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Net unrealized gains (losses)	0	0
Collateralized Mortgage Obligations [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	6,749	5,616
Cost or amortized cost	7,046	5,123
Gross unrealized gains	40	493
Gross unrealized losses	(337)	0
Net unrealized gains (losses)	(297)	493
Corporate Securities [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	295,894	281,381
Cost or amortized cost	284,676	274,340
Gross unrealized gains	13,318	7,492
Gross unrealized losses	(2,100)	(451)
Net unrealized gains (losses)	11,218	7,041
Mortgage-backed Securities [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	45,502	47,463
Cost or amortized cost	53,106	46,685
Gross unrealized gains	478	1,047
Gross unrealized losses	(8,082)	(269)
Net unrealized gains (losses)	(7,604)	778
Municipal Obligations [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	38,359	36,286
Cost or amortized cost	36,967	35,749
Gross unrealized gains	1,421	684
Gross unrealized losses	(29)	(147)
Net unrealized gains (losses)	1,392	537
Non-U.S. Government Obligations [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	30,210	24,179
Cost or amortized cost	29,312	23,889
Gross unrealized gains	900	290
Gross unrealized losses	(2)	0
Net unrealized gains (losses)	898	290
U.S. Government Obligations [Member]
Available-for-sale Debt Securities [Abstract]
Fair value	181,935	208,440
Cost or amortized cost	172,794	206,623
Gross unrealized gains	9,141	2,891
Gross unrealized losses	0	(1,074)
Net unrealized gains (losses)	$ 9,141	$ 1,817

Investments, Continuous Unrealized Loss Position (Details) $ in Thousands	Jun. 30, 2020 USD ($) Secutrity	Dec. 31, 2019 USD ($) Secutrity
Available-for-sale Securities Continuous Unrealized Loss Positions [Abstract]
Number of securities, 12 months or less \| Secutrity	149	88
Number of securities, Greater than 12 months \| Secutrity	23	69
Number of securities, total \| Secutrity	172	157
Available-for-sale Securities Continuous Unrealized Loss Position, Fair Value [Abstract]
Fair value, 12 months or less	$ 130,567	$ 108,387
Fair value, Greater than 12 months	25,739	66,860
Fair value, total	156,306	175,247
Available-for-sale Securities Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Gross unrealized loss, 12 months or less	(14,097)	(2,452)
Gross unrealized loss, Greater than 12 months	(3,936)	(1,100)
Gross unrealized loss, total	(18,033)	(3,552)
Available-for-sale Securities Debt Maturities Fair Value [Abstract]
One year or less, Fair Value	96,464
Excess of one year to five years, Fair Value	319,395
Excess of five years to ten years, Fair Value	132,463
Excess of ten years, Fair Value	15,781
Total contractual maturities, Fair Value	564,103
Asset-backed securities, Fair Value	247,898
Total, Fair Value	812,001	795,538
Available-for-sale Securities Debt Maturities Amortized Cost Basis [Abstract]
One year or less, Cost or Amortized Cost	95,568
Excess of one year to five years, Cost or Amortized Cost	306,894
Excess of five years to ten years, Cost or Amortized Cost	124,972
Excess of ten years, Cost or Amortized Cost	15,805
Total contractual maturities, Cost or Amortized Cost	543,239
Asset-backed securities, Cost or Amortized Cost	257,280
Cost or amortized cost	$ 800,519	$ 783,047

Reinsurance (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Reinsurance (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Reinsurance [Abstract]
Premiums ceded to reinsurers	$ 28,216	$ 32,425	$ 56,683	$ 62,598
Losses and loss expenses ceded to reinsurers	24,394	28,859	47,930	59,648
Commissions from reinsurers	$ 7,052	$ 8,176	$ 14,580	$ 15,410

Loss and Loss Expense Reserves (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Activity in the reserve for losses and loss expenses [Roll Forward]
Reserves, gross of reinsurance recoverable, at the beginning of the year	$ 988,305	$ 865,339
Reinsurance recoverable on unpaid losses at the beginning of the year	398,305	375,935
Reserves at the beginning of the year	590,000	489,404
Provision for losses and loss expenses [Abstract]
Claims occurring during the current period	150,366	179,211
Claims occurring during prior periods	(326)	(1,656)
Total incurred	150,040	177,555
Loss and loss expense payments [Abstract]
Claims occurring during the current period	26,246	30,573
Claims occurring during prior periods	103,798	92,822
Total paid	130,044	123,395
Reserves at the end of the period	609,996	543,564
Reinsurance recoverable on unpaid losses at the end of the period	405,364	389,899
Reserves, gross of reinsurance recoverable, at the end of the period	$ 1,015,360	$ 933,463

