Protective Insurance Corp (Form: 10-Q, Received: 05/06/2020 17:15:15)

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 March 31, 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 May 5, 2020:

Common Stock, No Par Value:	Class A (voting)	2,603,350
	Class B (non-voting)	11,579,546
		14,182,896

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)

	March 31 2020			December 31 2019
Assets
Investments:
Fixed income securities	$	746,856		$	795,538
Equity securities		70,320			76,812
Limited partnerships		7,981			23,292
Commercial mortgage loans		11,882			11,782
Short-term and other		1,000			1,000
		838,039			908,424

Cash and cash equivalents		89,318			67,851
Restricted cash and cash equivalents		10,813			21,037
Accounts receivable		89,510			111,762
Reinsurance recoverable		415,021			432,067
Other assets		94,009			86,306
Current federal income taxes recoverable		4,381			4,878
Deferred federal income taxes		11,004			2,035
Total Assets	$	1,552,095		$	1,634,360

Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	1,001,599		$	988,305
Reserves for unearned premiums		70,686			74,810
Reinsurance payable		47,562			65,835
Short-term borrowings		20,000			20,000
Accounts payable and other liabilities		106,865			121,094
Total Liabilities		1,246,712			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 - 11,579,546; 2019 - 11,675,956		495			499
Additional paid-in capital		53,045			53,349
Accumulated other comprehensive income (loss)		(12,179	)		9,369
Retained earnings		263,911			300,988
Total Shareholders' Equity		305,383			364,316
Total Liabilities and Shareholders' Equity	$	1,552,095		$	1,634,360

See notes to condensed consolidated financial statements.

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Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended March 31
	2020			2019
Revenues
Net premiums earned	$	109,659		$	110,013
Net investment income		7,236			6,232
Commissions and other income		1,663			2,064
Net realized losses on investments, excluding impairment losses		(4,787	)		(39	)
Impairment losses on investments		(40	)		(260	)
Net unrealized gains (losses) on equity securities and limited partnership investments		(22,929	)		6,327
Net realized and unrealized gains (losses) on investments		(27,756	)		6,028
		90,802			124,337

Expenses
Losses and loss expenses incurred		81,831			87,122
Other operating expenses		34,110			33,701
		115,941			120,823
Income (loss) before federal income tax expense (benefit)		(25,139	)		3,514
Federal income tax expense (benefit)		(2,983	)		766
Net income (loss)	$	(22,156	)	$	2,748

Per share data:
Basic and diluted earnings (loss)	$	(1.56	)	$	.18

Reconciliation of shares outstanding:
Average shares outstanding - basic		14,169			14,848
Dilutive effect of share equivalents		–			30
Average shares outstanding - diluted		14,169			14,878

See notes to condensed consolidated financial statements.

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Protective Insurance Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended March 31
	2020			2019
Net income (loss)	$	(22,156	)	$	2,748

Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on fixed income securities		(20,861	)		8,456

Foreign currency translation adjustments		(687	)		307

Other comprehensive income (loss)		(21,548	)		8,763

Comprehensive income (loss)	$	(43,704	)	$	11,511

See notes to condensed consolidated financial statements.

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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		–		–		–			–			–			–			(22,156	)		(22,156	)
Foreign currency translation adjustment, net of tax		–		–		–			–			–			(687	)		–			(687	)
Change in unrealized gain (loss) on investments, net of tax		–		–		–			–			–			(20,861	)		–			(20,861	)
Common stock dividends		–		–		–			–			–			–			(1,426	)		(1,426	)
Repurchase of common stock		–		–		(127	)		(5	)		(563	)		–			(1,214	)		(1,782	)
Restricted stock grants		–		–		31			1			259			–			–			260
Balance at March 31, 2020		2,603	$	111		11,580		$	495		$	53,045		$	(12,179	)	$	263,911		$	305,383

	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		–		–		–			–			–			–			2,748			2,748
Foreign currency translation adjustment, net of tax		–		–		–			–			–			307			–			307
Change in unrealized gain (loss) on investments, net of tax		–		–		–			–			–			8,456			–			8,456
Common stock dividends		–		–		–			–			–			–			(1,493	)		(1,493	)
Repurchase of common stock		–		–		(25	)		(1	)		(108	)		–			(359	)		(468	)
Restricted stock grants		–		–		20			1			437			–			–			438
Balance at March 31, 2019		2,615	$	112		12,249		$	522		$	55,049		$	1,416		$	308,971		$	366,070

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)

	Three Months Ended March 31
	2020			2019
Operating activities
Net income (loss)	$	(22,156	)	$	2,748
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities		20,844			8,657
Net cash provided by (used in) operating activities		(1,312	)		11,405

Investing activities
Purchases of fixed income and equity securities		(82,641	)		(140,645	)
Distributions from limited partnerships		14,636			17,214
Proceeds from maturities		31,088			16,776
Proceeds from sales of fixed income securities		48,552			52,199
Proceeds from sales of equity securities		5,480			9,169
Purchase of commercial mortgage loans		(368	)		(1,172	)
Proceeds from commercial mortgage loans		72			–
Purchases of property and equipment		(369	)		(797	)
Net cash provided by (used in) investing activities		16,450			(47,256	)

Financing activities
Dividends paid to shareholders		(1,426	)		(1,493	)
Repurchase of common shares		(1,782	)		(468	)
Net cash used in financing activities		(3,208	)		(1,961	)

Effect of foreign exchange rates on cash and cash equivalents		(687	)		307

Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents		11,243			(37,505	)
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	$	100,131		$	133,306

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 March 31, 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 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 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 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 March 31, 2020.

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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: 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 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 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 March 31, 2020, each of approximately $94, 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.

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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.

