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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended December 31, ~~2019~~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 No.)

111 Congressional Boulevard, Carmel, Indiana		46032
(Address of Principal Executive Offices)		(Zip Code)

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of Class A and Class B Common Stock held by non-affiliates of the Registrant as of June 2830, ~~2019~~2020, based on the closing trade prices on that date, was approximately $~~175~~149,~~668~~681,000.

The number of shares outstanding of each of the issuer's classes of common stock as of March 18, ~~2020~~2021:

Common Stock, No Par Value:	Class A (voting)	2,603,350
	Class B (nonvoting)	11,~~636~~552,~~766~~801
		14,240,116
		14,156,151

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 54, ~~2020~~2021 are incorporated by reference into Part III of this Annual Report on Form 10-K.

Table of Contents

PROTECTIVE INSURANCE CORPORATION

Form 10-K

For the Fiscal Year Ended December 31, ~~2019~~2020

TABLE OF CONTENTS

			Page
Part I	Item 1.	Business	4
	Item 1A.	Risk Factors	1317
	Item 1B.	Unresolved Staff Comments	1623
	Item 2.	Properties	1623
	Item 3.	Legal Proceedings	1623
	Item 4.	Mine Safety Disclosures	1623
		Information About our Executive Officers	1724
Part II	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1825
	Item 6.	Selected Financial Data	2027
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2128
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	3243
	Item 8.	Financial Statements and Supplementary Data	3546
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6682
	Item 9A.	Controls and Procedures	6682
	Item 9B.	Other Information	6884
Part III	Item 10.	Directors, Executive Officers and Corporate Governance	6884
	Item 11.	Executive Compensation	6985
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6985
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	6985
	Item 14.	Principal Accountant Fees and Services	6985
Part IV	Item 15.	Exhibits, and Financial Statement Schedules	6985
	Item 16.	Form 10-K Summary	7087
	Signatures		7997

- 2 -

FORWARD-LOOKING STATEMENTS

The disclosures in this Form 10-K 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-K relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as "may," "target," "anticipate," "believe," "plan," "estimate," "expect," "intend," "project," and other similar expressions, constitute forward-looking statements.

Investors are cautioned that such forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements, many of which are difficult to predict and generally beyond our control. Investors are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Investors are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors that affect our business, including "Risk Factors" set forth in Part I, Item 1A hereof and in our other reports filed with the U.S. Securities and Exchange Commission, or SEC, 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 ~~weakness~~continued volatility of the financial markets, prevailing interest rate levels and stock and credit market performance, which may affect or continue to affect (among other things) our ability to sell our products and to collect amounts due to us, our ability to access capital resources and the costs associated with such access to capital and the market value of our investments;

●

the risks related to our proposed merger with The Progressive Corporation (“Progressive”), and Carnation Merger Sub Inc. (“Merger Sub”) described under “Proposed Merger with The Progressive Corporation” in Part I, Item 1, “Business” hereof, including:

•

the inability to complete the proposed transaction due to the failure to obtain approval by our Class A shareholders of the proposed transaction or the failure to satisfy any of the other conditions to completion of the proposed transaction, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction;

•	uncertainty as to the timing of completion of the proposed transaction;

•	the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement and plan of merger;

•	risks related to disruption of management’s attention from our ongoing business operations due to the proposed transaction;

•	the effect of the announcement of the proposed transaction on our relationships with our clients, operating results and business generally; and

•	the outcome of any legal proceedings to the extent initiated against us, Progressive or others following the announcement of the proposed transaction;

●

the effects of the novel coronavirus ("COVID-19") pandemic and associated government actions on our operating and financial performance;

●

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

●

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

●

other changes in the markets for our insurance products;

●

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

●

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

●

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

●

the impact of a downgrade in our financial strength rating;

●

technology or network security disruptions or breaches;

●

adequacy of insurance reserves;

●

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

●

our ability to attract and retain qualified employees;

●

tax law and accounting changes; and

●

legal actions brought against us.

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 I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K. You should read that information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements and related notes in Part II, Item 8 of this Annual Report on Form 10-K.

- 3 -

PART I

Item 1. BUSINESS

Protective Insurance Corporation (referred to herein as "Protective") was incorporated under the laws of the State of Indiana in 1930. Through its subsidiaries, Protective engages 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.

Protective’s principal subsidiaries are:

Protective Insurance Company (referred to herein as "Protective Insurance Co."), which is licensed by insurance authorities in all 50 states, the District of Columbia, all Canadian provinces and Puerto Rico;

Protective Specialty Insurance Company (referred to herein as "Protective Specialty"), which is currently approved for excess and surplus lines business by insurance authorities in 48 states and the District of Columbia and licensed in Indiana;

Sagamore Insurance Company (referred to herein as "Sagamore"), which is licensed by insurance authorities in 49 states and the District of Columbia and approved for excess and surplus lines business in one additional state;

B&L Brokerage Services, Inc. (referred to herein as "BLBS"), an Indiana-domiciled insurance broker licensed in all 50 states and the District of Columbia; and

B&L Insurance, Ltd. (referred to herein as "BLI"), which is domiciled and licensed in Bermuda.

Protective Insurance Co., Protective Specialty, Sagamore and BLI are collectively referred to herein as the "Insurance Subsidiaries." The "Company"," "we"," "us" and "our"," as used herein, refer to Protective and all of its subsidiaries unless the context clearly indicates otherwise.

As is a common practice in the property and casualty insurance industry, the Insurance Subsidiaries share or "cede" portions of their gross premiums written with several non-affiliated reinsurers under excess of loss and quota share treaties covering predetermined groups of risks and by facultative (individual policy-by-policy) placements. Reinsurance is ceded to spread the risk of loss from individual claims or groups of claims among several reinsurers and is an integral part of the Company's business.

In ~~2019~~2020, the Insurance Subsidiaries primarily served the commercial automobile market, although the Insurance Subsidiaries continue to support previously written policies in ~~specialty~~ markets for which the Company has discontinued writing business, and these operations are in run-off. The Company expects targeted growth to ~~occur~~continue in its core business of commercial automobile and workers' compensation.

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 to be allocated to the segment and assessing its performance.

Proposed Merger with The Progressive Corporation

Merger Agreement

On February 14, 2021, Protective entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Progressive Corporation, an Ohio corporation (“Progressive”), and Carnation Merger Sub Inc., an Indiana corporation and wholly-owned indirect subsidiary of Progressive (“Merger Sub”). The Merger Agreement provides for, subject to the satisfaction or waiver of specified conditions, the merger of Merger Sub with and into Protective (the “Merger”), whereupon the separate existence of Merger Sub will cease and Protective will continue as the surviving corporation and as a wholly-owned indirect subsidiary of Progressive.

Protective’s Board of Directors (the “Board”), at the unanimous recommendation of the Special Committee of the Board, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, Protective and its shareholders, and approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby. The Merger is expected to close prior to the end of the third quarter of 2021. At the effective time of the Merger, each issued and outstanding share of common stock, without par value, of Protective (other than each share of Protective’s common stock that is owned by Protective as treasury stock or by any subsidiary of Protective and each share of Protective’s common stock owned by Progressive, Merger Sub or any other subsidiary of Progressive immediately prior to the effective time of the Merger) will be automatically canceled and converted into the right to receive $23.30 in cash, without interest, for a total transaction value of approximately $338 million.

The Merger Agreement contains various customary representations and warranties from each of Protective, Progressive and Merger Sub. Protective has also agreed to various customary covenants, including but not limited to conducting its business in the ordinary course and not engaging in certain types of transactions during the period between the execution of the Merger Agreement and the closing of the Merger. However, the Merger Agreement permits Protective to continue to pay regular quarterly dividends not to exceed $0.10 per share of its common stock. The consummation of the Merger is subject to certain conditions, including approval of the Merger by Protective’s Class A shareholders, legal and regulatory approvals including from the Indiana Department of Insurance and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary closing conditions.

For additional information regarding the risks associated with the Merger, please see Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

Voting and Support Agreement

On February 14, 2021, Protective also entered into a Voting and Support Agreement (the “Voting Agreement”) with Progressive and certain of Protective’s shareholders. The Voting Agreement requires that the Protective shareholders party to the Voting Agreement: (i) appear at the meeting of the holders of Protective’s Class A common stock to consider resolutions to approve the Merger Agreement and the Merger or otherwise cause their shares of Protective’s common stock to be counted as present for purposes of calculating a quorum, and (ii) vote their shares (a) in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and any action reasonably requested by Progressive or the Board in furtherance of the foregoing, (b) against any action or agreement that would result in a material breach of any covenant, representation or warranty or other obligation or agreement of Protective contained in the Merger Agreement and (c) against any takeover proposal or superior proposal (provided, that if the Board changes its recommendation with respect to the Merger, any shares of Class A common stock owned by such shareholders in excess of approximately 35% of the outstanding shares of Class A common stock will be voted in the same proportion as those shares of Class A common stock voted by the holders of Protective’s Class A common stock that are not party to the Voting Agreement).