Segment Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
Segment Information (Details) $ in Thousands	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Segment	Jun. 30, 2019 USD ($)
Segment Information [Abstract]
Number of reportable segments \| Segment			1
Summary of Segment Revenue [Abstract]
Net premiums earned	$ 97,730	$ 115,631	$ 207,389	$ 225,644
Net investment income	6,379	6,500	13,616	12,732
Net realized and unrealized gains (losses) on investments	10,615	2,889	(17,141)	8,916
Commissions and other income	1,889	1,978	3,551	4,043
Total revenues	116,613	126,998	207,415	251,335
Property and Casualty Insurance [Member]
Summary of Segment Revenue [Abstract]
Net premiums earned	97,730	115,631	207,389	225,644
Net investment income	6,379	6,500	13,616	12,732
Net realized and unrealized gains (losses) on investments	10,615	2,889	(17,141)	8,916
Commissions and other income	1,889	1,978	3,551	4,043
Total revenues	$ 116,613	$ 126,998	$ 207,415	$ 251,335

Debt (Details) - Revolving Credit Facility [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) Covenant	Aug. 09, 2018 USD ($)
Credit Agreement [Abstract]
Maximum credit limit		$ 40,000
Additional incremental loans limit		$ 35,000
Expiration date	Aug. 09, 2022
Optional period of fixed interest	1 year
Outstanding drawings	$ 20,000
Effective interest rate	1.29%
Amount remaining under credit facility	$ 20,000
Number of financial covenants \| Covenant	2
Net worth and maximum consolidated leverage ratio	0.35

Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Taxes (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Mar. 31, 2020
Taxes [Abstract]
Effective federal tax rate on consolidated loss	20.00%	21.30%	1.30%	21.60%
Valuation allowance	$ 2,388		$ 2,388		$ 4,929
Valuation allowance recorded in statement of operations	$ 130		2,176
Reduction in valuation allowance			$ (2,541)

Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fixed income securities [Abstract]
Total fixed income securities	$ 812,001	$ 795,538
Equity securities [Abstract]
Total equity securities	46,009	76,812
Recurring [Member]
Fixed income securities [Abstract]
Agency collateralized mortgage obligations	11,054	12,093
Agency mortgage-backed securities	91,512	56,280
Asset-backed securities	99,830	106,397
Bank loans	8,121	14,568
Certificates of deposit	2,835	2,835
Collateralized mortgage obligations	6,749	5,616
Corporate securities	290,889	276,087
Options embedded in convertible securities	5,005	5,294
Mortgage-backed securities	45,502	47,463
Municipal obligations	38,359	36,286
Non-U.S. government obligations	30,210	24,179
U.S. government obligations	181,935	208,440
Total fixed income securities	812,001	795,538
Equity securities [Abstract]
Consumer	10,087	16,707
Energy	1,333	3,074
Financial	22,468	31,577
Industrial	3,483	4,927
Technology	2,443	2,817
Funds (e.g., mutual funds, closed end funds, ETFs)	0	9,460
Other	6,195	8,250
Total equity securities	46,009	76,812
Short-term investments	1,000	1,000
Cash equivalents	94,039	59,780
Total	953,049	933,130
Recurring [Member] \| Level 1 [Member]
Fixed income securities [Abstract]
Agency collateralized mortgage obligations	0	0
Agency mortgage-backed securities	0	0
Asset-backed securities	0	0
Bank loans	0	0
Certificates of deposit	2,835	2,835
Collateralized mortgage obligations	0	0
Corporate securities	0	0
Options embedded in convertible securities	0	0
Mortgage-backed securities	0	0
Municipal obligations	0	0
Non-U.S. government obligations	0	0
U.S. government obligations	0	0
Total fixed income securities	2,835	2,835
Equity securities [Abstract]
Consumer	10,087	16,707
Energy	1,333	3,074
Financial	22,468	31,577
Industrial	3,483	4,927
Technology	2,443	2,817
Funds (e.g., mutual funds, closed end funds, ETFs)	0	9,460
Other	6,195	8,250
Total equity securities	46,009	76,812
Short-term investments	1,000	1,000
Cash equivalents	0	0
Total	49,844	80,647
Recurring [Member] \| Level 2 [Member]
Fixed income securities [Abstract]
Agency collateralized mortgage obligations	11,054	12,093
Agency mortgage-backed securities	91,512	56,280
Asset-backed securities	99,830	106,397
Bank loans	8,121	14,568
Certificates of deposit	0	0
Collateralized mortgage obligations	6,749	5,616
Corporate securities	290,889	276,087
Options embedded in convertible securities	5,005	5,294
Mortgage-backed securities	45,502	47,463
Municipal obligations	38,359	36,286
Non-U.S. government obligations	30,210	24,179
U.S. government obligations	181,935	208,440
Total fixed income securities	809,166	792,703
Equity securities [Abstract]
Consumer	0	0
Energy	0	0
Financial	0	0
Industrial	0	0
Technology	0	0
Funds (e.g., mutual funds, closed end funds, ETFs)	0	0
Other	0	0
Total equity securities	0	0
Short-term investments	0	0
Cash equivalents	94,039	59,780
Total	903,205	852,483
Recurring [Member] \| Level 3 [Member]
Fixed income securities [Abstract]
Agency collateralized mortgage obligations	0	0
Agency mortgage-backed securities	0	0
Asset-backed securities	0	0
Bank loans	0	0
Certificates of deposit	0	0
Collateralized mortgage obligations	0	0
Corporate securities	0	0
Options embedded in convertible securities	0	0
Mortgage-backed securities	0	0
Municipal obligations	0	0
Non-U.S. government obligations	0	0
U.S. government obligations	0	0
Total fixed income securities	0	0
Equity securities [Abstract]
Consumer	0	0
Energy	0	0
Financial	0	0
Industrial	0	0
Technology	0	0
Funds (e.g., mutual funds, closed end funds, ETFs)	0	0
Other	0	0
Total equity securities	0	0
Short-term investments	0	0
Cash equivalents	0	0
Total	$ 0	$ 0