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(2) Investments:

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

	Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gains (Losses)
March 31, 2020
Fixed income securities
Agency collateralized mortgage obligations	$	10,460	$	11,016	$	390	$	(946	)	$	(556	)
Agency mortgage-backed securities		58,619		55,675		2,950		(6	)		2,944
Asset-backed securities		93,369		107,774		237		(14,642	)		(14,405	)
Bank loans		10,187		12,455		–		(2,268	)		(2,268	)
Certificates of deposit		2,835		2,835		–		–			–
Collateralized mortgage obligations		4,076		4,327		19		(270	)		(251	)
Corporate securities		262,160		263,356		4,682		(5,878	)		(1,196	)
Mortgage-backed securities		47,993		53,697		74		(5,778	)		(5,704	)
Municipal obligations		39,132		38,474		916		(258	)		658
Non-U.S. government obligations		28,842		27,992		850		–			850
U.S. government obligations		189,183		179,850		9,333		–			9,333
Total fixed income securities	$	746,856	$	757,451	$	19,451	$	(30,046	)	$	(10,595	)

	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 March 31, 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.

	March 31, 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		270	$	225,745	$	(25,029	)		88	$	108,387	$	(2,452	)
Greater than 12 months		20		20,410		(5,017	)		69		66,860		(1,100	)
Total fixed income securities		290	$	246,155	$	(30,046	)		157	$	175,247	$	(3,552	)

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The fair value and the cost or amortized costs of fixed income investments at March 31, 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	$	97,469	$	96,889
Excess of one year to five years		293,569		289,041
Excess of five years to ten years		132,550		130,161
Excess of ten years		12,828		13,198
Contractual maturities		536,416		529,289
Asset-backed securities		210,440		228,162
Total	$	746,856	$	757,451

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 March 31
	2020			2019

Gross gains on available-for-sale fixed income securities during the period	$	2,652		$	3,171
Gross losses on available-for-sale fixed income securities during the period		(4,741	)		(3,527	)

Impairment losses on investments		(40	)		(260	)

Change in value of limited partnership investments		(676	)		408

Gains (losses) on equity securities:
Realized gains (losses) on equity securities sold during the period		(2,698	)		317
Unrealized gains (losses) on equity securities held at the end of the period		(22,253	)		5,919
Realized and unrealized gains (losses) on equity securities during the period		(24,951	)		6,236

Net realized and unrealized gains (losses) on investments	$	(27,756	)	$	6,028

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. As of March 31, 2020, the Company intended to sell one security in an unrealized loss position and, in accordance with the new guidance, recorded $40 of a write down to earnings. The Company reviewed its remaining fixed income securities in an unrealized loss position as of March 31, 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 securities under the new guidance in the first quarter of 2020.

Shareholders' equity at March 31, 2020 included approximately $4,453, net of federal income tax expense, of reported earnings that remain undistributed by limited partnerships.

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(3) Reinsurance:

The following table summarizes the Company's transactions with reinsurers for the three months ended March 31, 2020 and 2019 comparative periods.

	2020		2019
Three months ended March 31:
Premiums ceded to reinsurers	$	28,467	$	30,173
Losses and loss expenses ceded to reinsurers		23,536		30,789
Commissions from reinsurers		7,528		7,233

(4) Loss and Loss Expense Reserves:

Activity in the reserves for losses and loss expenses for the three months ended March 31, 2020 and 2019 is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.

	Three Months Ended
	March 31
	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		81,839			88,180
Claims occurring during prior periods		(8	)		(1,058	)
Total incurred		81,831			87,122

Loss and loss expense payments:
Claims occurring during the current period		8,169			8,708
Claims occurring during prior periods		61,812			56,747
Total paid		69,981			65,455
Reserves at the end of the period		601,850			511,071

Reinsurance recoverable on unpaid losses at the end of the period		399,749			383,150
Reserves, gross of reinsurance recoverable, at the end of the period	$	1,001,599		$	894,221

The $8 prior accident year favorable development during the three months ended March 31, 2020 was primarily due to favorable loss development in independent contractor coverages. This savings compares to a prior accident year savings of $1,058 for the three months ended March 31, 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.

(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.

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The following table summarizes segment revenues for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31
	2020			2019
Revenues:
Net premiums earned	$	109,659		$	110,013
Net investment income		7,236			6,232
Net realized and unrealized gains (losses) on investments		(27,756	)		6,028
Commissions and other income		1,663			2,064
Total revenues	$	90,802		$	124,337

(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 March 31, 2020. At March 31, 2020, the effective interest rate was 2.03%, 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 March 31, 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 loss for the three months ended March 31, 2020 was 11.9% compared to 21.8% on consolidated income for the three months ended March 31, 2019. The pre-tax loss for the three months ended March 31, 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 March 31, 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 has concluded that a valuation allowance is necessary for its deferred tax assets not supported by either carryback availability or future reversals of existing taxable temporary differences and recorded a valuation allowance of $4,929 for the three months ended March 31, 2020, of which $2,306 was recorded in the condensed consolidated statement of operations and the balance was recorded in shareholders' equity within accumulated other comprehensive income (loss). The Company recognized this allowance entirely in the first quarter of 2020 as it relates to realized and unrealized capital losses during the quarter that are treated as a discrete item.

As of March 31, 2020, the Company's calendar years 2018, 2017 and 2016 remain subject to examination by the Internal Revenue Service.

