☒
|
QUARTERLY REPORT PRUSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|
INDIANA
(State or other jurisdiction of
incorporation or organization)
|
35-0160330
(I.R.S. Employer
Identification Number)
|
|
111 Congressional Boulevard, Carmel, Indiana
(Address of principal executive offices)
|
46032
(Zip Code)
|
Unaudited Condensed Consolidated Balance Sheets
|
||||||||
(in thousands, except share data)
|
||||||||
June 30
|
December 31
|
|||||||
2018
|
2017
|
|||||||
Assets
|
||||||||
Investments:
|
||||||||
Fixed maturities
|
$
|
576,388
|
$
|
521,853
|
||||
Equity securities
|
125,407
|
201,763
|
||||||
Limited partnerships
|
65,442
|
70,806
|
||||||
Short-term and other
|
1,000
|
1,000
|
||||||
768,237
|
795,422
|
|||||||
Cash and cash equivalents
|
75,952
|
64,680
|
||||||
Restricted cash and cash equivalents
|
6,853
|
4,033
|
||||||
Accounts receivable
|
108,145
|
87,551
|
||||||
Reinsurance recoverable
|
326,346
|
318,331
|
||||||
Other assets
|
102,736
|
80,061
|
||||||
Current federal income taxes recoverable
|
1,626
|
6,938
|
||||||
$
|
1,389,895
|
$
|
1,357,016
|
|||||
Liabilities and shareholders' equity
|
||||||||
Reserves for losses and loss expenses
|
$
|
716,281
|
$
|
680,274
|
||||
Reserves for unearned premiums
|
65,535
|
53,085
|
||||||
Short-term borrowings
|
20,000
|
20,000
|
||||||
Accounts payable and other liabilities
|
178,612
|
170,488
|
||||||
Deferred federal income taxes
|
2,232
|
14,358
|
||||||
982,660
|
938,205
|
|||||||
Shareholders' equity:
|
||||||||
Common stock-no par value:
|
||||||||
Class A voting -- authorized 3,000,000 shares;
|
||||||||
outstanding -- 2018 - 2,622,809; 2017 - 2,623,109
|
112
|
112
|
||||||
Class B non-voting -- authorized 20,000,000 shares;
|
||||||||
outstanding -- 2018 - 12,379,561; 2017 - 12,423,518
|
528
|
530
|
||||||
Additional paid-in capital
|
55,745
|
55,078
|
||||||
Unrealized net gains (losses) on investments
|
(4,487
|
)
|
46,700
|
|||||
Foreign exchange adjustment
|
(720
|
)
|
(309
|
)
|
||||
Retained earnings
|
356,057
|
316,700
|
||||||
407,235
|
418,811
|
|||||||
$
|
1,389,895
|
$
|
1,357,016
|
Protective Insurance Corporation and Subsidiaries
|
||||||||||||||||
Unaudited Condensed Consolidated Statements of Operations
|
||||||||||||||||
(in thousands, except per share data)
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenues
|
||||||||||||||||
Net premiums earned
|
$
|
111,940
|
$
|
67,996
|
$
|
217,402
|
$
|
141,971
|
||||||||
Net investment income
|
5,796
|
4,716
|
10,432
|
8,408
|
||||||||||||
Commissions and other income
|
2,263
|
1,400
|
4,076
|
2,380
|
||||||||||||
Net realized gains on investments, excluding impairment losses
|
915
|
2,565
|
1,290
|
3,573
|
||||||||||||
Other-than-temporary impairment losses on investments
|
-
|
-
|
-
|
-
|
||||||||||||
Net unrealized gains (losses) on equity securities and limited partnership investments
|
(4,350
|
)
|
731
|
(9,258
|
)
|
6,017
|
||||||||||
Net realized and unrealized gains (losses) on investments
|
(3,435
|
)
|
3,296
|
(7,968
|
)
|
9,590
|
||||||||||
116,564
|
77,408
|
223,942
|
162,349
|
|||||||||||||
Expenses
|
||||||||||||||||
Losses and loss expenses incurred
|
77,488
|
71,754
|
149,787
|
120,353
|
||||||||||||
Other operating expenses
|
36,019
|
26,834
|
70,784
|
52,998
|
||||||||||||
113,507
|
98,588
|
220,571
|
173,351
|
|||||||||||||
Income (loss) before federal income tax expense (benefit)
|
3,057
|
(21,180
|
)
|
3,371
|
(11,002
|
)
|
||||||||||
Federal income tax expense (benefit)
|
570
|
(8,837
|
)
|
554
|
(5,414
|
)
|
||||||||||
Net income (loss)
|
$
|
2,487
|
$
|
(12,343
|
)
|
$
|
2,817
|
$
|
(5,588
|
)
|
||||||
Per share data:
|
||||||||||||||||
Basic and diluted earnings (loss)
|
$
|
.17
|
$
|
(.82
|
)
|
$
|
.19
|
$
|
(.37
|
)
|
||||||
Dividends paid to shareholders
|
$
|
.28
|
$
|
.27
|
$
|
.56
|
$
|
.54
|
||||||||
Reconciliation of shares outstanding:
|
||||||||||||||||
Average shares outstanding - basic
|
15,014
|
15,122
|
15,012
|
15,122
|
||||||||||||
Dilutive effect of share equivalents
|
9
|
-
|
9
|
-
|
||||||||||||
Average shares outstanding - diluted
|
15,023
|