COVID-19 Impacts

Beginning in March 2020 and continuing through the date of this Annual Report on Form 10-K, the global pandemic associated with COVID-19 and related economic conditions have impacted the global economy and the Company’s results of operations. For the year ended December 31, 2020, net premiums earned within the Company’s commercial automobile products, specifically public transportation, were negatively impacted due to a reduction in miles driven, which is the basis for premiums the Company receives, as well as an overall reduction in public transportation units insured. The declines in public transportation persisted throughout the year and have continued into 2021, but we saw a recovery in the third and fourth quarters within our commercial automobile products that has continued through the date of this Annual Report on Form 10-K. However, losses and loss expenses incurred during the same period reflected favorable impacts within all commercial automobile products as a result of declines in accident frequency due to lower traffic density. In addition to these impacts on the Company’s underwriting loss, as defined below, the Company incurred net realized and unrealized losses on investments of $9.2 million for the year ended December 31, 2020, primarily due to investment losses realized as a result of the significant declines in the global financial markets experienced during the first and second quarters due to the COVID-19 pandemic. As of December 31, 2020, both the Company’s fixed income and equity security investments have recovered to a net gain position. 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, the Company has not seen a material decrease or slowdown in premium collection to date. Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during 2020. For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company’s results, see Part I, Item 1A, "Risk Factors," and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

Product Lines

Commercial Automobile

The Insurance Subsidiaries provide coverage for larger companies in the motor carrier industry that retain substantial amounts of self-insurance, for independent contractors utilized by trucking companies, for medium-sized and small trucking companies on a first- dollar or deductible basis, and for public livery concerns, principally covering fleets of commercial buses. This group of products is collectively referred to as commercial automobile. Large fleet trucking products are marketed both directly to commercial automobile clients and also through relationships with non-affiliated brokers and specialized agents. Products for small and intermediate fleets and independent contractors are marketed through relationships with non-affiliated brokers and specialized agents. In some cases, the Insurance Subsidiaries will provide customized product offerings to specific markets through partnerships with brokers or program administrators. In most cases, the Company's commercial automobile policies are written on an "occurrence" basis. This means that the Company may be liable for claims that occurred when its policy was in place with an insured, regardless of when those claims are reported to the Company, and it may take months or even years for claims to be reported to the Company.

The principal types of commercial automobile insurance marketed by the Insurance Subsidiaries are:

●

Commercial motor vehicle liability, physical damage and general liability insurance;

●

Workers' compensation insurance;

●

Specialized accident (medical and indemnity) insurance for independent contractors in the trucking industry;

●

Non-trucking motor vehicle liability insurance for independent contractors;

●

Fidelity and surety bonds; and

●

Inland marine insurance consisting principally of cargo insurance.

-The 4Insurance Subsidiaries perform a variety of additional services, primarily for the Company's insureds, including risk surveys and analyses, safety program design and monitoring, government compliance assistance, loss control and cost studies and research, development, and consultation in connection with new insurance programs, including development of systems to assist customers in monitoring their accident data. The Company also provides claims handling services, primarily to excess clients with self-insurance programs.

The Insurance Subsidiaries also perform a variety of additional services, primarily for the Company's insureds, including risk surveys and analyses, safety program design and monitoring, government compliance assistance, loss control and cost studies and research, development, and consultation in connection with new insurance programs, including development of systems to assist customers in monitoring their accident data. The Company also provides claims handling services, primarily to excess clients with self-insurance programs.

Workers' Compensation

The Insurance Subsidiaries provide workers' compensation insurance for the commercial automobile industry, primarily to employees of motor carriers or independent contractors providing services in the transportation industry. In 2017, the Company began marketing workers' compensation coverage beyond commercial automobile clients to a variety of non-transportation operations, such as light manufacturing, restaurants, retailers, and professional services on both a first-dollar and deductible basis. In 2019, the Company took actions to reduce exposure to workers’ compensation coverage for non-transportation risks. While the Company ~~may~~has ~~continue~~continued to underwrite select non-transportation risks, the Company’s primary focus ~~will~~is be underwriting workers’ compensation coverage for transportation risks. In most cases, the Company's workers' compensation policies are written on an "occurrence" basis. This means that the Company may be liable for claims that occurred when its policy was in place with an insured, regardless of when those claims are reported to the Company, and it may take months or even years for claims to be reported to the Company.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses incurred on average comprise approximately two-thirds of the Company's operating expenses.

The Company's consolidated balance sheets as of December 31, ~~2019~~2020 and ~~2018~~2019 set forth in Part II, Item 8 of this Annual Report on Form 10-K include the estimated liability for unpaid losses and loss adjustment expenses ("LAE") of the Insurance Subsidiaries before the application of reinsurance credits (gross reserves). The liabilities for losses and LAE are determined using case basis evaluations and statistical projections and represent estimates of the Company's ultimate exposure for all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effects of trends in claim severity and frequency and are continually reviewed and, as experience develops and new information becomes known, the liability is adjusted as necessary. Such adjustments, either positive or negative, are reflected in current operations as recorded.

The Company's reserves for losses and loss expenses are determined based on evaluations of individual reported claims and by actuarial estimation processes using historical experience, current economic information and, when necessary, available industry statistics. "Case basis" loss reserves are evaluated on an individual case-by-case basis by experienced claims adjusters using established Company guidelines and are monitored by claims management. Additionally, "bulk" reserves are established for (1) those losses which have occurred but have not yet been reported to the Company ("incurred but not reported" claims), (2) provisions for any possible deficiencies in the case reserving process and (3) the expected external and internal costs to fully settle each claim, also referred to as LAE. Common actuarial methods are employed in the establishment of bulk reserves using Company historical loss data, consideration of changes in the Company's business and study of current economic trends affecting ultimate claims costs. LAE reserves include amounts ultimately allocable to individual claims as well as amounts required for the general overhead of the claims handling operation that are not specifically allocable to individual claims. Historical analyses of the ratio of LAE to losses paid on prior closed claims and study of current economic trends affecting loss settlement costs are used to estimate the LAE reserve needs relative to the established loss reserves. Each of these reserve categories contains elements of uncertainty, which assures variability when compared to the ultimate costs to settle the underlying claims for which the reserves are established. For a more detailed discussion of the three categories of reserves, see "Loss and Loss Expense Reserves" under the caption, "Critical Accounting Policies" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K.

Beginning in early 2019, the Company began strategically buying facultative reinsurance on policies with $5.0 million limits, specifically in our excess automobile and public transportation books of business. This reinsurance coverage has served to lower the loss limit on a significant portion of the Company’s commercial automobile liability policies to $2.0 million for a single occurrence. This action, coupled with the renewal of our annual aggregate deductible treaty at a 35% quota share rate, whereby once the aggregate stop-loss level is reached the Company is responsible for its 65% retention, has significantly reduced the Company’s exposure and volatility to large commercial automobile liability losses. In 2020, due to continued rate achievement in commercial automobile, improvements in the Company's mix of business and reductions to the Company's average policy loss limits, the Company decided to non-renew the annual aggregate deductible treaty for policies written on and after July 3, 2020.

The Company is a cedent under numerous reinsurance treaties covering its product lines. Treaties are typically written on an annual basis, each with its own renewal date. However, treaty terms may occasionally be agreed to for periods beyond one year. Treaty renewals are expected to largely continue to occur annually in the foreseeable future. Because losses from certain of the Company's products can experience delays in being reported and can take years to settle, losses reported to the Company in the current year may be covered by a number of older reinsurance treaties with higher or lower net loss exposures than those provided by current treaty provisions.

The table below sets forth a reconciliation of beginning and ending loss and LAE liability balances for ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018. This table includes reserves, net of reinsurance recoverable, to correspond with the presentation in the Company's consolidated statements of operations, but also includes a reconciliation of beginning and ending loss and LAE liability, gross of reinsurance recoverable, as presented in the Company's consolidated balance sheets. All amounts are shown net of reinsurance, unless otherwise indicated.

- 5 -

(dollars in thousands)	2020			2019			2018
Reserves, gross of reinsurance recoverable, at the beginning of the year	$	988,305		$	865,339		$	680,274
Reinsurance recoverable on unpaid losses at the beginning of the year		398,305			375,935			308,143
Reserves at the beginning of the year		590,000			489,404			372,131

Provision for losses and loss expenses:
Claims occurring during the current year		319,269			349,018			329,078
Claims occurring during prior years		(311	)		(550	)		16,786
Total incurred losses and loss expenses		318,958			348,468			345,864

Loss and loss expense payments:
Claims occurring during the current year		77,880			90,364			84,738
Claims occurring during prior years		165,777			157,508			143,853
Total paid		243,657			247,872			228,591
Reserves at the end of the year		665,301			590,000			489,404

Reinsurance recoverable on unpaid losses at the end of the year		424,368			398,305			375,935
Reserves, gross of reinsurance recoverable, at the end of the year	$	1,089,669		$	988,305		$	865,339

(dollars in thousands)	2019			2018		2017
Reserves, gross of reinsurance recoverable, at the beginning of the year	$	865,339		$	680,274	$	576,330
Reinsurance recoverable on unpaid losses at the beginning of the year		375,935			308,143		251,563
Reserves at the beginning of the year		489,404			372,131		324,767
Provision for losses and loss expenses:
Claims occurring during the current year		349,018			329,078		228,303
Claims occurring during prior years		(550	)		16,786		19,215
Total incurred losses and loss expenses		348,468			345,864		247,518
Loss and loss expense payments:
Claims occurring during the current year		90,364			84,738		67,234
Claims occurring during prior years		157,508			143,853		132,920
Total paid		247,872			228,591		200,154
Reserves at the end of the year		590,000			489,404		372,131
Reinsurance recoverable on unpaid losses at the end of the year		398,305			375,935		308,143
Reserves, gross of reinsurance recoverable, at the end of the year	$	988,305		$	865,339	$	680,274

The reconciliation above shows the Company's estimate of net losses on ~~2018~~2019 and prior accident years is approximately $0.63 million lower at December 31, ~~2019~~2020 than was provided in loss reserves at December 31, ~~2018~~2019 (referred to as a "reserve savings"). This compares to a reserve savings of $160.86 million ~~reserve deficiency~~ on prior accident years in ~~2018~~2019 and a $1916.28 million reserve deficiency reported in ~~2017~~2018 related to prior accident years.

The following table is a summary of the ~~2019~~2020 calendar year reserve savings by accident year (dollars in thousands):

Years in Which Losses Were Incurred	Reserve atatDecember ~~December~~ 31, ~~2018~~2019		(Savings)DeficiencyRecordedDuring ~~Deficiency~~2020 ~~Recorded During 2019~~ (1)			% (Savings) Deficiency
2018	$	244,339	$	(5,168	)		(2.1	)%
2019	$	258,655	$	(1,743	)		(.7	)%
2017		92,770		(8,694	)		(9.4	)%
2018		158,311		4,017			2.5	%
2016		41,427		1,648			4.0	%
2017		65,516		(3,997	)		(6.1	)%
2015		25,545		2,688			10.5	%
2016		21,374		392			1.8	%
2014		23,357		5,016			21.5	%
2015		16,377		858			5.2	%
2013 and prior		61,966		3,960			6.4	%
2014 and prior		69,767		162			.2	%
	$	~~489~~590,~~404~~000	$	(~~550~~311	)		(.1	)%

(1) Consists of development on cases known at December 31, ~~2018~~2019, losses reported which were previously unknown at December 31, ~~2018~~2019 (incurred but not reported), unallocated loss expense paid related to accident years ~~2018~~2019 and prior and changes in the reserves for incurred but not reported losses and loss expenses.