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(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 March 31, 2020:

Description	Total		Level 1		Level 2		Level 3
Fixed income securities:
Agency collateralized mortgage obligations	$	10,460	$	–	$	10,460	$	–
Agency mortgage-backed securities		58,619		–		58,619		–
Asset-backed securities		93,369		–		93,369		–
Bank loans		10,187		–		10,187		–
Certificates of deposit		2,835		2,835		–		–
Collateralized mortgage obligations		4,076		–		4,076		–
Corporate securities		259,528		–		259,528		–
Options embedded in convertible securities		2,632		–		2,632		–
Mortgage-backed securities		47,993		–		47,993		–
Municipal obligations		39,132		–		39,132		–
Non-U.S. government obligations		28,842		–		28,842		–
U.S. government obligations		189,183		–		189,183		–
Total fixed income securities		746,856		2,835		744,021		–
Equity securities:
Consumer		11,880		11,880		–		–
Energy		1,508		1,508		–		–
Financial		22,092		22,092		–		–
Industrial		3,707		3,707		–		–
Technology		2,963		2,963		–		–
Funds (e.g., mutual funds, closed end funds, ETFs)		21,837		21,837		–		–
Other		6,333		6,333		–		–
Total equity securities		70,320		70,320		–		–
Short-term investments		1,000		1,000		–		–
Cash equivalents		69,527		–		69,527		–
Total	$	887,703	$	74,155	$	813,548	$	–

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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 March 31, 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 three months ended March 31, 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.

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:

- 15 -

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 March 31, 2020 and December 31, 2019 is as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
March 31, 2020
Assets:
Limited partnerships	$	7,981	$	–	$	–	$	7,981	$	7,981
Commercial mortgage loans		11,882		–		–		12,492		12,492
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 will vest and be 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 will also vest and be distributed on May 7, 2020. The table below provides detail of the restricted stock issuances to directors for 2019 and 2020:

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

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

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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 March 31, 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 $14 of expense during the three months ended March 31, 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 $35 of expense during the three months ended March 31, 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 $39 of expense during the three months ended March 31, 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 $88 of expense during the three months ended March 31, 2020 related to this grant.

(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.

- 17 -

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. 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 March 31, 2020, Protective had approximately $14,680 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 $1,300. PSG’s estimated ultimate obligation under the agreements is approximately $44,600 as of March 31, 2020 (inclusive of the $14,680 in deductible receivables noted above). At March 31, 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). There was no change to the allowance during the first quarter 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.

(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 three months ended March 31, 2020, the Company paid $1,782 to repurchase 126,764 shares of Class B Common Stock under the share repurchase program.

- 18 -

The following table illustrates changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 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		(687	)		(20,256	)		(20,943	)
Amounts reclassified from accumulated other comprehensive income (loss)		–			(605	)		(605	)

Net current-period other comprehensive income (loss)		(687	)		(20,861	)		(21,548	)

Ending balance at March 31, 2020	$	(1,181	)	$	(10,998	)	$	(12,179	)

The following table illustrates changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 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 loss before reclassifications		307			7,671			7,978
Amounts reclassified from accumulated other comprehensive income (loss)		–			785			785

Net current-period other comprehensive income (loss)		307			8,456			8,763

Ending balance at March 31, 2019	$	(832	)	$	2,248		$	1,416

(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 $6,698 at March 31, 2020. Total commissions and net fees earned by this investment firm and its affiliates on these portfolios were $37 and $34 for the three months ended March 31, 2020 and 2019.

(13) Subsequent Events:

On May 5, 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 June 2, 2020 to shareholders of record on May 19, 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.

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 quarter 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. As of March 31, 2020, we intended to sell one security in an unrealized loss position and, in accordance with the new guidance, recorded a write down to earnings of less than $0.1 million. We reviewed our remaining fixed income securities in an unrealized loss position as of March 31, 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 quarter of 2020.

COVID-19 Impacts

Beginning in March 2020, the global pandemic associated with COVID-19 and related economic conditions began to impact the global economy and our results of operations. While we did not see a material impact on our underwriting income (loss), as defined below, during the three months ended March 31, 2020, we did incur net realized and unrealized losses on investments of $27.8 million during the period, primarily driven by the impact of changes in fair value on our equity investments as a result of the recent disruption in global financial markets. 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 and share repurchases and reductions to discretionary spending in response to COVID-19. For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company, see "Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q.

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Liquidity and Capital Resources

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 the 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 three months ended March 31, 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. Our fixed income investment portfolio continues to emphasize shorter-duration instruments. If there was a hypothetical increase in interest rates of 100 basis points, the price of our fixed income portfolio, including cash, at March 31, 2020 would be expected to fall by approximately 2.5%. 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 6.9 years at both March 31, 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 market, 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.

Net cash used in operating activities was $1.3 million during the three months ended March 31, 2020 compared to net cash flows from operations of $11.4 million for the three months ended March 31, 2019. The decrease in operating cash flows was primarily related to lower premium volume as well as the timing of payments required under our reinsurance treaties, partially offset by higher investment income from our fixed income securities during the three months ended March 31, 2020 compared to the same period in 2019.

Net cash provided by investing activities was $16.5 million for the three months ended March 31, 2020 compared to cash used in investing activities of $47.3 million for the three months ended March 31, 2019. The $63.8 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 $2.6 million less in limited partnership distributions, during the three months ended March 31, 2020 when compared to the same period in 2019.

Net cash used in financing activities for the three months ended March 31, 2020 consisted of regular cash dividend payments to shareholders of $1.4 million ($0.10 per share) and $1.8 million to repurchase shares of our Class B Common Stock. Financing activities for the three months ended March 31, 2019 consisted of regular cash dividend payments to shareholders of $1.5 million ($0.10 per share) and $0.5 million to repurchase shares of our Class A and B Common Stock.

Our assets at March 31, 2020 included $69.5 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 $97.5 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, 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.