15,122
|
15,021
|
15,122
|
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net income (loss)
|
$
|
2,487
|
$
|
(12,343
|
)
|
$
|
2,817
|
$
|
(5,588
|
)
|
||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||
Unrealized net gains (losses) on fixed income securities:
|
||||||||||||||||
Unrealized net gains (losses) arising during the period
|
(1,051
|
)
|
5,147
|
(4,050
|
)
|
11,137
|
||||||||||
Less: reclassification adjustment for net gains
|
||||||||||||||||
included in net income (loss)
|
975
|
1,667
|
1,097
|
2,322
|
||||||||||||
(2,026
|
)
|
3,480
|
(5,147
|
)
|
8,815
|
|||||||||||
Foreign currency translation adjustments
|
(188
|
)
|
388
|
(411
|
)
|
453
|
||||||||||
Other comprehensive income (loss)
|
(2,214
|
)
|
3,868
|
(5,558
|
)
|
9,268
|
||||||||||
Comprehensive income (loss)
|
$
|
273
|
$
|
(8,475
|
)
|
$
|
(2,741
|
)
|
$
|
3,680
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
||||||||
(in thousands)
|
||||||||
Six Months Ended
|
||||||||
June 30
|
||||||||
2018
|
2017
|
|||||||
|
||||||||
Operating activities
|
||||||||
Net income (loss)
|
$
|
2,817
|
$
|
(5,588
|
)
|
|||
Adjustments to reconcile net income to net cash provided by operating activities
|
21,857
|
28,752
|
||||||
Net cash provided by operating activities
|
24,674
|
23,164
|
||||||
Investing activities
|
||||||||
Purchases of fixed maturities and equity securities
|
(215,226
|
)
|
(231,601
|
)
|
||||
Purchases of limited partnership interests
|
(450
|
)
|
-
|
|||||
Distributions from limited partnerships
|
369
|
15,398
|
||||||
Proceeds from maturities
|
37,590
|
83,484
|
||||||
Proceeds from sales of fixed maturities
|
102,408
|
121,708
|
||||||
Proceeds from sales of equity securities
|
87,557
|
16,626
|
||||||
Purchase of insurance company-owned life insurance
|
(10,000
|
)
|
-
|
|||||
Purchases of property and equipment
|
(2,691
|
)
|
(3,534
|
)
|
||||
Proceeds from disposals of property and equipment
|
8
|
580
|
||||||
Net cash provided by (used in) investing activities
|
(435
|
)
|
2,661
|
|||||
Financing activities
|
||||||||
Dividends paid to shareholders
|
(8,456
|
)
|
(8,174
|
)
|
||||
Repurchase of common shares
|
(1,280
|
)
|
-
|
|||||
Net cash used in financing activities
|
(9,736
|
)
|
(8,174
|
)
|
||||
Effect of foreign exchange rates on cash and cash equivalents
|
(411
|
)
|
453
|
|||||
Increase in cash, cash equivalents and restricted cash
|
14,092
|
18,104
|
||||||
Cash, cash equivalents and restricted cash at beginning of period
|
68,713
|
62,976
|
||||||
Cash, cash equivalents and restricted cash at end of period
|
$
|
82,805
|
$
|
81,080
|
||||
|
Net
|
|||||||||||||||||||
|
Cost or
|
Gross
|
Gross
|
Unrealized
|
||||||||||||||||
|
Fair
|
Amortized
|
Unrealized
|
Unrealized
|
Gains
|
|||||||||||||||
|
Value
|
Cost
|
Gains
|
Losses
|
(Losses)
|
|||||||||||||||
June 30, 2018
1
|
||||||||||||||||||||
Fixed maturities
|
||||||||||||||||||||
Agency collateralized mortgage obligations
|
$
|
14,961
|
$
|
14,480
|
$
|
646
|
$
|
(165
|
)
|
$
|
481
|
|||||||||
Agency mortgage-backed securities
|
33,708
|
34,459
|
12
|
(763
|
)
|
(751
|
)
|
|||||||||||||
Asset-backed securities
|
51,454
|
50,994
|
689
|
(229
|
)
|
460
|
||||||||||||||
Bank loans
|
20,202
|
20,127
|
204
|
(129
|
)
|
75
|
||||||||||||||
Certificates of deposit
|
3,122
|
3,124
|
-
|
(2
|
)
|
(2
|
)
|
|||||||||||||
Collateralized mortgage obligations
|
5,135
|
4,789
|
369
|
(23
|
)
|
346
|
||||||||||||||
Corporate securities
|
212,059
|
216,496
|
716
|
(5,153
|
)
|
(4,437
|
)
|
|||||||||||||
Mortgage-backed securities
|
30,954
|
30,475
|
940
|
(461
|
)
|
479
|
||||||||||||||
Municipal obligations
|
48,327
|
48,468
|
296
|
(437
|
)
|
(141
|
)
|
|||||||||||||
Non-U.S. government obligations
|
38,602
|
39,681
|
191
|
(1,270
|
)
|
(1,079
|
)
|
|||||||||||||
U.S. government obligations
|
117,864
|
118,975
|
-
|
(1,111
|
)
|
(1,111
|
)
|
|||||||||||||
Total fixed maturities
|
$
|
576,388
|
$
|
582,068
|
$
|
4,063
|
$
|
(9,743
|
)
|
$
|
(5,680
|
)
|
|
Net
|
|||||||||||||||||||
|
Cost or
|
Gross
|
Gross
|
Unrealized
|
||||||||||||||||
|
Fair
|
Amortized
|
Unrealized
|
Unrealized