The savings shown in accident ~~years~~year ~~2018~~2019 ~~and 2017~~ in the table above ~~reflect~~reflects favorable loss development in ~~both~~ short-tail lines of business, such as physical damage, and ~~the~~occupational ~~Company's~~accident. The ~~independent~~deficiency ~~contractor~~shown ~~products~~in ~~(including non-trucking liability, occupational~~ accident ~~and~~year ~~workers'~~2018 ~~compensation). The~~represents deficiencies in ~~accident~~the ~~years~~Company's ~~2013~~commercial ~~and~~automobile ~~prior~~business, ~~through~~specifically ~~2016~~excess ~~are~~automobile ~~largely~~and ~~the~~public ~~result~~transportation lines of ~~several severe transportation losses~~business. The Company took and continues to take action in all accident years to reflect new trends in loss development for commercial automobile products that have emerged over the last several years. These actions include case reserving reviews, as well as continued actuarial product reviews, and resulted in the small reserve strengthening noted in accident years ~~2016~~2018 and prior.

Bulk loss reserves are established to provide for potential future adverse development on cases known to the Company and for cases unknown at the reserve date. Changes in the reserves for incurred but not reported losses and loss expenses occur based upon information received on known and newly reported cases during the current year and the effect of that development on the application of standard actuarial methods used by the Company.

The Company continues to incorporate more recent loss development data into its loss reserving formulae; however, the dynamic nature of losses associated with the commercial automobile business, as well as the timing of settlement of large claims, increases the likelihood of variability in loss developments from period to period. While the Company's basic assumptions have remained consistent, the Company continues to update loss data to reflect changing trends, which can be expected to result in fluctuations in loss developments over time.

Management's goal is to produce an overall estimate of reserves which is sufficient and as close to expected ultimate losses as possible. The Company constantly monitors changes in trends related to the number of claims incurred relative to correlative variances with premium volume, average settlement amounts, number of claims outstanding at period ends and the average value per claim outstanding and adjusts actuarial assumptions as necessary to accommodate observed trends.

~~- 6 -~~8

Ten-Year Historical Development Tables:

The table below presents the development of U.S. generally accepted accounting principles ("GAAP") balance sheet insurance reserves for each year-end from ~~2009~~ 2010 through ~~2018~~2019, as of December 31, ~~2019~~2020, net of all reinsurance credits.

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS

(Dollars in thousands)

Year Ended December 31

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Liability for Unpaid Losses and Loss Adjustment Expenses (1)

~~203~~218,~~253~~629

~~218~~290,~~629~~092

~~290~~289,~~092~~236

~~289~~288,~~236~~088

~~288~~295,~~088~~583

~~295~~301,~~583~~753

~~301~~324,~~753~~767

~~324~~372,~~767~~131

~~372~~489,~~131~~404

~~489~~590,~~404~~000

~~590~~665,~~000~~301

Liability Reestimated as of: (2)

One Year Later

~~194~~208,~~430~~933

~~208~~280,~~933~~217

~~280~~283,~~217~~673

~~283~~277,~~673~~734

~~277~~285,~~734~~521

~~285~~315,~~521~~589

~~315~~343,~~589~~982

~~343~~388,~~982~~917

~~388~~488,~~917~~853

~~488~~589,~~854~~689

Two Years Later

~~198~~201,~~220~~745

~~201~~272,~~745~~285

~~272~~282,~~285~~381

~~282~~268,~~381~~757

~~268~~303,~~757~~540

~~303~~340,~~540~~361

~~340~~369,~~361~~670

~~369~~393,~~670~~536

~~393~~490,~~536~~320

Three Years Later

~~188~~204,~~110~~243

~~204~~276,~~243~~525

~~276~~279,~~525~~685

~~279~~288,~~685~~862

~~288~~332,~~862~~175

~~332~~361,~~175~~791

~~361~~382,~~791~~982

~~382~~390,~~982~~951

Four Years Later

~~192~~202,~~195~~078

~~202~~268,~~078~~299

~~268~~291,~~299~~332

~~291~~313,~~332~~909

~~313~~343,~~909~~898

~~343~~373,~~898~~454

~~373~~384,~~454~~394

Five Years Later

~~187~~198,~~792~~518

~~198~~275,~~518~~517

~~275~~298,~~517~~861

~~298~~313,~~861~~662

~~313~~352,~~662~~873

~~352~~374,~~873~~475

Six Years Later

~~181~~200,~~547~~922

~~200~~276,~~922~~812

~~276~~299,~~812~~996

~~299~~317,~~996~~621

~~317~~353,~~621~~036

Seven Years Later

~~181~~203,~~998~~692

~~203~~279,~~692~~598

~~279~~300,~~598~~450

~~300~~316,~~450~~504

Eight Years Later

~~184~~204,~~122~~769

~~204~~279,~~769~~926

~~279~~299,~~926~~830

Nine Years Later

~~183~~205,~~693~~047

~~205~~278,~~047~~192

Ten Years Later

~~184~~202,~~280~~278

Cumulative Redundancy (Deficiency) (3)

1816,~~973~~351

1311,~~582~~900

(10,~~166~~594

)

(1128,~~214~~416

)

(2957,~~533~~453

)

(5772,~~290~~722

)

(7159,~~701~~627

)

(5818,~~215~~820

)

(~~21,405~~916

)

~~550~~311

Cumulative Amount of Liability Paid Through: (4)

One Year Later

7472,~~182~~393

7294,~~393~~003

94103,~~003~~941

~~103~~92,~~941~~275

92,~~275~~870

92109,~~870~~228

~~109~~132,~~228~~920

~~132~~143,~~920~~853

~~143~~157,~~853~~508

~~157~~165,~~508~~776

Two Years Later

~~107~~109,~~413~~382

~~109~~156,~~382~~271

~~156~~162,~~271~~087

~~162~~159,~~087~~282

~~159~~166,~~282~~642

~~166~~195,~~642~~951

~~195~~217,~~951~~376

~~217~~220,~~376~~502

~~220~~243,~~502~~766

Three Years Later

~~125~~133,~~038~~507

~~133~~193,~~507~~566

~~193~~205,~~566~~452

~~205~~166,~~452~~642

~~166~~222,~~642~~295

~~222~~250,~~295~~924

~~250~~275,~~924~~464

~~275~~260,~~464~~136

Four Years Later

~~137~~147,~~460~~462

~~147~~214,~~462~~873

~~214~~202,~~873~~803

~~202~~234,~~803~~158

~~234~~258,~~158~~576

~~258~~287,~~576~~311

~~287~~295,~~311~~576

Five Years Later

~~143~~158,~~461~~172

~~158~~227,~~172~~359

~~227~~241,~~359~~533

~~241~~251,~~533~~696

~~251~~283,~~696~~107

~~283~~301,~~107~~159

Six Years Later

~~148~~166,~~101~~112

~~166~~234,~~112~~578

~~234~~252,~~578~~648

~~252~~263,~~648~~194

~~263~~292,~~194~~069

Seven Years Later

~~152~~168,~~375~~524

~~168~~241,~~524~~383

~~241~~258,~~383~~630

~~258~~269,~~630~~206

Eight Years Later

~~153~~173,~~999~~015

~~173~~246,~~015~~052

~~246~~262,~~052~~371

Nine Years Later

~~157~~176,~~297~~204

~~176~~248,~~204~~812

Ten Years Later

~~159~~178,~~933~~577

(1)

Represents the estimated liability for unpaid losses and LAE recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and LAE for claims arising in all prior years that were unpaid at the respective balance sheet date, including incurred but not reported ("IBNR") losses, to the Company.

(2)

Represents the re-estimated amount of the previously recorded liability based on additional information available to the Company as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of individual claims and as claims are settled and paid.

(3) Represents the aggregate change in the estimates of each calendar year-end reserve through December 31, ~~2019~~2020.

(4)

Represents the cumulative amount paid with respect to the previously recorded calendar year-end liability as of the end of each succeeding year. The payment patterns shown in this table demonstrate the "long-tail" nature of much of the Company's business, whereby portions of claims, principally in workers' compensation coverages, do not fully pay out for more than ten years.

Reserve developments for all years ended in the period 1985 through 2011 have produced redundancies as of December 31, ~~2019~~2020, with deficiencies developing for periods from 2012 to 2018. The $0.63 million ~~savings~~prior ~~developed~~accident ~~through one~~ year onsavings ~~the~~that ~~2018~~developed ~~reserve~~during ~~position~~2020 ~~reflects~~related ~~(1)~~to ~~action~~favorable ~~taken~~loss bydevelopment ~~management~~in tothe ~~respond~~Company's tooccupational ~~higher~~accident ~~than~~business, ~~expected~~partially ~~adverse~~offset ~~commercial~~by ~~automobile~~unfavorable ~~case~~loss development ~~and (2) continued favorable development~~ in ~~short-tail~~commercial ~~lines~~automobile ~~and workers' compensation~~coverages. The deficiencies that developed in the chart from 2012 through 2018 have been largely attributable to two main factors. First, the Company engaged in new markets between 2008 and 2013, including professional liability and property coverages concentrated in the state of Florida. These products (now discontinued) experienced significant adverse loss development in calendar years 2016 and 2017 as more information emerged and was therefore considered in the reserving process. Second, the Company has experienced increased severity in losses related to its commercial automobile transportation offerings. During ~~2019~~2020, the Company continued to address the rate adequacy and customer segmentation practices of ~~these~~commercial automobile products in response to these adverse loss trends.