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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 March 31, 2020. At March 31, 2020, the effective interest rate was 2.03% 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 March 31, 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 first quarter of 2020 equaled approximately 130% 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 March 31, 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 March 31, 2020, $61.9 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 $140.4 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 $14.7 million at March 31, 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 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). 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. 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
	March 31
(dollars in thousands)	2020			2019
Income (loss) before federal income tax expense (benefit)	$	(25,139	)	$	3,514
Less: Net realized and unrealized gains (losses) on investments		(27,756	)		6,028
Less: Net investment income		7,236			6,232
Underwriting loss	$	(4,619	)	$	(8,746	)


Ratios
Losses and loss expenses incurred	$	81,831		$	87,122
Net premiums earned		109,659			110,013
Loss ratio		74.6	%		79.2	%

Other operating expenses	$	34,110		$	33,701
Less: Commissions and other income		1,663			2,064
Other operating expenses, less commissions and other income		32,447			31,637
Net premiums earned		109,659			110,013
Expense ratio		29.6	%		28.8	%

Combined ratio		104.2	%		108.0	%

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Results of Operations

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

	2020			2019			Change			% Change
Gross premiums written	$	134,006		$	148,893		$	(14,887	)		(10.0	)%
Ceded premiums written		(24,772	)		(33,571	)		8,799			(26.2	)%
Net premiums written	$	109,234		$	115,322		$	(6,088	)		(5.3	)%

Net premiums earned	$	109,659		$	110,013		$	(354	)		(0.3	)%
Net investment income		7,236			6,232			1,004			16.1	%
Commissions and other income		1,663			2,064			(401	)		(19.4	)%
Net realized and unrealized gains (losses) on investments		(27,756	)		6,028			(33,784	)		(560.5	)%
Total revenue		90,802			124,337
Losses and loss expenses incurred		81,831			87,122			(5,291	)		(6.1	)%
Other operating expenses		34,110			33,701			409			1.2	%
Total expenses		115,941			120,823
Income (loss) before federal income tax expense (benefit)		(25,139	)		3,514			(28,653	)
Federal income tax expense (benefit)		(2,983	)		766			(3,749	)
Net income (loss)	$	(22,156	)	$	2,748		$	(24,904	)

Gross premiums written during the first quarter of 2020 decreased $14.9 million (10.0%), while net premiums earned decreased $0.4 million (0.3%), as compared to the first quarter of 2019. The lower net premiums earned in the first quarter of 2020 were primarily the result of declines in premiums associated with lower retention rates as we continue to take actions to improve profitability, including rate increases and non-renewal of certain risks, 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 18.5% of gross premiums written for the first quarter of 2020 compared to 22.5% in the first quarter 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 first quarter of 2020 decreased $5.3 million (6.1%) compared to the first quarter of 2019, resulting in a loss ratio of 74.6% during the first quarter of 2020 compared to a loss ratio of 79.2% during the first 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 first quarter of 2020 reflected results of our underwriting actions, including non-renewal of unprofitable business as well as significant rate increases in commercial automobile.

Net investment income for the first quarter of 2020 increased 16.1% to $7.2 million compared to $6.2 million for the first quarter of 2019. The increase reflected an increase in average funds invested compared to the first quarter of 2019, as well as the continued reallocation from equity investments in limited partnerships and cash and cash equivalent investments into short-duration, high-quality bonds.

Net realized and unrealized losses on investments of $27.8 million during the first quarter of 2020 were primarily driven by $22.3 million in unrealized losses on equity securities, which were largely attributable to disruptions in the financial markets related to COVID-19, $4.8 million in net realized losses on sales of securities, excluding impairment losses, and a $0.7 million decrease in the value of our limited partnership investments. Comparative first quarter 2019 net realized and unrealized gains on investments of $6.0 million were primarily driven by $6.0 million in unrealized gains on equity securities and a $0.4 million increase in the value of our limited partnership investments, 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 first quarter of 2020 increased $0.4 million, or 1.2%, to $34.1 million compared to the first quarter of 2019. The increase was driven primarily by higher commission expenses as a result of the mix of premium written during the first quarter of 2020 partially offset by lower salary and benefit expenses during the period. The expense ratio was 29.6% during the first quarter of 2020 compared to 28.8% for the first quarter of 2019. The increase in the expense ratio was primarily related to the higher commission expenses noted above as well as the decrease in net premiums earned during the period.

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Federal income tax benefit was $3.0 million for the first quarter of 2020 compared to federal income tax expense of $0.8 million for the first quarter of 2019. The effective tax rate for the first quarter of 2020 was an 11.9% tax benefit compared to a 21.8% tax expense in the first quarter of 2019. The pre-tax loss for the three months ended March 31, 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 March 31, 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 have concluded that a valuation allowance is necessary for our deferred tax assets not supported by either carryback availability or future reversals of existing taxable temporary differences and recorded a valuation allowance of $4.9 million for the three months ended March 31, 2020, of which $2.3 million was recorded in the condensed consolidated statement of operations and the balance was recorded in shareholders' equity within accumulated other comprehensive income (loss). We recognized this allowance entirely in the first quarter of 2020 as it relates to realized and unrealized capital losses during the quarter that are treated as a discrete item. 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 $24.9 million to a loss of $22.2 million during the first quarter of 2020 compared to net income of $2.7 million during the first quarter 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.

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.

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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 and in Part II, Item 1A of this Quarterly Report on Form 10-Q and 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 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;

●

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;

●

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

●

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.

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 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 of this Quarterly Report on Form 10-Q.

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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 March 31, 2020, amounts due from reinsurers on paid and unpaid losses were estimated to total approximately $400 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 March 31, 2020 to selected hypothetical changes in interest rates (dollars in thousands).

	Fair Value		Estimated Change in Fair Value
200 basis point increase	$	707,311	$	(39,545	)
100 basis point increase		727,083		(19,773	)
Current fair value		746,856		–
100 basis point decrease		766,629		19,773
200 basis point decrease		786,401		39,545

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 March 31, 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 other than as described below.

The following risk factor has been added:

The impact of COVID-19 and related risks could 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. 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 may negatively impact our premium volumes. We did not experience a material effect in the first quarter of 2020, but the impact could be more significant in the second quarter of 2020 based on changes in the operations of our insureds including, but not limited to, the reduction in hours worked by insureds with workers' compensation coverages as well as the reduction in miles driven by commercial automobile insureds, which are the basis of premiums we receive. 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 not seen a material impact on our loss and loss expenses incurred in the first quarter of 2020, but 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.