|
Gains
|
|||||||||||||||
|
Value
|
Cost
|
Gains
|
Losses
|
(Losses)
|
|||||||||||||||
December 31, 2017
1
|
||||||||||||||||||||
Fixed maturities
|
||||||||||||||||||||
Agency collateralized mortgage obligations
|
$
|
16,586
|
$
|
15,839
|
$
|
818
|
$
|
(71
|
)
|
$
|
747
|
|||||||||
Agency mortgage-backed securities
|
27,075
|
27,180
|
47
|
(152
|
)
|
(105
|
)
|
|||||||||||||
Asset-backed securities
|
43,469
|
42,861
|
749
|
(141
|
)
|
608
|
||||||||||||||
Bank loans
|
19,488
|
19,271
|
266
|
(49
|
)
|
217
|
||||||||||||||
Certificates of deposit
|
3,135
|
3,124
|
11
|
-
|
11
|
|||||||||||||||
Collateralized mortgage obligations
|
6,492
|
6,079
|
451
|
(38
|
)
|
413
|
||||||||||||||
Corporate securities
|
198,349
|
198,419
|
1,602
|
(1,672
|
)
|
(70
|
)
|
|||||||||||||
Mortgage-backed securities
|
24,204
|
23,656
|
933
|
(385
|
)
|
548
|
||||||||||||||
Municipal obligations
|
96,650
|
97,059
|
322
|
(731
|
)
|
(409
|
)
|
|||||||||||||
Non-U.S. government obligations
|
37,394
|
37,971
|
475
|
(1,052
|
)
|
(577
|
)
|
|||||||||||||
U.S. government obligations
|
49,011
|
49,558
|
-
|
(547
|
)
|
(547
|
)
|
|||||||||||||
Total fixed maturities
|
521,853
|
521,017
|
5,674
|
(4,838
|
)
|
836
|
||||||||||||||
Equity securities:
|
||||||||||||||||||||
Consumer
|
46,578
|
23,565
|
24,031
|
(1,018
|
)
|
23,013
|
||||||||||||||
Energy
|
10,278
|
6,763
|
3,602
|
(87
|
)
|
3,515
|
||||||||||||||
Financial
|
45,470
|
31,859
|
13,937
|
(326
|
)
|
13,611
|
||||||||||||||
Industrial
|
25,402
|
8,949
|
16,793
|
(340
|
)
|
16,453
|
||||||||||||||
Technology
|
13,061
|
5,768
|
7,401
|
(108
|
)
|
7,293
|
||||||||||||||
Funds (e.g. mutual funds, closed end funds, ETFs)
|
50,291
|
46,177
|
4,153
|
(39
|
)
|
4,114
|
||||||||||||||
Other
|
10,683
|
7,670
|
3,313
|
(300
|
)
|
3,013
|
||||||||||||||
Total equity securities
|
201,763
|
130,751
|
73,230
|
(2,218
|
)
|
71,012
|
||||||||||||||
|
||||||||||||||||||||
Total
|
$
|
723,616
|
$
|
651,768
|
$
|
78,904
|
$
|
(7,056
|
)
|
$
|
71,848
|
|
June 30, 2018
|
December 31, 2017
|
||||||||||||||||||||||
|
Number of Securities
|
Fair Value
|
Gross Unrealized Loss
|
Number of Securities
|
Fair Value
|
Gross Unrealized Loss
|
||||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
12 months or less
|
542
|
$
|
419,376
|
$
|
(7,862
|
)
|
459
|
$
|
313,421
|
$
|
(2,683
|
)
|
||||||||||||
Greater than 12 months
|
101
|
58,200
|
(1,881
|
)
|
112
|
75,638
|
(2,155
|
)
|
||||||||||||||||
Total fixed maturities
|
643
|
477,576
|
(9,743
|
)
|
571
|
389,059
|
(4,838
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
Equity securities
1
:
|
||||||||||||||||||||||||
12 months or less
|
-
|
-
|
-
|
65
|
46,654
|
(2,218
|
)
|
|||||||||||||||||
Greater than 12 months
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Total equity securities
|
-
|
-
|
-
|
65
|
46,654
|
(2,218
|
)
|
|||||||||||||||||
Total fixed maturity and equity securities
|
643
|
$
|
477,576
|
$
|
(9,743
|
)
|
636
|
$
|
435,713
|
$
|
(7,056
|
)
|
Fair Value
|
Cost or Amortized Cost
|
|||||||
One year or less
|
$
|
48,916
|
$
|
49,514
|
||||
Excess of one year to five years
|
303,116
|
307,337
|
||||||
Excess of five years to ten years
|
87,208
|
89,044
|
||||||
Excess of ten years
|
2,531
|
2,590
|
||||||
Contractual maturities
|
441,771
|
448,485
|
||||||
Asset-backed securities
|
134,617
|
133,583
|
||||||
Total
|
$
|
576,388
|
$
|
582,068
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June 30
|
June 30
|
||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
||||||||||||
Gross gains on available-for-sale investments sold during the period:
|
||||||||||||||||
Fixed maturities
|
$
|
3,691
|
$
|
4,804
|
$
|
6,134
|
$
|
5,692
|
||||||||
Equity securities
1
|
-
|
2,892
|
-
|
4,498
|
||||||||||||
Total gains
|
3,691
|
7,696
|
6,134
|
10,190
|
||||||||||||
|
||||||||||||||||
Gross losses on available-for-sale investments sold during the period:
|
||||||||||||||||
Fixed maturities
|
$
|
(3,088
|
)
|
(4,776
|
)
|
$
|
(5,796
|
)
|
(6,149
|
)
|
||||||
Equity securities
1
|
-
|
(355
|
)
|
-
|
(468
|
)
|
||||||||||
Total losses
|
(3,088
|
)
|
(5,131