~~- 7 -~~9

Readers should note the table above does not present accident or policy year development data, which they may be more accustomed to analyzing. Rather, this table is intended to present an evaluation of the Company's ability to establish its liability for losses and loss expenses at a given balance sheet date. In reviewing this information, it is important to understand that this method of presentation causes some development experience to be duplicated. For example, the amount of any redundancy or deficiency related to losses settled in 2012, but incurred in 2009, will be included in the cumulative development amount for each of the years ending December 31, ~~2009,~~ 2010, 2011, and ~~2011~~2012. It is also important to note that conditions and trends that have affected development of the liability in the past may not necessarily occur in the future. Accordingly, it would not be appropriate to extrapolate future redundancies or deficiencies based on this table.

The table below presents loss development data on a gross (before consideration of reinsurance) basis for the same ten-year period December 31, ~~2009~~ 2010 through December 31, ~~2018~~2019, as of December 31, ~~2019~~2020, with a reconciliation of the data to the net amounts shown in the table above.

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS

(Dollars in thousands)

	Year Ended December 31
	2009			2010			2011			2012			2013			2014			2015			2016			2017			2018			2019
	2010			2011			2012			2013			2014			2015			2016			2017			2018			2019			2020
Direct and Assumed:
Liability for Unpaid Losses and Loss Adjustment Expenses	$	~~359~~344,~~030~~520		$	~~344~~421,~~520~~556		$	~~421~~455,~~556~~454		$	~~455~~474,~~454~~470		$	~~474~~506,~~470~~102		$	~~506~~513,~~102~~596		$	~~513~~576,~~596~~330		$	~~576~~680,~~330~~274		$	~~680~~865,~~274~~339		$	~~865~~988,~~339~~305		$	~~988~~1,~~305~~089,669
Liability Reestimated as of December 31, 2019		312,879			335,183			427,008			487,838			538,943			623,982			661,396			676,334			730,261			872,344
Liability Reestimated as of December 31, 2020		341,571			434,106			496,856			547,749			632,297			672,667			686,485			735,058			892,796			1,010,036
Cumulative Redundancy (Deficiency)	$	462,~~151~~949		$	9(12,~~337~~550	)	$	(541,~~452~~402	)	$	(3273,~~384~~279	)	$	(64126,~~473~~195	)	$	(~~117~~159,~~880~~071	)	$	(~~147~~110,~~800~~155	)	$	(~~100~~54,~~004~~784	)	$	(4927,~~987~~457	)	$	(721,~~005~~731	)
Ceded:
Liability for Unpaid Losses and Loss Adjustment Expenses	$	~~155~~140,~~777~~401		$	~~125~~54,~~891~~428		$	~~131~~132,~~464~~320		$	~~166~~167,~~218~~366		$	~~186~~178,~~382~~887		$	~~210~~204,~~519~~349		$	~~211~~188,~~843~~829		$	~~251~~204,~~563~~199		$	~~308~~190,~~143~~870		$	~~375~~275,~~935~~339		$	~~398~~424,~~305~~368
Liability Reestimated as of December 31, 2019		128,599			130,136			147,082			187,388			221,322			271,109			287,942			293,352			336,725			383,491
Liability Reestimated as of December 31, 2020		153,803			78,878			163,128			212,229			247,629			290,699			239,357			240,163			217,410			297,381
Cumulative Redundancy (Deficiency)	$	27(13,~~178~~402	)	$	(424,~~245~~450	)	$	(1530,~~618~~808	)	$	(2144,~~170~~863	)	$	(3468,~~940~~742	)	$	(6086,~~590~~350	)	$	(7650,~~099~~528	)	$	(4135,~~789~~964	)	$	(2826,~~582~~540	)	$	(722,~~556~~042	)
Net:
Liability for Unpaid Losses and Loss Adjustment Expenses	$	~~203~~218,~~253~~629		$	~~218~~290,~~629~~092		$	~~290~~289,~~092~~236		$	~~289~~288,~~236~~088		$	~~288~~295,~~088~~583		$	~~295~~301,~~583~~753		$	~~301~~324,~~753~~767		$	~~324~~372,~~767~~131		$	~~372~~489,~~131~~404		$	~~489~~590,~~404~~000		$	~~590~~665,~~000~~301
Liability Reestimated as of December 31, 2019		184,280			205,047			279,926			300,450			317,621			352,873			373,454			382,982			393,536			488,854
Liability Reestimated as of December 31, 2020		202,278			278,192			299,830			316,504			353,036			374,475			384,394			390,951			490,320			589,689
Cumulative Redundancy (Deficiency)	$	1816,~~973~~351		$	1311,~~582~~900		$	(10,~~166~~594	)	$	(1128,~~214~~416	)	$	(2957,~~533~~453	)	$	(5772,~~290~~722	)	$	(7159,~~701~~627	)	$	(5818,~~215~~820	)	$	(~~21,405~~916	)	$	~~550~~311

Readers are reminded the gross data presented above requires significantly more subjectivity in the estimation of IBNR and loss expense reserves because of the high limits provided by the Company to its commercial automobile and workers' compensation customers, some of which has been covered by excess of loss and facultative reinsurance. This is particularly true of excess of loss treaties in which the Company retains risk in only the lower, more predictable, layers of coverage. Accordingly, one would generally expect more variability in development on a gross basis than on a net basis. The Company's consolidated financial statements reflect its financial results net of reinsurance.

Environmental Matters:

Given that one of the Company's core businesses is insuring commercial automobile companies, on occasion claims involving a commercial automobile accident which has resulted in the spill of a pollutant are made. Certain of the Company's policies may cover these situations on the basis that they were caused by an accident that resulted in the immediate and isolated spill of a pollutant. These claims are typically reported, evaluated and fully resolved within a short period of time.

- 8 -

In general, establishing reserves for environmental claims, other than those associated with "sudden and accidental" losses, is subject to uncertainties that are greater than those represented by other types of claims. Factors contributing to those uncertainties include a lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure, unresolved legal issues regarding policy coverage, and the extent and timing of any such contractual liability. Courts have reached different and sometimes inconsistent conclusions as to when the loss occurred and what policies provide coverage, what claims are covered, whether there is an insured obligation to defend, how policy limits are determined, how policy exclusions are applied and interpreted, and whether cleanup costs represent insured property damage.

Very few environmental claims have historically been reported to the Company. In addition, a review of the businesses of the Company's past and current insureds indicates that exposure to claims of an environmental nature is typically limited because the vast majority of the Company's accounts are not currently, and have not in the past been, involved in the hauling of hazardous substances. Also, the revision of the pollution exclusion in the Company's policies since 1986 limits exposure to such claims.

The Company does not expect to have any significant environmental claims relating to asbestos exposure.

The Company's reserves for unpaid losses and loss expenses at December 31, ~~2019~~2020 did not include significant amounts for liability related to environmental damage claims. The Company does not foresee significant future exposure to environmental damage claims and accordingly has established no reserve for IBNR environmental losses at December 31, ~~2019~~2020.

Marketing

Historically, the Insurance Subsidiaries have primarily focused their commercial automobile marketing efforts on large and medium-sized trucking fleets, with their biggest market share in larger trucking fleets (over 150 power units). The largest of these fleets (over 250 power units) generally self-insure a significant portion of their risk, and self-insured retention plans are a specialty of the Company. The indemnity contract provided to such customers is designed to cover all aspects of commercial automobile liability, including third-party liability, property damage, physical damage and cargo, whether arising from vehicular accident or other casualty loss. The self-insured program is supplemented with large deductible workers' compensation policies in states which do not allow for self-insurance of this coverage. Fleets with fewer than 250 power units typically purchase full insurance coverage or retain deductibles on each claim. ~~The~~ In 2020, the Company's commercial automobile offerings also include public livery risks, principally small operators of bus fleets, work-related accident insurance, on a group or individual basis, to independent contractors under contract to a fleet sponsor, as well as workers' compensation coverage to employees of independent contractor fleet owners. Large fleet trucking products are marketed both directly to commercial automobile clients and also through relationships with non-affiliated brokers and specialized independent agents.

In addition, the Company offers a program of coverages for "small fleet" trucking concerns ~~(owner-operators~~with generally ~~with~~5 ~~one~~ to ~~six~~25 power units~~) and "medium fleet" trucking concerns (7 to 150 power units)~~. ~~Products for small and medium fleets, independent contractors, and non-trucking entities are marketed through relationships with non-affiliated brokers and specialized agents.~~

In some cases, the Company will provide specific product offerings to specialized markets through partnerships with brokers and program administrators. As the Company has grown, its distribution strategy has moved toward utilization of non-affiliated agents and brokers to place new business for small and intermediate commercial automobile (including independent contractor products). In addition, the Company has developed customized commercial automobile liability and workers' compensation programs, which are marketed through non-affiliated agent partners. These customized programs can include a suite of products selected for its targeted customer base, including commercial automobile liability, general liability, non-trucking liability, cargo, occupational accident, or workers' compensation coverages.

Investments

The Company'’s investment portfolio ishas ~~notionally~~been ~~divided~~de-risked ~~between~~over ~~(1)~~the ~~funds~~past ~~which~~three ~~are~~years ~~considered~~primarily ~~necessary~~by toreducing ~~support~~the ~~insurance~~equity ~~underwriting~~and ~~activities~~limited ~~and~~partnership ~~(2)~~investments ~~excess~~as ~~capital~~a ~~funds. Management~~percentage ~~believes~~of the ~~funds invested~~overall inportfolio ~~fixed income~~ and ~~short-term~~increasing ~~securities~~fixed ~~are~~income ~~more~~investments. The ~~than~~Company’s ~~sufficient~~investment tostrategy ~~cover~~emphasizes ~~underwriting~~preservation ~~operations while equity securities~~ and ~~limited~~growth ~~partnerships~~of ~~are utilized to invest excess~~ capital ~~funds to achieve higher long-term returns~~surplus. ~~The following~~Subject ~~discussion~~to ~~will~~achieving ~~concentrate~~that onobjective, the ~~different~~Company ~~investment~~pursues ~~strategies~~favorable ~~for~~risk ~~these~~adjusted ~~two major categories~~returns.