Fair Value, Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets [Abstract]
Limited partnerships	$ 7,393	$ 23,292
Carrying Value [Member]
Assets [Abstract]
Limited partnerships	7,393	23,292
Commercial mortgage loans	11,875	11,782
Liabilities [Abstract]
Short-term borrowings	20,000	20,000
Fair Value [Member]
Assets [Abstract]
Limited partnerships	7,393	23,292
Commercial mortgage loans	12,514	12,068
Liabilities [Abstract]
Short-term borrowings	20,000	20,000
Fair Value [Member] \| Level 1 [Member]
Assets [Abstract]
Limited partnerships	0	0
Commercial mortgage loans	0	0
Liabilities [Abstract]
Short-term borrowings	0	0
Fair Value [Member] \| Level 2 [Member]
Assets [Abstract]
Limited partnerships	0	0
Commercial mortgage loans	0	0
Liabilities [Abstract]
Short-term borrowings	20,000	20,000
Fair Value [Member] \| Level 3 [Member]
Assets [Abstract]
Limited partnerships	7,393	23,292
Commercial mortgage loans	12,514	12,068
Liabilities [Abstract]
Short-term borrowings	$ 0	$ 0

Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands				6 Months Ended	12 Months Ended
	Nov. 05, 2019 USD ($) Manager	May 22, 2019 shares	Nov. 13, 2018 shares	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2018 shares
Stock Based Compensation [Abstract]
Shares distribution period from grant date				1 year
5/8/2018 [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				19,085
Vesting date				May 08, 2019
Service period, beginning				Jul. 01, 2018
Service period, ending				Jun. 30, 2019
Grant date fair value per share (in dollars per share) \| $ / shares				$ 23.05
5/7/2019 [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				29,536
Vesting date				May 07, 2020
Service period, beginning				Jul. 01, 2019
Service period, ending				Jun. 30, 2020
Grant date fair value per share (in dollars per share) \| $ / shares				$ 16.25
5/17/2019 [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				3,591
Vesting date				May 07, 2020
Service period, beginning				Jul. 01, 2019
Service period, ending				Jun. 30, 2020
Grant date fair value per share (in dollars per share) \| $ / shares				$ 16.25
5/22/2019 [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				3,541
Vesting date				May 07, 2020
Service period, beginning				Jul. 01, 2019
Service period, ending				Jun. 30, 2020
Grant date fair value per share (in dollars per share) \| $ / shares				$ 16.25
5/5/2020 [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				42,220
Vesting date				May 05, 2021
Service period, beginning				Jul. 01, 2020
Service period, ending				Jun. 30, 2021
Grant date fair value per share (in dollars per share) \| $ / shares				$ 14.21
Restricted [Member] \| John D. Nichols, Jr. [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)			85,000
Restricted [Member] \| John D. Nichols, Jr. [Member] \| Tranche One [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)			42,500
Stock based compensation expense \| $				$ 128
Restricted [Member] \| John D. Nichols, Jr. [Member] \| Tranche Two [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)			21,250
Restricted [Member] \| John D. Nichols, Jr. [Member] \| Tranche Three [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)			21,250
Restricted [Member] \| Edgecliffe-Johnson Stock Grant [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)		70,000
Stock based compensation expense \| $				135