|
)
|
(5,796
|
)
|
(6,617
|
)
|
||||||||
|
||||||||||||||||
Other-than-temporary impairments
|
-
|
-
|
-
|
-
|
||||||||||||
|
||||||||||||||||
Change in value of limited partnership investments
|
(2,842
|
)
|
731
|
(5,445
|
)
|
6,017
|
||||||||||
|
||||||||||||||||
Gains (losses) on equity securities:
|
||||||||||||||||
Realized gains on equity securities sold during the period
2
|
312
|
-
|
953
|
-
|
||||||||||||
Unrealized losses on equity securities held at the end of the period
|
(1,508
|
)
|
-
|
(3,814
|
)
|
-
|
||||||||||
Realized and unrealized losses on equity securities held at the end of the period
|
(1,196
|
)
|
-
|
(2,861
|
)
|
-
|
||||||||||
|
||||||||||||||||
Net realized and unrealized gains (losses) on investments
|
$
|
(3,435
|
)
|
$
|
3,296
|
$
|
(7,968
|
)
|
$
|
9,590
|
2018
|
2017
|
|||||||
Three months ended June 30:
|
||||||||
Premiums ceded to reinsurers
|
$
|
28,800
|
$
|
45,791
|
||||
Losses and loss expenses
|
||||||||
ceded to reinsurers
|
21,975
|
52,396
|
||||||
Commissions from reinsurers
|
6,443
|
6,387
|
||||||
Six months ended June 30:
|
||||||||
Premiums ceded to reinsurers
|
$
|
61,241
|
$
|
77,099
|
||||
Losses and loss expenses
|
||||||||
ceded to reinsurers
|
48,636
|
71,870
|
||||||
Commissions from reinsurers
|
14,323
|
13,795
|
2018
|
2017
|
|||||||
Reserves, gross of reinsurance
|
||||||||
recoverable, at the beginning of the year
|
$
|
680,274
|
$
|
576,330
|
||||
Reinsurance recoverable on unpaid losses at the beginning of the year
|
308,143
|
251,563
|
||||||
Reserves at the beginning of the year
|
372,131
|
324,767
|
||||||
Provision for losses and loss expenses:
|
||||||||
Claims occurring during the current period
|
151,462
|
103,666
|
||||||
Claims occurring during prior periods
|
(1,675
|
)
|
16,687
|
|||||
Total incurred
|
149,787
|
120,353
|
||||||
Loss and loss expense payments:
|
||||||||
Claims occurring during the current period
|
28,903
|
23,548
|
||||||
Claims occurring during prior periods
|
88,965
|
84,628
|
||||||
Total paid
|
117,868
|
108,176
|
||||||
Reserves at the end of the period
|
404,050
|
336,944
|
||||||
Reinsurance recoverable on unpaid losses at the end of the period
|
312,231
|
290,781
|
||||||
Reserves, gross of reinsurance
|
||||||||
recoverable, at the end of the period
|
$
|
716,281
|
$
|
627,725
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenues:
|
||||||||||||||||
Net premiums earned
|
$
|
111,940
|
$
|
67,996
|
$
|
217,402
|
$
|
141,971
|
||||||||
Net investment income
|
5,796
|
4,716
|
10,432
|
8,408
|
||||||||||||
Net realized and unrealized gains (losses) on investments
|
(3,435
|
)
|
3,296
|
(7,968
|
)
|
9,590
|
||||||||||
Commissions and other income
|
2,263
|
1,400
|
4,076
|
2,380
|
||||||||||||
Total revenues
|
$
|
116,564
|
$
|
77,408
|
$
|
223,942
|
$
|
162,349
|
As of June 30, 2018:
|
||||||||||||||||
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Fixed maturities:
|
||||||||||||||||
Agency collateralized mortgage obligations
|
$
|
14,961
|
$
|
-
|
$
|
14,961
|
$
|
-
|
||||||||
Agency mortgage-backed securities
|
33,708
|
-
|
33,708
|
-
|
||||||||||||
Asset-backed securities
|
51,454
|
-
|
51,454
|
-
|
||||||||||||
Bank loans
|
20,202
|
-
|
20,202
|
-
|
||||||||||||
Certificates of deposit
|
3,122
|
3,122
|
-
|
-
|
||||||||||||
Collateralized mortgage obligations
|
5,135
|
-
|
5,135
|
-
|
||||||||||||
Corporate securities
|
206,291
|
-
|
206,291
|
-
|
||||||||||||
Options embedded in convertible securities
|
5,768
|
-
|
5,768
|
-
|
||||||||||||
Mortgage-backed securities
|
30,954
|
-
|
30,954
|
-
|
||||||||||||
Municipal obligations
|
48,327
|
-
|
48,327
|
-
|
||||||||||||
Non-U.S. government obligations
|
38,602
|
-
|
38,602
|
-
|
||||||||||||
U.S. government obligations
|
117,864
|
-
|
117,864
|
-
|
||||||||||||
Total fixed maturities
|
576,388
|
3,122
|
573,266
|
-
|
||||||||||||
Equity securities:
|
||||||||||||||||
Consumer
|
25,000
|
25,000
|
-
|
-
|
||||||||||||
Energy
|
7,240
|
7,240
|
-
|
-
|
||||||||||||
Financial
|
37,243
|
37,243
|
-
|
-
|
||||||||||||
Industrial
|
13,144
|
13,144
|
-
|
-
|
||||||||||||
Technology