At December 31, ~~2019~~2020, the market value of the Company's consolidated investment portfolio was approximately $~~968~~1,043.27 million, consisting of fixed income securities, equity securities, investments in limited partnerships, commercial mortgage loans and short-term and other investments and included $5947.80 million of short-term funds classified as cash equivalents.

- 9 -

A comparison of the allocation of assets within the Company's consolidated investment portfolio, using market value as a basis, is as follows as of December 31:

	2019			2018
	2020			2019
Fixed income securities		8288.21	%		6782.52	%
Short-term		0.1			0.1
Cash equivalents		64.25			176.82
Total fixed income and short-term securities		8892.57			8588.45
Limited partnerships (equity basis)		20.47			62.34
Commercial mortgage loans (amortized cost basis)		1.20			01.82
Equity securities		75.96			7.59
		100.0	%		100.0	%

Fixed Income and Short-Term Investments

Fixed income and short-term securities comprised 8892.57% of the market value of the Company's consolidated investment portfolio of $~~968~~1,043.27 million at December 31, ~~2019~~2020. The fixed income portfolio is widely diversified with no concentrations in any single industry, geographic location or municipality. The largest amount invested in any single issuer was $4.0 million (0.4% of the Company's consolidated investment portfolio). The Company's fixed income portfolio has a short duration compared to the duration of its insurance liabilities and, accordingly, the Company does not actively trade fixed income securities but typically holds such investments until maturity. Exceptions exist in instances where the underlying credit for a specific issue is deemed to be diminished. In such cases, the security will be considered for disposal prior to maturity. In addition, fixed income securities may be sold when realignment of the portfolio is considered beneficial (e.g., moving from taxable to non-taxable issues) or when valuations are considered excessive compared to alternative investments.

Approximately $6163.27 million of the Company's fixed income investments (6.31% of the Company's consolidated investment portfolio, which includes money market instruments classified as cash equivalents) consisted of non-rated bonds and bonds rated as less than investment grade by the National Association of Insurance Commissioners ("NAIC") at year end. These investments had a $02.72 million aggregate net unrealized gain position at December 31, ~~2019~~2020.

The market value of the consolidated fixed income portfolio included $1226.53 million of net unrealized gains at December 31, ~~2019~~2020 compared to $712.95 million of net unrealized ~~losses~~ gains at December 31, ~~2018~~2019. The Company analyzes fixed income securities for other-than-temporary impairment ("OTTI") in accordance with the Financial Accounting Standards Board OTTI guidance. As has been the Company's consistent policy, OTTI is considered for any individual issue which has sustained a decline in current market value of at least 20% below original or adjusted cost, and the decline is ongoing for more than six months, regardless of the evaluation of the creditworthiness of the issuer or the specific issue. Additionally, the Company takes into account any known subjective information in evaluating for impairment without consideration of the Company's 20% threshold. The current net unrealized gain on fixed income securities ~~consists~~consisted of $34.67 million of gross unrealized losses and $1631.10 million of gross unrealized gains at December 31, 2020. The gross unrealized losses equal approximately 0.5% of the cost of all fixed income securities. See also "Critical Accounting Policies" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K for additional details regarding the Company's investment valuation.

Equity Securities

Because of the large amount of high-quality fixed income investments owned, relative to the Company's loss and loss expense reserves (net of reinsurance recoverables) and other liabilities, amounts invested in equity securities are not needed to fund current operations and, accordingly, can be committed for longer periods of time. Equity securities comprised 75.96% of the market value of the Company's consolidated investment portfolio of $~~968~~1,043.27 million at December 31, ~~2019~~2020. The Company's equity securities portfolio consists of various securities with diversification from large to small capitalization issuers and among several industries. The largest single-equity issue owned had a market value of $3.95 million at December 31, ~~2019~~2020 (0.43% of the Company's consolidated investment portfolio).

Realized gains related to the sale of equity securities during 2019 recognized in the consolidated statement of operations for the year ended December 31, 2019 were $1.9 million before taxes. Net unrealized gains on equity securities held at December 31, 2019 included in the consolidated statement of operations for the year ended December 31, 2019 were $9.3 million.12

AnRealized ~~individual~~losses ~~equity~~related ~~security~~to ~~will~~the besale ~~disposed~~ of ~~when~~equity itsecurities isduring ~~determined~~2020 byrecognized in the ~~Company's~~consolidated ~~external~~statement ~~investment~~of ~~managers~~operations orfor the ~~Board~~year ofended ~~Directors'~~December ~~Investment~~31, ~~Committee~~2020 ~~that~~were ~~there~~$8.1 ismillion ~~little~~before ~~potential~~taxes. ~~for~~Net ~~future appreciation~~unrealized orgains toon ~~reallocate from~~ equity tosecurities ~~fixed~~held ~~income~~at ~~securities. Securities~~December ~~are~~31, ~~disposed~~2020 ofincluded ~~only~~in ~~when~~the ~~market~~consolidated ~~conditions~~statement ~~dictate,~~of ~~regardless~~operations offor the ~~impact,~~year ~~positively~~ended orDecember ~~negatively~~31, on2020 ~~current~~were ~~period~~$1.9 ~~earnings~~million.

An individual equity security will be disposed of when it is determined that there is little potential for future appreciation or to reallocate from equity to fixed income securities. Securities are disposed of only when market conditions dictate, regardless of the impact, positively or negatively, on current period earnings.

As of January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). The amendments in ASU 2016-01 changed the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Previously, the Company's equity securities were classified as available-for-sale and changes in fair value were recognized in accumulated other comprehensive income (loss) as a component of shareholders' equity.

- 10 -

During 2018, the Company's external investment managers and the Board of Directors' Investment Committee determined that reallocation of the Company's equity portfolio would be beneficial and sold $149.2 million of its equity portfolio, resulting in a gain on sale of $51.9 million. The majority of these gains were included in unrealized gains within other comprehensive income (loss) at December 31, 2017 and, as a result of the adoption of ASU 2016-01, were reclassified to retained earnings as of January 1, 2018 and were therefore not recognized in the consolidated statement of operations for the year ended December 31, 2018.

Limited Partnerships

The Company invests in various limited partnerships engaged in long-short equities, private equity, country-focused funds and real estate development as an alternative to direct equity investments. ~~The funds used for these investments are part of the Company's excess capital strategy.~~ At December 31, ~~2019~~2020, the aggregate carrying value was $237.32 million, comprising 20.47% of the market value of the Company's consolidated investment portfolio.

As a group, these investments ~~increased~~decreased in value during ~~2019~~2020, with the aggregate of the Company's share of such ~~gains~~losses reported by the limited partnerships totaling approximately $1.64 million.

The Company follows the equity method of accounting for its limited partnership investments and, accordingly, records the total change in value as a component of net unrealized gains (losses) on equity securities and limited partnership investments. Readers are cautioned that reported increases and decreases in equity value of the Company's limited partnerships can change quickly as a result of volatile market conditions. Limited partnerships also are highly illiquid investments, and the Company's ability to withdraw funds is generally subject to significant restrictions.

Investment Yields

Pre-tax net investment income ~~increased~~decreased $40.28 million, or 193.2%, during ~~2019~~2020, reflecting ~~higher~~lower interest rates ~~for~~earned ~~shorter~~on ~~duration~~cash ~~securities~~and cash equivalent balances for the year, ~~increased dividends~~partially ~~and~~offset ~~increased~~by an increase in average funds invested ~~assets~~resulting from ~~continuing~~ positive cash flow from operations, as well as the continued reallocation from equity investments in limited partnerships and cash and cash equivalent investments into short-duration, high-quality bonds. A comparison of consolidated investment yields, before consideration of investment management expenses, is as follows:

	2019			2018
	2020			2019
Before federal tax:
Investment income		32.39	%		3.03	%
Investment income plus investment gains (losses)		4.8			(0.1	)
After federal tax:
Investment income		32.38			23.73
Investment income plus investment gains (losses)		4.2			(0.6	)

See also "Results of Operations" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K for additional details of the Company's investment operations.

Regulatory Framework

The Insurance Subsidiaries are currently subject to insurance industry regulation by each of the jurisdictions in which they are licensed. In addition, minor portions of the Insurance Subsidiaries' business are subject to regulation by Bermudian and Canadian federal and provincial authorities. As an insurance holding company, Protective is also subject to oversight from the Indiana Department of Insurance. There can be no assurance that laws and regulations will not be changed by one or more of these regulatory bodies in ways that will require the Company to modify its business models and objectives. In particular, the United States federal government continuously reviews the regulation and supervision of financial institutions, including insurance companies, as well as tax laws and regulation, which could impact the Company's operations and performance.

Additionally, changes in laws and regulations governing the insurance industry could have an impact on the Company's ability to generate historical levels of income from its insurance operations. The Company is obligated to comply with numerous complex and varied governmental regulations in order to maintain its authority to write insurance business. While the Company has continuously maintained each of its licenses without exception, failure to maintain compliance could result in governmental regulators temporarily preventing the Company from writing new business, thus having a detrimental effect on the Company. Also, the ability of the Insurance Subsidiaries to modify certain insurance rates, specifically workers' compensation rates, is heavily regulated, and such rate increases are often denied or delayed for substantial periods by regulators.

Investments made by the Company's domestic Insurance Subsidiaries are regulated by guidelines promulgated by the NAIC, which are designed to provide protection for both policyholders and shareholders. The statutory capital of each of the Insurance Subsidiaries substantially exceeds the minimum risk-based capital requirements set by the NAIC. State regulatory authorities prescribe calculations of the minimum amount of statutory capital and surplus necessary for each insurance company to remain authorized. These computations are referred to as risk-based capital requirements and are based on a number of complex factors, taking into consideration the quality and nature of assets, the historical adequacy of recorded liabilities and the specific nature of business conducted. At December 31, ~~2019~~2020, the minimum statutory capital and surplus requirements of the Insurance Subsidiaries was $~~131~~136.65 million. Actual consolidated statutory capital and surplus at December 31, ~~2019~~2020 exceeded this requirement by $~~240~~210.29 million.