●

Investments. The disruption in the 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 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 disruptions in global financial markets due to the continuing impact of COVID-19 could result in additional 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.

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●

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 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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

	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⁾
January 1 – January 31		29,990	$	16.05		29,990		1,472,503
February 1 – February 29		9,200		14.87		9,200		1,463,303
March 1 – March 31		87,574		13.30		87,574		1,375,729
Total		126,764				126,764

⁽¹⁾

ITEM 5. OTHER INFORMATION

On May 5, 2020, the Board of Directors (the “Board”) of Protective Insurance Corporation (the “Company”) approved a form of indemnification agreement (the “Indemnification Agreement”) between the Company and the individuals who serve or may serve from time to time as directors of the Company (each such person, an “Indemnitee”). Under the Indemnification Agreement, the Company agrees to indemnify the Indemnitees against certain liabilities, including those arising out of, relating to, or in connection with the fact that Indemnitee is or was a director or member of any committee of the Board. The Indemnification Agreement also provides for the advancement of expenses relating to the indemnification obligations. On May 5, 2020, the Company entered into such Indemnification Agreements with each of its directors.

The foregoing summary of the Indemnification Agreement is qualified by reference to the full text of the Indemnification Agreement, a copy of which is filed herewith as Exhibit 10.2 and incorporated herein by reference.

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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 effective April 14, 2020, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on April 20, 2020.

3.3		Code of By-Laws of Protective Insurance Corporation, as amended effective May 5, 2020, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 6, 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 March 31, 2020

10.2		Form of Indemnification Agreement, by and between Protective Insurance Corporation and members of its Board of Directors, dated as of May 5, 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 March 31, 2020, formatted in 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.

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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 May 6, 2020

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

Date May 6, 2020

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

AMENDMENT 1

THIS AMENDMENT to the Employment Agreement (“Agreement”), is entered into by and between Jeremy D. Edgecliffe-Johnson (“Executive”) and Protective Insurance Corporation (“Company”), effective March 31, 2020 (“Effective Date”). Executive and Company are sometimes referred herein as the “Parties.”

WHEREAS, Paragraph 5(b) of the Agreement provides that Executive shall be eligible for equity-based and other long-term incentive awards under the Company’s Long-Term Incentive Plan (“LTIP”) with a target annual value of at least $900,000;

WHEREAS, as of the date of this Amendment, the COVID-19 pandemic’s impact on the United States, the insurance industry, and the Company is yet to be determined;

WHEREAS, Executive has consulted with the Company’s Compensation and Human Capital Committee and the Committee has determined that no LTIP award opportunity will be provided to Executive for 2020;

WHEREAS, the Parties agree that the Agreement between the Parties effective May 22, 2019 shall remain in full force an effect except as expressly altered by this Amendment;

NOW, THEREFORE, in consideration of the Company’s continued employment of the Executive pursuant to this Agreement, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive and the Company (the “parties”) hereby agree as follows:

1.	Paragraph 5(b) of the Agreement is hereby deleted and replaced with the following:

(a)

During the Term, the Executive shall be eligible for equity-based and other long-term incentive awards under the Company's Long-Term Incentive Plan, as amended from time to time (the “LTIP”), with a target annual value of at least $900,000 (the "Target LTIP"); notwithstanding the foregoing, the Executive’s Target LTIP for 2019 will be $525,204 and the Executive’s Target LTIP for 2020 will be $0. The resulting payout of any LTIP award will be calculated based upon a combination of the Company's achievement of certain Company performance targets, as set annually by the Board and/or Compensation and Human Capital Committee, and the Compensation and Human Capital Committee’s evaluation of the Executive's individual performance. LTIP awards shall otherwise be subject to the terms of the LTIP and any applicable award agreements.

2.	Upon an applicable separation effective prior to December 31, 2020, the cash lump sum amount provided for in Paragraph 8(f)(a) shall include an additional $900,000.

IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.

Executive Protective Insurance Corporation

By: By:

Printed: Title:

Dated: __________________ Dated: __________________

FORM OF INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated as of [●], 2020 (this “Agreement”), is entered into between Protective Insurance Corporation, an Indiana corporation (the “Company”), and [•] (“Indemnitee”).

WHEREAS, it is essential to the Company to retain as directors the most capable persons available;

WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in today’s environment;

WHEREAS, the Amended and Restated Articles of Incorporation of the Company (the “Articles of Incorporation”) require the Company, to the fullest extent permitted by Indiana law, to indemnify, and advance expenses to, its directors whenever any such director is made a party or threatened to be made a party in any action, suit or proceeding by reason of his service as such with the Company;

WHEREAS, the Code of By-Laws of the Company (the “By-Laws”) requires the Company to indemnify and permits the Company to advance expenses to its directors, in each case subject to the terms and conditions provided therein;

WHEREAS, the Indiana Business Corporation Law expressly provides that the indemnification provisions set forth therein are not exclusive, and thereby contemplates that contracts may be entered into between the Company and directors of the Company with respect to indemnification;

WHEREAS, the Indemnitee serves as a director on the board of directors of the Company (the “Board of Directors”) and may be serving as a member of the Special Committee of the Board of Directors formed on April 24, 2020 (the “Special Committee”), in part in reliance on the Articles of Incorporation and the By-Laws;

WHEREAS, uncertainties as to the availability of indemnification created by recent court decisions may increase the risk that the Company will be unable to retain as directors, or members of the Special Committee, the most capable persons available;

WHEREAS, the Board of Directors has determined that enhancing the ability of the Company to retain directors, including the members of the Special Committee, is in the best interests of the Company and its shareholders, and that the Company therefore should seek to assure such persons that indemnification and insurance coverage will be available in the future; and