|
4,129
|
4,129
|
-
|
-
|
||||||||||||
Funds (e.g. mutual funds, closed end funds, ETFs)
|
27,908
|
22,873
|
5,035
|
-
|
||||||||||||
Other
|
10,743
|
10,743
|
-
|
-
|
||||||||||||
Total equity securities
|
125,407
|
120,372
|
5,035
|
-
|
||||||||||||
Short-term
|
1,000
|
1,000
|
-
|
-
|
||||||||||||
Cash equivalents
|
73,600
|
-
|
73,600
|
-
|
||||||||||||
Total
|
$
|
776,395
|
$
|
124,494
|
$
|
651,901
|
$
|
-
|
As of December 31, 2017:
|
||||||||||||||||
Description
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Fixed maturities:
|
||||||||||||||||
Agency collateralized mortgage obligations
|
$
|
16,586
|
$
|
-
|
$
|
16,586
|
$
|
-
|
||||||||
Agency mortgage-backed securities
|
27,075
|
-
|
27,075
|
-
|
||||||||||||
Asset-backed securities
|
43,469
|
-
|
43,469
|
-
|
||||||||||||
Bank loans
|
19,488
|
-
|
19,488
|
-
|
||||||||||||
Certificates of deposit
|
3,135
|
3,135
|
-
|
-
|
||||||||||||
Collateralized mortgage obligations
|
6,492
|
-
|
6,492
|
-
|
||||||||||||
Corporate securities
|
193,058
|
-
|
193,058
|
-
|
||||||||||||
Options embedded in convertible securities
|
5,291
|
-
|
5,291
|
-
|
||||||||||||
Mortgage-backed securities
|
24,204
|
-
|
24,204
|
-
|
||||||||||||
Municipal obligations
|
96,650
|
-
|
96,650
|
-
|
||||||||||||
Non-U.S. government obligations
|
37,394
|
-
|
37,394
|
-
|
||||||||||||
U.S. government obligations
|
49,011
|
-
|
49,011
|
-
|
||||||||||||
Total fixed maturities
|
521,853
|
3,135
|
518,718
|
-
|
||||||||||||
Equity securities:
|
||||||||||||||||
Consumer
|
46,578
|
46,578
|
-
|
-
|
||||||||||||
Energy
|
10,278
|
10,278
|
-
|
-
|
||||||||||||
Financial
|
45,470
|
45,470
|
-
|
-
|
||||||||||||
Industrial
|
25,402
|
25,402
|
-
|
-
|
||||||||||||
Technology
|
13,061
|
13,061
|
-
|
-
|
||||||||||||
Funds (e.g. mutual funds, closed end funds, ETFs)
|
50,291
|
45,276
|
5,015
|
-
|
||||||||||||
Other
|
10,683
|
10,683
|
-
|
-
|
||||||||||||
Total equity securities
|
201,763
|
196,748
|
5,015
|
-
|
||||||||||||
Short-term
|
1,000
|
1,000
|
-
|
-
|
||||||||||||
Cash equivalents
|
59,173
|
-
|
59,173
|
-
|
||||||||||||
Total
|
$
|
783,789
|
$
|
200,883
|
$
|
582,906
|
$
|
-
|
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.
|
2018
|
2017
|
|||||||
Beginning of period balance
|
$
|
-
|
$
|
25,218
|
||||
Total gains or losses (realized)
|
||||||||
included in income
|
-
|
406
|
||||||
Purchases
|
-
|
81
|
||||||
Settlements
|
-
|
(9,123
|
)
|
|||||
Transfers into Level 3
|
-
|
144
|
||||||
Transfers out of Level 3
|
-
|
(16,726
|
)
|
|||||
End of period balance
|
$
|
-
|
$
|
-
|
Carrying
|
Fair Value
|
|||||||||||||||||||
Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
June 30, 2018
|
||||||||||||||||||||
Assets: Limited partnerships
|
$
|
65,442
|
$
|
-
|
$
|
-
|
$
|
65,442
|
$
|
65,442
|
||||||||||
Liabilities: Short-term borrowings
|
20,000
|
-
|
20,000
|
-
|
20,000
|
|||||||||||||||
December 31, 2017
|
||||||||||||||||||||
Assets: Limited partnerships
|
70,806
|
-
|
-
|
70,806
|
70,806
|
|||||||||||||||
Liabilities: Short-term borrowings
|
20,000
|
-
|
20,000
|
-
|
20,000
|
Grant Date
|
||||||||
Grant
|
Number of Shares
|
Vesting
|
Service
|
Fair Value
|
||||
Date
|
Issued
|
Date
|
Period
|
Per Share
|
||||
5/9/2017
|
|
18,183
|
|
5/9/2018
|
|
7/1/2017 - 6/30/2018
|
|
$24.20
|
8/31/2017
|
|
1,257
|
|
5/9/2018
|
|
8/31/2017 - 6/30/2018
|
|
$21.90
|
2/9/2018
|
|
408
|
|
5/9/2018
|
|
2/9/2018 - 6/30/2018
|
|
$24.20
|
5/8/2018
|
19,085
|
5/8/2019
|
7/1/2018 - 6/30/2019
|
$23.05
|
Additional
|
|||||||||||||||||||||
Class A
|
Class B
|
Paid-in
|
|||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
|||||||||||||||||
Balance at December 31, 2017
|
2,623,109
|
|
$
|
112
|
12,423,518
|
|
$
|
530
|
$
|
55,078
|
|||||||||||
Restricted stock grants
|
-
|
|
-
|
10,128
|
|
-
|
901
|
||||||||||||||
Repurchase of common shares
|
(300
|
)
|
-
|
(54,085
|
) |
(2
|
)
|
(234
|
)
|
||||||||||||
Balance at June 30, 2018
|
2,622,809
|
$
|
112
|
12,379,561
|
$
|
528
|
$
|
55,745
|
Total equity
|
||||
Balance at December 31, 2017
|
$
|
418,811
|
||
Net income
|
2,817
|
|||
Other comprehensive loss
|