-Human 11Capital -Management

~~Employees~~Protective is committed to attracting, developing and retaining top talent in order to drive its continued success and achieve its business goals. The Company strives for a diverse and inclusive culture, which rewards performance, provides growth and development opportunities and supports employees through competitive compensation, benefits and numerous volunteer and charitable giving opportunities.

As of December 31, ~~2019~~2020, the Company had ~~500~~approximately 490 employees working full-time.

COVID-19, Employee Safety and Wellness

Employee health and safety are top priorities. In response to the COVID-19 pandemic, the Company adopted numerous health and safety measures in accordance with best-practice safe hygiene guidelines issued by recognized health experts such as the U.S. Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO), as well as government mandates.

The Company has provided for work-from-home arrangements for employees where possible, including providing employees with the necessary equipment to effectively work from home, provides regular communication updates to its employees on COVID-19 related matters, has implemented office sanitization protocols and requires mask usage at the office and temperature and health screening prior to entering the Company's facilities.

Diversity and Inclusion

Protective is committed to fostering a work environment that values and promotes diversity and inclusion. During 2020, several Employee Resource Groups (ERGs) were created and staffed by employees with diverse backgrounds, experiences or characteristics who share a common interest in professional development, improving corporate culture and delivering sustained business results. The Company provides equal access to and participation in programs and services without regard to race, religion, color, national origin, disability, sex, sexual orientation, gender identify, stereotypes or assumptions based thereon.

Employee Engagement, Development and Training

Protective invests resources in professional development and growth as a means to encourage employee performance, motivation and retention. The Company encourages and supports the growth and development of its employees, and wherever possible, seeks to fill positions by promotion or transfer from within the organization. The Company promotes continuous learning and career development through ongoing performance and development discussions and evaluations, training programs, succession and talent pipeline planning and educational reimbursement programs. The Company provides employees with the opportunity to provide regular feedback through surveys, meetings with management and CEO-led discussions. Employees are also eligible to participate in a departmental rotation program to gain experience and knowledge about the organization.

Opportunities for continuous learning and development are available to employees through internal and external training resources, conferences and seminars. Protective offers internal online training opportunities on topics such as diversity and inclusion, health and safety, personal development, computer skills and management training courses.

Compensation and Benefits

Protective is committed to providing its employees with a competitive compensation package, which rewards performance and achievement of desired business results and personal goal attainment. The Company's compensation package consists of base pay and an incentive program in which all employees are eligible to participate, health and welfare benefits and retirement contributions. The Company analyzes its compensation and benefits programs regularly to ensure they remain competitive with the market.

Health and wellness programs are provided and contribute to a productive workforce by empowering our employees to take personal responsibility for their health, safety and well-being. Employees are offered the opportunity to participate in healthcare and insurance benefits, disability insurance, health savings and flexible spending accounts, paid time off, parental leave and various wellness programs.

Community Involvement

The Company and its employees provide multi-faceted support for its communities to address needs where its employees work and live. Corporate sponsorships and employee volunteer opportunities support a wide range of non-profits, including those that address children and youth programs, education, safety, human trafficking, housing, abuse, joblessness, blood donations and many others.

Revenue Concentration

The Company derives a significant percentage of its direct premium volume from certain FedEx Corporation subsidiaries and operating companies ("FedEx"), and from insurance coverage provided to FedEx's contracted service providers. FedEx represented approximately $4.7 million, $164.27 million and $1816.52 million of the Company's consolidated gross premiums written in ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018, respectively. The decrease in 2019 is related to the non-renewal of certain excess coverage policies in late 2018. An additional $~~172~~207.86 million, $~~174~~172.78 million and $~~189~~174.47 million in 2020, 2019, ~~2018~~ and ~~2017~~2018, respectively, was placed with the Company by a non-affiliated broker on behalf of contracted service providers of FedEx, but this additional business was not dependent upon the Company's direct business with FedEx.

Competition

Insurance underwriting is highly competitive. The Insurance Subsidiaries compete with other stock and mutual companies and inter-insurance exchanges (reciprocals). There are numerous insurance companies offering the lines of insurance which are currently written or may in the future be written by the Insurance Subsidiaries. Many of these companies have been in business for longer periods of time, have significantly larger volumes of business, offer more diversified lines of insurance coverage and have significantly greater financial resources than the Company. In many cases, competitors are willing to provide coverage for rates lower than those charged by the Insurance Subsidiaries. Many potential clients self-insure workers' compensation and other risks for which the Company offers coverage, and some have organized "captive" insurance companies as subsidiaries through which they insure their own operations. Some states have workers' compensation funds that preclude private companies from writing this business in those states. Federal law also authorizes the creation of "Risk Retention Groups," which may write insurance coverages similar to those offered by the Company.

The Company believes it has a competitive advantage in its major lines of business as the result of its management and staff, its service and products, its willingness to custom build insurance programs for its customers, its centralized location with ready access to skilled employees, its proprietary databases and the use of technology with respect to its insureds. However, should competitors determine to "buy" market share with unprofitable rates, the Insurance Subsidiaries will generally experience a decline in business until pricing returns to profitable levels.

Availability of Documents

The Company is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is required, pursuant to Item 101 of Regulation S-K, to provide certain information regarding its website and the availability of certain documents filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC"). The Company's Internet website is www.protectiveinsurance.com. The Company has included its Internet website address throughout this Annual Report on Form 10-K as a textual reference only. The information contained on, or accessible through, the Company's Internet website is not incorporated by reference into this Annual Report on Form 10-K.

The Company makes available, free of charge, through its Internet website, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with or furnishes it to the SEC. The Company also includes on its Internet website its Code of Business Conduct and the charter of each permanent committee of its Board of Directors (the "Board"). In addition, the Company intends to disclose on its Internet website any amendments to, or waivers from, its Code of Business Conduct that are required to be publicly disclosed pursuant to rules of the SEC and the Nasdaq Stock Market LLC ("Nasdaq").

Shareholders may obtain, without charge, a copy of this Annual Report on Form 10-K, including the consolidated financial statements and schedules thereto, without the accompanying exhibits, upon written request to Protective Insurance Corporation, 111 Congressional Boulevard, Carmel, Indiana 46032, Attention: Investor Relations. A list of exhibits is included in this Annual Report on Form 10-K, and exhibits are available from the Company upon payment to the Company of the cost of furnishing the exhibits.

~~- 12 -~~16

Item 1A. RISK FACTORS

The following is a description of the risk factors that could cause our actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by management from time to time. Such factors may have a material adverse effect on our business, financial condition and results of operations, and you should carefully consider them before deciding to invest in, or retain, shares of our common stock. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

OPERATIONAL RISKS

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 COVID-19 and related economic conditions began to impact the global economy and our results of operations. A discussion of the impact of the COVID-19 pandemic on our business to date can be found in Part I, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K. 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 experienced an effect on our net premiums earned in the second and third quarters of 2020 primarily due to the reduction in miles driven during that time, which is the basis of premiums we receive, by our commercial automobile insureds, as well as an overall reduction in public transportation units insured. During the fourth quarter of 2020, we saw a partial recovery of premium volume when miles driven increased as a result of increased shipping around the holidays.

•

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

•

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

•

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

•

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

•

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

We compete with a large number of companies in the insurance industry for underwriting revenues.

We compete with a large number of other companies in our selected lines of business. During periods of intense competition for premium, we are vulnerable to the actions of other companies who may seek to write business without what we believe to be an appropriate regard for ultimate profitability. During these times, it is very difficult to grow or maintain premium volume without sacrificing underwriting discipline and income.

Insurance underwriting is highly competitive. We compete with other stock and mutual companies and inter-insurance exchanges (reciprocals). There are numerous insurance companies offering the lines of insurance which are currently written or may in the future be written by us. Many of these companies have been in business for longer periods of time, have significantly larger volumes of business, offer more diversified lines of insurance coverage and have significantly greater financial resources than us. In many cases, competitors are willing to provide coverage for rates lower than those charged by us. Many potential clients self-insure workers' compensation and other risks for which we offer coverage, and some have organized "captive" insurance companies as subsidiaries through which they insure their own operations. Some states have workers' compensation funds that preclude private companies from writing this business in those states. Federal law also authorizes the creation of "Risk Retention Groups," which may write insurance coverages similar to those offered by us.

We may incur increased costs in competing for underwriting revenues as we seek to expand our business. Increased costs associated with attracting and writing new clients may negatively impact underwriting revenue. If we are unable to compete effectively, our underwriting revenues may decline, as well as our overall business results.

New competition could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our coverages at attractive rates and thereby adversely affect our underwriting results.

~~Changes~~The inloss ~~laws~~of ~~and~~our ~~regulations~~major ~~governing~~sponsor ~~the~~program ~~insurance industry~~ could ~~have~~severely ~~a negative~~ impact on our ~~ability~~revenue toand ~~generate~~earnings ~~income from our insurance operations~~potential.

~~One~~We orderive ~~more~~a ofsignificant ~~our~~percentage ~~Insurance Subsidiaries are regulated and/or licensed in all 50~~ of ~~the~~our ~~United~~direct ~~States,~~premium ~~the~~volume ~~District~~from ofinsurance ~~Columbia,~~coverage ~~all~~provided ~~Canadian provinces, Puerto Rico and Bermuda. We are obligated~~ to ~~comply~~FedEx ~~with numerous~~Ground's ~~complex~~contracted ~~and~~service ~~varied~~providers ~~governmental~~through regulations in order to maintain our authority to write insurance business. Failure to maintain compliance could result in governmental regulators preventing us from writing new business, which would have a ~~material~~ ~~adverse~~FedEx ~~impact~~Ground onsponsored ~~us, our results of operations and our financial condition~~program. ~~Further,~~The ~~the~~loss ~~ability~~ of ~~our~~this ~~Insurance~~would ~~Subsidiaries~~likely tomaterially ~~adjust~~adversely ~~insurance~~impact ~~rates and other product offerings is regulated for significant portions of~~ our ~~business,~~revenue and ~~needed~~ ~~rate~~earnings ~~adjustments can be denied or delayed for substantial periods by regulators, which could have a material adverse effect on our results of operations and our financial condition~~potential.