WHEREAS, in recognition of Indemnitee’s need for protection against personal liability in order to enhance Indemnitee’s service as a director, including as a member of the Special Committee (if applicable), and to take actions as a member of the Board of Directors arising out of, relating to, or in connection with the fact that Indemnitee is or was (or agreed to serve as) a director, member of any committee of the Board of Directors, agent or fiduciary of the Company or any subsidiary of the Company, including as a member of the Special Committee (if applicable) (including taking any action recommended by the Special Committee (including voting to approve or not approve any matter before the Board of Directors in a manner consistent with the recommendation of the Special Committee) and omitting to take any actions within the scope of responsibility of the Special Committee for which the recommendation of the Special Committee has not been provided), in an effective manner and with Indemnitee’s reliance on the Articles of Incorporation and the By-Laws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by the Articles of Incorporation and the By-Laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Articles of Incorporation and/or By-Laws or any change in the composition of the Board of Directors or acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and for the continued coverage of Indemnitee under the directors’ and officers’ liability insurance policy of the Company.

NOW, THEREFORE, in consideration of the premises and of Indemnitee’s agreement to serve or continue to serve the Company as a director, including as a member of the Special Committee (if applicable), directly or, at its request, director of another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

(a)	Affiliate: shall have the meaning set forth in Rule 12b-2 under the Exchange Act.

(b)

Change in Control: shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (A) the Shapiro Group, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or (C) a corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of shares of common stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company’s then outstanding Voting Securities, (ii) the Shapiro Group is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 45% or more of the total voting power represented by the Company’s then outstanding Voting Securities, (iii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director whose election by the Board of Directors or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iv) the shareholders of the Company approve a merger, consolidation, acquisition or other fundamental transaction involving the Company or any of its Affiliates with any other entity other than any such transaction that would result in the Voting Securities of the Company outstanding immediately prior thereto (less any such Voting Securities of the Company beneficially owned, directly or indirectly, by any person that also beneficially owns, directly or indirectly, more than 5% of the Voting Securities of the other party to such transaction) continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity or its ultimate parent entity) over 50% of the total voting power represented by the Voting Securities of the Company or such surviving entity (or its ultimate parent entity) outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company’s assets.

(c)

Claim: means any threatened, asserted, pending or completed action, suit or proceeding, including a request to waive or toll a statute of limitations, whether civil, criminal, regulatory, administrative, investigative or any other action, suit, or proceeding of any kind whatsoever, whether formal or informal, including any arbitration, mediation or other alternative dispute resolution mechanism, or any appeal of any kind thereof, or any inquiry or investigation, whether instituted by (or in the right of) the Company, any subsidiary of the Company or any governmental agency or any other person or entity, in which Indemnitee was, is, may be or will be involved as a party, witness or otherwise.

(d)	ERISA: means the Employee Retirement Income Security Act of 1974, as amended.

(e)	Exchange Act: means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(f)

Expenses: means attorneys’ fees and all other direct or indirect costs, expenses and obligations, including judgments, fines, penalties, interest, appeal bonds, amounts paid in settlement with the approval of the Company (which approval shall not be unreasonably delayed, withheld or conditioned), and counsel fees and disbursements (including, without limitation, experts’ fees, court costs, retainers, appeal bond premiums, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, prosecuting, defending, settling, arbitrating, mediating, being a witness in or participating in (including on appeal), or preparing to investigate, prosecute, defend, settle, arbitrate, mediate, be a witness in or participate in, any Claim relating to any Indemnifiable Event, and shall include, without limitation, all attorneys’ fees and all other expenses incurred by or on behalf of an Indemnitee in connection with preparing and submitting any requests or statements for indemnification, advancement or any other right provided by this Agreement (including, without limitation, such fees or expenses incurred in connection with legal proceedings contemplated by Section 2(d) hereof).

(g)

Indemnifiable Amounts: means any and all liabilities, Expenses, damages, judgments, fines, penalties, ERISA excise taxes and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such liabilities, Expenses, damages, judgments, fines, penalties, ERISA excise taxes or amounts paid in settlement) arising out of or resulting from any Claim relating to an Indemnifiable Event. To the fullest extent permitted by law, Indemnifiable Amounts shall include any punitive, special or exemplary damages, and the multiple portion of a multiplied damages award.

(h)

Indemnifiable Event: means any event or occurrence, whether occurring before, on or after the date of this Agreement, arising out of, relating to, or in connection with the fact that Indemnitee is or was (or agreed to serve as) a director, member of any committee of the Board of Directors, agent or fiduciary of the Company or any subsidiary of the Company, including as a member of the Special Committee (if applicable) (including taking any action recommended by the Special Committee (including voting to approve or not approve any matter before the Board of Directors in a manner consistent with the recommendation of the Special Committee) and omitting to take any actions within the scope of responsibility of the Special Committee for which the recommendation of the Special Committee has not been provided), or is or was serving (or agreed to serve) on behalf of the Company or the Board of Directors or at the request of the Company, the Board of Directors or any committee of the Board of Directors, as a director, member of any committee of directors, officer, employee, manager, member, partner, tax matter partner, trustee, agent, fiduciary or similar capacity, of another company, corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other entity or enterprise, or by reason of any act or omission by Indemnitee in any such capacity (in all cases whether or not Indemnitee is acting or serving in any such capacity or has such status at the time any Indemnifiable Amount is incurred for which indemnification, advancement or any other right can be provided by this Agreement). The term “Company,” where the context requires when used in this Agreement, shall be construed to include the subsidiaries of the Company and such other company, corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other entity or enterprise.