(5,558
|
)
|
||
Cash dividends paid to shareholders
|
(8,456
|
)
|
||
Restricted stock grants
|
901
|
|||
Repurchase of common shares
|
(1,280
|
)
|
||
Balance at June 30, 2018
|
$
|
407,235
|
Total equity
|
||||
Balance at December 31, 2016
|
$
|
404,345
|
||
Net income
|
(5,588
|
)
|
||
Other comprehensive income
|
9,268
|
|||
Cash dividends paid to shareholders
|
(8,174
|
)
|
||
Restricted stock grants
|
920
|
|||
Balance at June 30, 2017
|
$
|
400,771
|
Unrealized
|
||||||||||||
holding gains on
|
||||||||||||
Foreign
|
available-for-sale
|
|||||||||||
Currency
|
securities
|
Total
|
||||||||||
Beginning balance at December 31, 2017
|
$
|
(309
|
)
|
$
|
46,700
|
$
|
46,391
|
|||||
Cumulative effect of adoption of
|
||||||||||||
ASU 2016-01, net of tax
|
-
|
(46,157
|
)
|
(46,157
|
)
|
|||||||
Balance at January 1, 2018
|
(309
|
)
|
543
|
234
|
||||||||
Cumulative effect of adoption of
|
||||||||||||
ASU 2018-02
|
-
|
117
|
117
|
|||||||||
Other comprehensive loss
|
||||||||||||
before reclassifications
|
(411
|
)
|
(4,050
|
)
|
(4,461
|
)
|
||||||
Amounts reclassified from
|
||||||||||||
accumulated other
|
||||||||||||
comprehensive income (loss)
|
-
|
(1,097
|
)
|
(1,097
|
)
|
|||||||
Net current-period other
|
||||||||||||
comprehensive loss
|
(411
|
)
|
(5,147
|
)
|
(5,558
|
)
|
||||||
Ending balance at June 30, 2018
|
$
|
(720
|
)
|
$
|
(4,487
|
)
|
$
|
(5,207
|
)
|
Unrealized
|
||||||||||||
holding gains on
|
||||||||||||
Foreign
|
available-for-sale
|
|||||||||||
Currency
|
securities
|
Total
|
||||||||||
Beginning balance
|
$
|
(831
|
)
|
$
|
34,051
|
$
|
33,220
|
|||||
Other comprehensive income
|
||||||||||||
before reclassifications
|
453
|
11,137
|
11,590
|
|||||||||
Amounts reclassified from
|
||||||||||||
accumulated other
|
||||||||||||
comprehensive income (loss)
|
-
|
(2,322
|
)
|
(2,322
|
)
|
|||||||
Net current-period other
|
||||||||||||
comprehensive income
|
453
|
8,815
|
9,268
|
|||||||||
Ending balance
|
$
|
(378
|
)
|
$
|
42,866
|
$
|
42,488
|
2018
|
2017
|
Change
|
||||||||||
Gross Premiums Written
|
$
|
142,270
|
$
|
119,007
|
$
|
23,263
|
||||||
Net Premiums Written
|
114,254
|
72,707
|
41,547
|
|||||||||
Net Premiums Earned
|
111,940
|
67,996
|
43,944
|
2018
|
2017
|
Change
|
||||||||||
Gross Premiums Written
|
$
|
291,093
|
$
|
229,035
|
$
|
62,058
|
||||||
Net Premiums Written
|
227,688
|
150,237
|
77,451
|
|||||||||
Net Premiums Earned
|
217,402
|
141,971
|
75,431
|
●
|
general economic conditions, including weakness 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;
|
●
|
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;
|
●
|
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;
|
●
|
technology or network security disruptions;
|
●
|
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.
|
|
Fair Value
|
Estimated Change in Fair Value
|
||||||
|
in thousands
|
|||||||
200 basis point increase
|
$
|
542,965
|
$
|
(33,423
|
)
|
|||
100 basis point increase
|
559,677
|
(16,711
|
)
|
|||||
Current fair value
|
576,388
|
-
|
||||||
100 basis point decrease
|
592,886
|
16,498
|
||||||
200 basis point decrease
|
609,251
|
32,863
|
Total number of shares purchased
|
Average price paid per share
|
Total number of shares purchased under the program
(1)
|
Remaining shares available to be purchased under the program
(1)
|
|||||||||||||
April 1 – April 30
|
-
|
$
|
-
|
-
|
2,368,749
|
|||||||||||
May 1 – May 31
|
15,234
|
23.11
|
15,234
|
2,353,515
|
||||||||||||
June 1 – June 30
|
28,651
|
24.16
|
28,651
|
2,324,864
|
||||||||||||
Total
|
43,885
|
43,885
|
|
The United States of America, Canada, Puerto Rico, and Bermuda;
|
|
Each state, province, commonwealth, territory, and other political subdivision of the United States of America, Canada, Puerto Rico, and Bermuda;
|
|
Indiana and any state, province, commonwealth, territory, or other political subdivision in which the Executive performed any services for the Company Group at any time in the two (2) year period immediately preceding the Separation Date; and
|
|
Within one hundred (100) miles of any office or facility of the Company Group.