Technological advances, including those specific to the transportation industry, could present us with added competitive risks.

An increase in accident prevention technologies and the growth of autonomous or partially autonomous vehicles could reduce the amount of accidents over time and shift the liability from the owner of the vehicle to the manufacturer, which would cause automobile insurance to become a smaller portion of our overall property and casualty insurance book of business. Innovations in telematics and the increase in usage-based information have become more important and will likely change the way premiums are determined in the future. These advances in technology could materially change the way products in the transportation industry are designed, priced and underwritten, and if we fail to adjust to these changes in a timely manner, our business and results of operations could be materially adversely affected.

The failure of our information technology systems and other operational systems to operate properly or disruptions or breaches of our information systems could adversely affect our business, results of operations and financial condition.

We rely upon complex and expensive information technology systems and other operational systems and on the integrity and timeliness of our data to run our businesses, service our customers and interact with policyholders, brokers and employers. The pace at which information systems must be upgraded is continually increasing, requiring an ongoing commitment of significant resources to maintain or upgrade to current standards. Our success may be impacted if we are not able to develop and expand the effectiveness of existing systems and to continue to enhance information systems that support our operations in a cost-effective manner. Our networking infrastructure and related assets may also be subject to employee errors or other unforeseen activities that could result in the disruption of business processes, network degradation and system downtime. To the extent that such disruptions occur, our business, results of operations and financial condition could be materially and adversely affected, resulting in a possible loss of business.

In addition, our daily business operations require us to retain sensitive data such as proprietary business information and data related to customers, claimants and business partners within our network infrastructure. Cybersecurity attacks and intrusion efforts are continuous and evolving. The scope and severity of risks that cyber threats present have increased dramatically, and include, but are not limited to, disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. Our information technology and other systems have been, and in the future could be, subject to physical or electronic break-ins; attempts to gain unauthorized access to data from our employees, vendors or third parties; unauthorized tampering; exploitation of weaknesses related to our vendors or other third parties; denials of service; computer viruses and other malicious software; or other cybersecurity attacks or breaches, resulting in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers and business partners, or in the theft of intellectual property or proprietary information. We evaluate the adequacy of our third-party service providers’ cybersecurity measures through periodic due diligence and contractual obligations. Despite these safeguards, disruptions to and breaches of our information technology systems or providers’ are possible and may negatively impact our business.

We cannot ensure that we will be able to identify, prevent or contain the effects of any future cyber attacks or other cybersecurity incidents that bypass our security measures or disrupt our information technology systems or business. Any failure to maintain proper security, confidentiality or privacy of sensitive data residing on our information technology and other operational systems could delay or disrupt our ability to do business and service clients, harm our reputation, require us to incur significant remediation costs, subject us to litigation, regulatory fines, a loss of customers and revenues or otherwise have a material adverse effect on our business, results of operations and financial condition.

We may be unable to attract and retain qualified employees.

We depend on our ability to attract and retain qualified executive officers, experienced underwriters, claims professionals and other skilled employees who are knowledgeable about our specialty lines of business. If we are unable to attract and retain such individuals, we may be unable to maintain our current competitive position in the specialty markets in which we operate and may be unable to achieve our growth strategy.

RISKS RELATED TO OUR PROPOSED MERGER

We may not consummate our proposed merger with Progressive within the timeframe or in the manner we anticipate, or at all, which could negatively affect our business and our stock price.

On February 14, 2021, we entered into the Merger Agreement with Progressive and Merger Sub. The Merger Agreement provides for, subject to the satisfaction or waiver of specified conditions, the merger of Merger Sub with and into Protective, whereupon the separate existence of Merger Sub shall cease and Protective shall continue as the surviving corporation and as a wholly-owned indirect subsidiary of Progressive.

Consummation of the Merger is subject to various conditions, including (i) approval by our Class A shareholders of the Merger; (ii) the receipt of required regulatory approvals, including from the Indiana Department of Insurance and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the absence of any law, injunction or order preventing or prohibiting the consummation of the Merger; (iv) the accuracy of representations and warranties subject to applicable materiality standards; (v) compliance with all covenants under the Merger Agreement and (vi) the absence of a material adverse effect. There can be no assurance that approval of our Class A shareholders will be obtained, that the other conditions to the consummation of the Merger will be satisfied or waived or that other events or circumstances will not intervene to delay or result in the termination of the Merger. Subject to certain limitations, either party may terminate the Merger Agreement if the Merger is not consummated by November 14, 2021. If the Merger is not consummated, the price of our common stock may change to the extent that the current market price of our common stock may reflect an assumption that the Merger will be consummated.

Pending the consummation of the Merger, the Merger Agreement also restricts us from engaging in certain actions without Progressive’s consent, which could prevent us from pursuing opportunities that may arise prior to the effective time of the Merger. In addition, if the Merger Agreement is terminated, depending on the circumstances giving rise to termination, we may be required to pay a termination fee of approximately $13.3 million.

Our financial condition, results of operations and cash flows could be adversely impacted as a result of the proposed Merger, regardless of whether it is consummated.

The Merger may cause disruptions to our business or business relationships, which could have an adverse impact on our financial condition, results of operations and cash flows, regardless of whether the Merger is consummated. For example:

•	the attention of our management and our employees may be directed to Merger-related considerations and may be diverted from the day-to-day operations of our business;

•	our employees may experience uncertainty about their future roles with us, which might adversely affect our ability to retain and recruit key employees;

•	customers, suppliers or other parties with whom we maintain business relationships may experience uncertainty about our future and seek alternative relationships with third parties or seek to alter their business relationships with us; and

•	legal proceedings may be instituted against us, our directors and/or our officers with respect to the Merger.

In addition, we have incurred, and will continue to incur, significant costs, fees and expenses for professional services and other costs related to the Merger Agreement and the Merger, and many of these costs, fees and expenses are payable by us regardless of whether or not the Merger is consummated.

FINANCIAL AND LIQUIDITY RISKS

A material decline in our financial strength rating could adversely affect our position in the insurance market and cause a significant reduction in our premiums and earnings.

Our main insurance subsidiary, Protective Insurance Co., currently has a financial strength rating of “A” (Excellent) with a negative outlook by A.M. Best Company, Inc. ("A.M. Best"), which represents a downgrade from the “A+” (Superior) financial strength rating with a negative outlook Protective Insurance Co. had prior to November 20, 2018. In connection with the Merger announcement with Progressive, A.M. Best placed our financial strength rating under review with positive implications on February 16, 2021. Financial ratings are an important factor influencing the competitive position of insurance companies. A.M. Best ratings, which are commonly used in the insurance industry, currently range from “A++” (Superior) to “F” (In Liquidation). The objective of A.M. Best’s rating system is to provide potential policyholders and other interested parties with an expert independent opinion of an insurer’s financial strength and ability to meet ongoing obligations, including paying claims. This rating is subject to periodic review and may be revised downward, upward or revoked at the sole discretion of A.M. Best. A future downgrade by A.M. Best could result in the loss of a number of insurance contracts we write and in a substantial loss of business to other competitors, which would have a material adverse effect on our results of operations.

We have two classes of common stock with unequal voting rights that are effectively controlled by our principal shareholders and management, which limits other shareholders’ ability to influence our operations.20

Our principal shareholders, directors and executive officers and their affiliates control approximately 49% of the outstanding shares of voting Class A Common Stock and approximately 25% of the outstanding shares of non-voting Class B Common Stock. These parties effectively control us, direct our affairs, and exert significant influence in the election of directors and approval of significant corporate transactions. The interests of these shareholders may conflict with those of other shareholders, and this concentration of voting power may limit the marketability of our stock and has the potential to delay, defer or prevent a change in control that other shareholders may believe to be in their best interests.

- 13 -

We are subject to credit risk relating to our ability to recover amounts due from reinsurers.

We limit our risk of loss from policies of insurance issued by our Insurance Subsidiaries through the purchase of reinsurance coverage from other insurance companies. Such reinsurance does not relieve us of our responsibility to policyholders should the reinsurers be unable to meet their obligations to us under the terms of the underlying reinsurance agreements. While we have not experienced any significant reinsurance losses for over 25 years, in the past, a small number of our less significant reinsurance carriers have experienced deteriorating financial conditions or have been downgraded by rating agencies, and provisions for potential uncollectible balances from these reinsurers have been established. If we are unable to collect the amounts due to us from reinsurers, any unreserved credit losses could adversely affect our results of operations, equity, business and insurer financial strength rating.

We may incur additional losses if our loss reserves are inadequate.

A large portion of our provision for losses recorded is composed of estimates of future loss payments to be made. Such estimates of future loss payments may prove to be inadequate. Loss and loss expense reserves represent our best estimate at a given point in time but are not an exact calculation of ultimate liability. Rather, they are complex estimates derived by utilizing a variety of reserve estimation techniques from numerous assumptions and expectations about future events, many of which are highly uncertain, such as estimates of claims severity, frequency of claims, inflation, claims handling, case reserving policies and procedures, underwriting and pricing policies, changes in the legal and regulatory environment and the lag time between the occurrence of an insured event and the time of its ultimate settlement. Many of these uncertainties are not precisely quantifiable and require significant judgment on our part. As trends in underlying claims develop, particularly in so-called “long tail” lines in which the adjudication of claims can take many years and which have seen an increase in claim severity, management is sometimes required to revise reserves. This results in a charge to our earnings in the amount of the adjusted reserves, recorded in the period the change in estimate is made. These charges can be substantial and can potentially have a material impact, either positively or negatively, on results of operations and shareholders’ equity.

The loss of our major customer could severely impact our revenue and earnings potential and A.M. Best rating.

We derive a significant percentage of our direct premium volume from FedEx, and from insurance coverage provided to FedEx’s contracted service providers. The loss of this major customer would likely materially adversely impact our revenue and earnings potential, as well as our A.M. Best rating. Insurance programs provided to FedEx and programs provided to the contracted service providers are not necessarily dependent upon one another.