(i)

Independent Legal Counsel: means an attorney or firm of attorneys (following a Change in Control, selected in accordance with the provisions of Section 3 hereof) who or which is experienced in matters of corporate law and who or which shall not have otherwise performed services for the Company or Indemnitee on any matter material to such party within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

(j)

Permitted Transferee: means, with respect to each member of the Shapiro Group, (i) any other member of the Shapiro Group, (ii) any Affiliate of any member of the Shapiro Group and (iii) (A) any member or general or limited partner of such member of the Shapiro Group, (B) any corporation, partnership, limited liability company or other entity that is an Affiliate of such member of the Shapiro Group or any member, general or limited partner of such member of the Shapiro Group (collectively, “Shapiro Group Affiliates”), (C) any managing director, general partner, director, limited partner, officer or employee of any Shapiro Group Affiliate, or any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of any of the foregoing persons described in this clause (C) (collectively, “Shapiro Group Associates”) or (D) any trust, the beneficiaries of which, or any corporation, limited liability company or partnership, the stockholders, members or general or limited partners of which, consist solely of any one or more of such members of the Shapiro Group, any general or limited partner of such member of the Shapiro Group, any Shapiro Group Affiliates, any Shapiro Group Associates, their spouses or their lineal descendants; provided, that, in no event shall “Permitted Transferees” include Protective Partners, LLC, Protective Investment Partners, LLC, Lancer Insurance Company, Vincent J. Dowling, David P. Delaney, Jr. or any of their respective Affiliates, immediate family members, lineal descendants, siblings, parents, heirs, executors, administrators, testamentary trustees, legatees or beneficiaries.

(k)

Reviewing Party: means any appropriate person or body consisting of a member or members of the Board of Directors or any other person or body appointed by the Board of Directors who or which is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

(l)

Shapiro Group: means (i) Norton Shapiro 2008 Trust, Norton Shapiro Revocable Trust, Norton Shapiro Family LLC, NSF Investment Partnership, Richard Horwood, Cheryl Kreiter, Nathan Shapiro, Stephen J. Gray, Emily Rita Shapiro, Randy Shapiro, Lesley Beider Stillman, Steven A. Shapiro C/F Jackson Henry Shapiro UGTMAIL, Steve Shapiro C/F Jayson Ryan Shapiro UTMA/IL, Steve Shapiro C/F Jordyn Reese Shapiro UTMA/IL, New Horizon (Florida) Enterprises Inc., Daniel M. Shapiro C/F Nick E. Shapiro UTMA/IL, Illinois Diversified Company, LLC, Lester Shapiro, Joseph Shapiro, Robert Shapiro, Norton Shapiro and National Superior Fur Dressing & Dyeing Co., Inc. and (ii) each Permitted Transferee thereof.

(m)	Voting Securities: means any securities of the Company which vote generally in the election of directors.

2. Basic Indemnification Arrangement; Advancement of Expenses.

(a)

In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made subject to, a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee, or cause Indemnitee to be indemnified, to the fullest extent permitted by law as soon as practicable but in any event no later than thirty (30) days after written demand is presented to the Company, and hold Indemnitee harmless against any and all Indemnifiable Amounts.

(b)

If so requested by Indemnitee, the Company shall advance, or cause to be advanced, promptly (and, in any event, within five (5) business days of such request), any and all Expenses incurred or reasonably expected to be incurred by Indemnitee (an “Expense Advance”). The Company shall, in accordance with such request (but without duplication), (i) pay, or cause to be paid, such Expenses on behalf of Indemnitee or (ii) if Indemnitee shall have elected to pay such Expenses and have such Expenses reimbursed, reimburse, or cause the reimbursement of, Indemnitee for such Expenses. Subject to Section 2(d) and to the fullest extent permitted by law, Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any prior determination by the Reviewing Party that Indemnitee has satisfied any applicable standard of conduct for indemnification.

(c)

Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification or advancement of Expenses pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless (i) the Company has joined in or the Board of Directors has authorized or consented to the initiation of such Claim, (ii) the Claim is one to enforce Indemnitee’s rights under this Agreement or (iii) the Company is expressly required by law to provide indemnification or advancement of Expenses in connection with such Claim initiated by Indemnitee.

(d)

Notwithstanding the foregoing, (i) the indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written legal opinion, in any case in which the Independent Legal Counsel is involved as required by Section 3 hereof) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(b) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines (in a written legal opinion, in any case in which the Independent Legal Counsel is involved as required by Section 3 hereof) that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid. Indemnitee hereby undertakes to repay any Expense Advances actually advanced to the extent it is ultimately determined that Indemnitee is not entitled under this Agreement or otherwise to be indemnified by the Company in respect thereof; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). No other form of undertaking shall be required of Indemnitee other than execution of this Agreement. Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free. If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party within thirty (30) days after written demand is presented to the Company or if the Reviewing Party determines that Indemnitee would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of New York or the State of Indiana having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual basis therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

3. Change in Control. The Company agrees that if there is a Change in Control then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any provision of the Articles of Incorporation or the By-Laws now or hereafter in effect, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably delayed, conditioned or withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

4. Indemnification for Additional Expenses. The Company shall indemnify, or cause the indemnification of, Indemnitee against any and all Expenses and, if requested by Indemnitee, shall advance such Expenses to Indemnitee subject to and in accordance with Section 2(b), which are incurred by Indemnitee in connection with any action brought by Indemnitee for (a) indemnification or an Expense Advance by the Company under this Agreement or any provision of the Articles of Incorporation or the By-Laws now or hereafter in effect and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be; provided that Indemnitee shall be required to reimburse such Expenses in the event that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that such action brought by Indemnitee, or the defense by Indemnitee of an action brought by the Company or any other person, as applicable, was frivolous or in bad faith.

5. Partial Indemnity, Etc. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses or other Indemnifiable Amounts in respect of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

6. Burden of Proof, Etc. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the Reviewing Party, any court, any finder of fact or any other relevant person shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company (or any other person or entity disputing such conclusions) to establish, by clear and convincing evidence, that Indemnitee is not so entitled.