|
(1)
|
Any Person acquires ownership of the Class A Common Stock that, together with Class A Common Stock previously held by the acquirer, constitutes more than fifty percent (50%) of the total Fair Market Value or total voting power of the Company's stock. If any Person is considered to own more than fifty percent (50%) of the total Fair Market Value or total voting power of the Company's stock, the acquisition of additional stock by the same Person does not cause a change in ownership. An increase in the percentage of stock owned by any Person as a result of a transaction in which the Company acquires its stock in exchange for property, is treated as an acquisition of stock;
|
(2)
|
Any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person) ownership of the Company's stock possessing at least thirty percent (30%) of the total voting power of the stock;
|
(3)
|
A majority of the members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of appointment or election; or
|
(4)
|
Any Person acquires (or has acquired during the twelve (12) month period ending on a date of the most recent acquisition by that Person) assets from a corporation that have a total gross fair market value equal to at least forty percent (40%) of the total gross fair market value of all the Company's assets immediately prior to the acquisition or acquisitions. Gross fair market value means the value of the Company's assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
|
5.08
|
"
Good Reason
" means an Executive's separation from service when the following
|
(1)
|
The Separation Date occurs no later than six (6) months after initial existence of one or more of the following conditions that arise without the Executive's consent:
|
a.
|
a material diminution in the Executive's base compensation;
|
b.
|
a material diminution in the Executive's authority, duties, or responsibilities;
|
c.
|
a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive reports, including a requirement that the Executive report to an officer or employee instead of reporting directly to the Board or other governing body; or
|
d.
|
a change in the geographical location at which the Executive performs services of more than twenty-five (25) miles.
|
(2)
|
The Executive gives written notice to the Board or other governing body of the entity to which the Executive primarily provides services of the conditions described in subparagraph (1) within ninety (90) days of its initial existence, and upon receipt of the written notice, the Company has thirty (30) days to cure it.
|
5.09
|
"
Restricted Period
" means throughout the Term and for a period of twelve (12) months
|
5.10
|
"Retire/Retirement" means the Executive's discontinuation of all employment,
|
(1)
|
AIP Retirement Payment.
Executive shall receive a pro-rated share of the Executive's eligible Annual Incentive Plan (AIP) bonus applicable to the year in which the Separation Date occurs. However, if the Separation Date occurs prior to the date that Annual Incentive Plan targets for the current year are determined by the Board of Directors for all executive officers, the Executive shall receive no AIP Separation Payment for the calendar year of the Separation Date. The Executive's assigned AIP target amount for the calendar year will be used to determine the pro-rated payout of the bonus; there will be no adjustment for Company performance prior to the Separation Date. The AIP Retirement Payment will be paid in cash within thirty (30) days of the Executive's Separation Date.
|
(2)
|
Long-Term Incentive Retirement Awards
. The Executive shall not be eligible for any bonus award or payment authorized under the Baldwin & Lyons, Inc. Long-Term Incentive Plan applicable to the performance period encompassing the Separation Date. Any type of awarded but unvested bonus provided to the Executive under the Baldwin & Lyons, Inc. Long-Term Incentive Plan related to prior performance years shall continue to vest and will be payable according to the award's existing vesting schedule. Upon the death of the Executive during the vesting period, all awards will be paid to the Executive's estate.
|
(3)
|
The Company may require the Executive to sign an affidavit of Retirement, in a form acceptable to the Company, prior to the payment of any Retirement Benefits. If an Executive desires to serve in a director or advisor role within the property & casualty industry prior to the vesting of any award described in Section 5.11(2), the Executive must receive prior written approval from the Company before beginning such role (which approval the Company may, in its sole discretion, withhold) or will otherwise forfeit any such unvested award. Notwithstanding any role approved by the Company, the Executive understands that the Company may seek to recoup any Retirement Benefits paid to Executive should his/her Retirement status change.
|
(1)
|
AIP Separation Payment.
Executive shall receive a pro-rated share of the Executive's eligible Annual Incentive Plan (AIP) bonus applicable to the year in which the Separation Date occurs. However, if the Separation Date occurs prior to the date that Annual Incentive Plan targets for the current year are determined by the Board of Directors for all executive officers, the Executive shall receive no AIP Separation Payment for the calendar year of the Separation Date. The Executive's assigned AIP target amount for the calendar year will be used to determine the pro-rated payout of the bonus; there will be no adjustment for Company performance prior to the Separation Date. The AIP Separation Payment will be paid in cash according to the Separation Payment timeframe detailed in
Section 1
.
|
(2)
|
Long-Term Incentive Awards.
The Executive shall not be eligible for any bonus award or payment authorized under the Baldwin & Lyons, Inc. Long-Term Incentive Plan applicable to the performance period encompassing the Separation Date. Any type of awarded but unvested bonus provided to the Executive under the Baldwin & Lyons, Inc. Long-Term Incentive Plan related to prior performance periods shall immediately vest and be paid to Executive.
|
(3)
|
Continuation of Employee Benefits.