Restricted [Member] \| Edgecliffe-Johnson Stock Grant [Member] \| Tranche One [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)		35,000
Restricted [Member] \| Edgecliffe-Johnson Stock Grant [Member] \| Tranche Two [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)		21,000
Restricted [Member] \| Edgecliffe-Johnson Stock Grant [Member] \| Tranche Three [Member]
Summary of stock Issuances [Abstract]
Number of shares vested (in shares)		14,000
Restricted [Member] \| Senior Management [Member]
Summary of stock Issuances [Abstract]
Shares granted in period \| $	$ 1,100
Stock based compensation expense \| $				$ 176
Number of members awarded equity compensation \| Manager	7
2018 LTIP Awards [Member] \| Performance Based Equity Award [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)					0
2018 VCIP Awards [Member] \| Performance Based Equity Award [Member]
Summary of stock Issuances [Abstract]
Number of shares issued (in shares)				0
Performance period				3 years
Vesting period				3 years
2019 LTIP Awards [Member] \| Performance Based Equity Award [Member]
Summary of stock Issuances [Abstract]
Stock based compensation expense \| $				$ 40
Annual vesting percentage of shares in year one				33.30%
Annual vesting percentage of shares in year two				33.30%
Annual vesting percentage of shares in year three				33.30%

Litigation, Commitments and Contingencies (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Loss Contingency [Abstract]
Estimated recoverable amount	$ 421,757	$ 432,067
ASU 2016-13 [Member]
Loss Contingency [Abstract]
Allowance for credit losses, before tax		15,000
Allowance for credit losses, net of tax		11,850
Charge incurred to operations, gross		31,730
Charge incurred to operations, net of tax		$ 25,067
Personnel Staffing Group d/b/a MVP Staffing [Member]
Loss Contingency [Abstract]
Per claim deductible amount	500
Damages sought	$ 0
Percentage of required collateral	110.00%
Deductible receivables	$ 17,338
Average monthly deductible invoices	1,085
Estimated recoverable amount	46,730
Personnel Staffing Group d/b/a MVP Staffing [Member] \| Minimum [Member]
Loss Contingency [Abstract]
Loss fund	$ 4,000

Shareholders' Equity (Details) - USD ($) $ in Thousands	6 Months Ended
Shareholders' Equity (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Jun. 30, 2019
Stock Repurchase Program [Abstract]
Stock repurchase program, shares authorized (in shares)	2,464,209
Stock repurchase program, authorized amount	$ 25,000
Stock repurchase program, authorized amount per quarter	6,250
Repurchase of common shares	$ 1,782	$ 6,487
Class B [Member]
Stock Repurchase Program [Abstract]
Repurchase of common stock (in shares)	126,764

Related Parties (Details) - Investment Firm Services [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) Director	Jun. 30, 2019 USD ($)
Related Party [Abstract]
Management fees and commissions	$ 67	$ 71
Director [Member]
Related Party [Abstract]
Number of related parties \| Director	1
Market value of equity and fixed maturity securities portfolio	$ 6,946

Subsequent Events (Details) - Subsequent Event [Member]	Aug. 04, 2020 $ / shares
Subsequent Event [Abstract]
Dividend payable, date declared	Aug. 04, 2020
Dividend payable, date to be paid	Sep. 01, 2020
Dividend payable, date of record	Aug. 18, 2020
Class A [Member]
Subsequent Event [Abstract]
Dividend payable (in dollars per share)	$ 0.10
Class B [Member]
Subsequent Event [Abstract]
Dividend payable (in dollars per share)	$ 0.10