7. Reliance as Safe Harbor. For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee’s actions or omissions were taken in good faith reliance upon the records of the Company or any of its subsidiaries, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties and reasonably believed at the time to be reliable and competent in the matters presented, or by committees of the Board of Directors, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believed at the time to be within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.

8. No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.

9. Nonexclusivity, Etc. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Articles of Incorporation, the By-Laws or the Indiana Business Corporation Law or otherwise. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded as of the date hereof under the Articles of Incorporation, the By-Laws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. To the extent that there is a conflict or inconsistency among the terms of this Agreement, the Articles of Incorporation or the By-Laws, it is the intent of the parties hereto that Indemnitee shall enjoy the greatest benefits regardless of whether contained herein or in the Articles of Incorporation or the By-Laws. No amendment or alteration of the Articles of Incorporation, the By-Laws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement. No change in applicable law shall have the effect of reducing the benefits available to Indemnitee hereunder.

10. Liability Insurance. The Company shall maintain an insurance policy or insurance policies (from insurance carriers with an A.M. Best rating of “A” or higher in the case of primary coverage and “A-” or higher in the case of excess coverage) providing directors’ and officers’ liability insurance, and Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any of the Company’s directors and officers. If the Company receives from Indemnitee any notice of a Claim, the Company shall give prompt notice of the Claim to the insurer(s) in accordance with the procedures set forth in the policy(ies). The Company shall thereafter take all necessary or desirable action to cause such insurer(s) to pay, to or on behalf of Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policy(ies). Nothing herein shall (a) relieve the Company of any of its indemnification obligations or (b) prevent Indemnitee from directly providing notice of a Claim to such insurer(s) or directly pursuing recovery under such policies.

11. Period of Limitations. No legal action shall be brought and no claim or cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such claim or cause of action, and any claim or cause of action of or on behalf of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such claim or cause of action, such shorter period shall govern.

12. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to, or shall, constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. The Company shall pay or reimburse all Expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

14. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent that Indemnitee has otherwise actually received payment of such amount otherwise indemnifiable hereunder, whether under any insurance policy, or any provision of the Articles of Incorporation or the By-Laws, or otherwise.

15. Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee; provided that if Indemnitee believes, after consultation with counsel selected by Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee would present such counsel with an actual or potential conflict of interest, (b) the named parties in any such Claim (including any impleaded parties) include both the Company, or any subsidiary of the Company, and Indemnitee, and Indemnitee concludes that there may be one or more legal defenses available to him or her that are different from or in addition to those available to the Company or any subsidiary of the Company, or (c) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at the Company’s expense. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without the Company’s prior written consent. The Company shall not, without the prior written consent of Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event to which Indemnitee is, was or could have been a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of Indemnitee from all liability on all claims that are the subject matter of such Claim. Neither the Company nor Indemnitee shall unreasonably withhold, condition or delay its or his or her consent to any proposed settlement; provided that Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of Indemnitee. In no event shall Indemnitee be required to waive, prejudice or limit attorney-client privilege or work-product protection or other applicable privilege or protection.

16. No Adverse Settlement. The Company shall not seek, shall not agree to, shall not consent to, shall not support and shall contest any settlement or other resolution of any Claim(s), or settlement or other resolution of any other claim, action, proceeding, demand, investigation or other matter that has the actual or purported effect of extinguishing, limiting or impairing Indemnitee’s rights hereunder, including, without limitation, the entry of any bar order or other order, decree or stipulation, pursuant to 15 U.S.C. § 78u-4 (the Private Securities Litigation Reform Act), or any similar foreign, federal or state statute, regulation, rule or law.

17. Binding Effect, Etc. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor or continuing company by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect and whether by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer and/or director of the Company or member of any committee of the Board of Directors or of any other entity or enterprise at the Company’s request.

18. Security. To the extent requested by Indemnitee and approved by the Board of Directors, the Company may at any time and from time to time provide security to Indemnitee for the obligations of the Company hereunder through an irrevocable bank line of credit, a funded trust or other collateral or by other means. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of such Indemnitee.

19. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to the terms of this Agreement.

20. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.

21. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by electronic mail, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other address as may hereafter be designated on the signature pages of this Agreement or in writing by such party to the other parties:

(a)	If to the Company, to:

Protective Insurance Corporation
111 Congressional Boulevard
Carmel, IN 46032
Email: swignall@protectiveinsurance.com
Attn: Sally B. Wignall
Senior Vice President, General Counsel & Corporate Secretary

(b)	If to Indemnitee, to the address set forth on Annex A hereto.

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, with confirmation received, to the emails specified above (or at such other address for a party as shall be specified by like notice). Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

22. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

23. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation hereof.

24. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws. Each party agrees that any suit or proceeding arising in respect of this Agreement will be tried exclusively in the Hamilton Superior Court (Hamilton County, Indiana), any New York State court sitting in the Borough of Manhattan, New York, the United States District Court for the Southern District of Indiana or the United States District Court for the Southern District of New York and, in each case, any appellate court thereof, and each party agrees to submit to the exclusive jurisdiction of, and to venue in, such courts (and agrees not to commence any action, suit, or proceeding relating thereto except in such courts). Each party hereby waives any objection to the laying of venue of any action, suit, or proceeding arising out of this Agreement in any such court, and hereby waives and agrees not to plead or claim in any such court that any such action, suit, or proceeding brought in any such court has been brought in an inconvenient forum.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

PROTECTIVE INSURANCE CORPORATION

By: _____________________________
Name:
Title:

________________________________
[Indemnitee]

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Jeremy D. Edgecliffe-Johnson, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Protective Insurance Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 6, 2020

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

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, John R. Barnett, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Protective Insurance Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 6, 2020

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

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Protective Insurance Corporation (the "Company") on Form 10-Q for the quarterly period ending March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Jeremy D. Edgecliffe-Johnson, Chief Executive Officer of the Company, and John R. Barnett, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(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.

Date: May 6, 2020

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


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