The Company shall pay for all costs associated with the continuation of Executive's medical, dental, and/or vision benefits under COBRA for a period of twelve (12) months, which period shall begin on the first day of the month following the Executive's Separation Date.
|
|
The United States of America, Canada, Puerto Rico, and Bermuda;
|
|
Each state, province, commonwealth, territory, and other political subdivision of the United States of America, Canada, Puerto Rico, and Bermuda;
|
|
Indiana and any state, province, commonwealth, territory, or other political subdivision in which the Executive performed any services for the Company Group at any time in the two (2) year period immediately preceding the Separation Date; and
|
|
Within one hundred (100) miles of any office or facility of the Company Group.
|
(1)
|
Any Person acquires ownership of the Class A Common Stock that, together with Class A Common Stock previously held by the acquirer, constitutes more than fifty percent (50%) of the total Fair Market Value or total voting power of the Company's stock. If any Person is considered to own more than fifty percent (50%) of the total Fair Market Value or total voting power of the Company's stock, the acquisition of additional stock by the same Person does not cause a change in ownership. An increase in the percentage of stock owned by any Person as a result of a transaction in which the Company acquires its stock in exchange for property, is treated as an acquisition of stock;
|
(2)
|
Any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person) ownership of the Company's stock possessing at least thirty percent (30%) of the total voting power of the stock;
|
(3)
|
A majority of the members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of appointment or election; or
|
(4)
|
Any Person acquires (or has acquired during the twelve (12) month period ending on a date of the most recent acquisition by that Person) assets from a corporation that have a total gross fair market value equal to at least forty percent (40%) of the total gross fair market value of all the Company's assets immediately prior to the acquisition or acquisitions. Gross fair market value means the value of the Company's assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
|
5.08
|
"
Good Reason
" means an Executive's separation from service when the following
|
(1)
|
The Separation Date occurs no later than six (6) months after initial existence of one or more of the following conditions that arise without the Executive's consent:
|
a.
|
a material diminution in the Executive's base compensation;
|
b.
|
a material diminution in the Executive's authority, duties, or responsibilities;
|
c.
|
a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive reports, including a requirement that the Executive report to an officer or employee instead of reporting directly to the Board or other governing body; or
|
d.
|
a change in the geographical location at which the Executive performs services of more than twenty-five (25) miles.
|
(2)
|
The Executive gives written notice to the Board or other governing body of the entity to which the Executive primarily provides services of the conditions described in subparagraph (1) within ninety (90) days of its initial existence, and upon receipt of the written notice, the Company has thirty (30) days to cure it.
|
5.09
|
"
Restricted Period
" means throughout the Term and for a period of twelve (12) months
|
5.10
|
"Retire/Retirement" means the Executive's discontinuation of all employment,
|
(1)
|
AIP Retirement Payment.
Executive shall receive a pro-rated share of the Executive's eligible Annual Incentive Plan (AIP) bonus applicable to the year in which the Separation Date occurs. However, if the Separation Date occurs prior to the date that Annual Incentive Plan targets for the current year are determined by the Board of Directors for all executive officers, the Executive shall receive no AIP Separation Payment for the calendar year of the Separation Date. The Executive's assigned AIP target amount for the calendar year will be used to determine the pro-rated payout of the bonus; there will be no adjustment for Company performance prior to the Separation Date. The AIP Retirement Payment will be paid in cash within thirty (30) days of the Executive's Separation Date.
|
(2)
|
Long-Term Incentive Retirement Awards
. The Executive shall not be eligible for any bonus award or payment authorized under the Baldwin & Lyons, Inc. Long-Term Incentive Plan applicable to the performance period encompassing the Separation Date. Any type of awarded but unvested bonus provided to the Executive under the Baldwin & Lyons, Inc. Long-Term Incentive Plan related to prior performance years shall continue to vest and will be payable according to the award's existing vesting schedule. Upon the death of the Executive during the vesting period, all awards will be paid to the Executive's estate.
|
(3)
|
The Company may require the Executive to sign an affidavit of Retirement, in a form acceptable to the Company, prior to the payment of any Retirement Benefits. If an Executive desires to serve in a director or advisor role within the property & casualty industry prior to the vesting of any award described in Section 5.11(2), the Executive must receive prior written approval from the Company before beginning such role (which approval the Company may, in its sole discretion, withhold) or will otherwise forfeit any such unvested award. Notwithstanding any role approved by the Company, the Executive understands that the Company may seek to recoup any Retirement Benefits paid to Executive should his/her Retirement status change.
|
(1)
|
AIP Separation Payment.
Executive shall receive a pro-rated share of the Executive's eligible Annual Incentive Plan (AIP) bonus applicable to the year in which the Separation Date occurs. However, if the Separation Date occurs prior to the date that Annual Incentive Plan targets for the current year are determined by the Board of Directors for all executive officers, the Executive shall receive no AIP Separation Payment for the calendar year of the Separation Date. The Executive's assigned AIP target amount for the calendar year will be used to determine the pro-rated payout of the bonus; there will be no adjustment for Company performance prior to the Separation Date. The AIP Separation Payment will be paid in cash according to the Separation Payment timeframe detailed in
Section 1
.
|
(2)
|
Long-Term Incentive Awards.
The Executive shall not be eligible for any bonus award or payment authorized under the Baldwin & Lyons, Inc. Long-Term Incentive Plan applicable to the performance period encompassing the Separation Date. Any type of awarded but unvested bonus provided to the Executive under the Baldwin & Lyons, Inc. Long-Term Incentive Plan related to prior performance periods shall immediately vest and be paid to Executive.
|
(3)
|
Continuation of Employee Benefits.
The Company shall pay for all costs associated with the continuation of Executive's medical, dental, and/or vision benefits under COBRA for a period of twelve (12) months, which period shall begin on the first day of the month following the Executive's Separation Date.
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|