Our collateral held may prove to be insufficient.

We require collateral from our large insureds covering the insureds’ obligations for self-insured retentions or deductibles related to policies of insurance provided. Should we, as surety, become responsible for such insured obligations, the collateral held may prove to be insufficient. In this regard, FedEx utilizes significant self-insured retentions and deductibles under policies of insurance provided by us. In the case of FedEx, we have determined that the financial strength of the customer is sufficient to allow for holding only partial collateral at this time. Should we become responsible for this customer’s entire self-insured retention and deductible obligations, the collateral held would be insufficient, and we would sustain a significant operating loss.

A material drop in interest rates, or disruption in the fixed income markets, could have an adverse impact on our earnings and, potentially, our financial position.

Given our significant interest-bearing investment portfolio, if interest rates materially drop or the fixed income markets are otherwise disrupted, our income from these investments could be materially reduced, which would reduce our results of operations, equity, business and insurer financial strength rating. The functioning of the fixed income markets, the values of the investments we hold and our ability to liquidate them may be adversely affected if those markets are disrupted by a change in interest rates or otherwise affected by significant negative factors, including, without limitation: local, national, or international events, such as regulatory changes, wars, or terrorist attacks; a recession, depression, or other adverse developments in either the U.S. or other economies that adversely affects the value of securities held in our portfolio; financial weakness or failure of one or more financial institutions that play a prominent role in securities markets or act as a counterparty for various financial instruments, which could further disrupt the markets; inactive markets for specific kinds of securities, or for the securities of certain issuers or in certain sectors, which could result in decreased valuations and impact our ability to sell a specific security or a group of securities at a reasonable price when desired; a significant change in inflation expectations; or the onset of deflation or stagflation.

Our investment portfolio is subject to market and credit risks, which could affect our financial results and ability to conduct business.

We have a large portfolio of securities and limited partnership investments which can fluctuate in value with a wide variety of market conditions. A decline in the aggregate value of the securities and limited partnership investments would result in a commensurate decline in our shareholders’ equity, either through the income statement or directly to equity. The resultant decline could, at least temporarily, materially adversely affect our results of operations, equity, business and insurer financial strength ratings.

~~- 14 -~~21

~~Technological advances~~LEGAL, ~~including~~REGULATORY ~~those~~AND ~~specific~~PUBLIC toPOLICY ~~the transportation industry, could present us with added competitive risks.~~RISKS

AnChanges ~~increase~~ in ~~accident~~laws ~~prevention technologies~~ and ~~the~~regulations ~~growth~~governing ~~of autonomous or partially autonomous vehicles could reduce~~ the ~~amount of accidents over time and shift the liability from the owner of the vehicle to the manufacturer, which would cause automobile~~ insurance toindustry ~~become~~could have a ~~smaller~~negative ~~portion~~impact ofon our ~~overall~~ability property and casualty insurance book of business. Innovations in telematics and the increase in usage-based information have become more important and will likely change the way premiums are determined in the future. These advances in technology could materially change the way products in the transportation industry are designed, priced and underwritten, and if we fail to ~~adjust~~generate toincome ~~these~~from ~~changes in a timely manner,~~ our ~~business~~insurance ~~and results of~~ operations ~~could be materially adversely affected~~.

~~The~~One ~~failure~~or more of our ~~information~~Insurance ~~technology~~Subsidiaries ~~systems~~are regulated and/or ~~other~~licensed ~~operational~~in ~~systems~~all to50 ~~operate~~of ~~properly~~the orUnited ~~disruptions~~States, orthe ~~breaches~~District of Columbia, all Canadian provinces, Puerto Rico and Bermuda. We are obligated to comply with numerous complex and varied governmental regulations in order to maintain our ~~information~~authority ~~systems~~to write insurance business. Failure to maintain compliance could ~~adversely~~result ~~affect~~ in governmental regulators preventing us from writing new business, which would have a material adverse impact on us, our results of operations and our financial condition. Further, the ability of our Insurance Subsidiaries to adjust insurance rates and other product offerings is regulated for significant portions of our business, and needed rate adjustments can be denied or delayed for substantial periods by regulators, which could have a material adverse effect on our results of operations and our financial condition.

We ~~rely~~have ~~upon~~two ~~complex~~classes ~~and expensive information technology systems and other operational systems and on the integrity and timeliness~~ of ~~our~~common ~~data~~stock ~~to run our businesses, service our customers and interact~~ with ~~policyholders,~~unequal ~~brokers~~voting ~~and~~rights ~~employers. The~~that pace at which information systems must be upgraded is continually increasing, requiring an ongoing commitment of significant resources to maintain or upgrade to current standards. Our success may be impacted if we are ~~not~~effectively ~~able~~controlled toby ~~develop and expand the effectiveness of existing systems and to continue to enhance information systems that support~~ our ~~operations~~principal inshareholders ~~a cost-effective manner. Our networking infrastructure~~ and ~~related~~management, ~~assets~~which ~~may~~limits ~~also~~other beshareholders’ ~~subject~~ability to ~~employee~~influence ~~errors or other unforeseen activities that could result in the disruption of business processes, network degradation and system downtime. To the extent that such disruptions occur,~~ our ~~business, results of~~ operations ~~and financial condition could be materially and adversely affected, resulting in a possible loss of business~~.

InOur ~~addition,~~principal ~~our daily business operations require us to retain sensitive data such as proprietary business information and data related to customers~~shareholders, ~~claimants~~directors and ~~business~~executive ~~partners~~officers ~~within our network infrastructure. Cybersecurity attacks~~ and ~~intrusion~~their ~~efforts~~affiliates ~~are~~control ~~continuous~~approximately ~~and~~49% ~~evolving. The~~of ~~scope~~the ~~and~~outstanding ~~severity~~shares of ~~risks~~voting ~~that~~Class ~~cyber~~A ~~threats~~Common ~~present~~Stock ~~have increased dramatically,~~ and ~~include,~~approximately ~~but~~25% ~~are~~of ~~not~~the ~~limited~~outstanding ~~to,~~shares ~~disruptions in systems, unauthorized release~~ of ~~confidential~~ ornon-voting ~~otherwise~~Class ~~protected~~B ~~information~~Common ~~and corruption of data~~Stock. ~~Our~~These ~~information~~parties ~~technology~~effectively ~~and~~control ~~other systems have been~~us, ~~and~~direct ~~in the future could be, subject to physical or electronic break-ins; attempts to gain unauthorized access to data from~~ our ~~employees~~affairs, ~~vendors~~and orexert ~~third~~significant ~~parties;~~influence ~~unauthorized~~in ~~tampering;~~the ~~exploitation~~election of ~~weaknesses~~directors ~~related~~and toapproval ~~our~~of ~~vendors~~significant orcorporate ~~other~~transactions. The ~~third~~interests ~~parties; denials~~ of ~~service;~~these ~~computer~~shareholders ~~viruses~~may ~~and~~conflict ~~other~~with ~~malicious~~those ~~software;~~of or other ~~cybersecurity~~shareholders, ~~attacks~~and ~~or breaches,~~this ~~resulting~~concentration inof avoting ~~failure~~power tomay ~~maintain~~limit the ~~security,~~marketability ~~confidentiality or privacy~~ of ~~sensitive data, including personal information relating to~~ our ~~customers~~stock and ~~business~~has ~~partners, or in~~ the ~~theft~~potential ofto ~~intellectual~~delay, ~~property~~defer or ~~proprietary information. We~~prevent ~~evaluate~~a ~~the~~change ~~adequacy~~in ofcontrol ~~our~~that ~~third-party~~other ~~service~~shareholders ~~providers’ cybersecurity~~may ~~measures~~believe ~~through periodic due diligence and contractual obligations. Despite these safeguards, disruptions~~ to ~~and~~be ~~breaches~~in oftheir ~~our~~best ~~information technology systems or providers’ are possible and may negatively impact our business~~interests.

Legal and regulatory proceedings are unpredictable and could produce one or more unexpected verdicts against us that could materially and adversely affect our financial results for any given period.

We are currently, and from time to time have been, involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of business. Some of these proceedings may involve matters particular to Protective or one or more of our Insurance Subsidiaries, while others may pertain to business practices in the industry in which we operate. These matters often raise difficult factual and legal issues and are subject to uncertainties and complexities. The outcomes of these matters are difficult to predict, and the amounts or ranges of potential loss at particular stages in the proceedings are in most cases difficult or impossible to ascertain. A further complication is that even where the possibility of an adverse outcome is remote under traditional legal analysis, juries sometimes substitute their subjective views in place of facts and established legal principles. Given the unpredictability of the legal and regulatory landscape in which we operate, there can be no assurance that one or more of these matters will not produce a result that could materially and adversely affect our financial results for any given period.

For information about our pending legal proceedings, see Note T, “Litigation, Commitments and Contingencies,” of the notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K..

Changes in current accounting practices and future pronouncements may materially impact our reported financial results.

Developments in accounting practices may require us to incur considerable additional expenses to comply with such developments, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively. The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, net equity and other historical financial statement line items that are important to users of our financial statements. Changes could also introduce significant volatility in our results of operations, equity, business and insurer financial strength rating.

~~We may be unable to attract and retain qualified employees.~~22

- 15 -

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

The Company owns its home office building and the adjacent real estate in Carmel, Indiana. The home office building contains a total of 181,000 square feet of usable space, and the Company currently occupies approximately 74% of this space, with a portion of the remainder being leased to non-affiliated entities on short-term leases expiring through 2023.

The Company also owns a building and the adjacent real estate in Indianapolis, approximately nine miles from its main office in Carmel. The building contains approximately 15,000 square feet of usable space, and is used primarily for off-site data storage and as a contingent back-up and disaster recovery site.

The Company's entire operations are conducted from these two facilities. The current facilities are expected to be adequate for the Company's operations for the near future.

Item 3. LEGAL PROCEEDINGS

The information required with respect to this item can be found in Note T, "Litigation, Commitments and Contingencies," of the notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated by reference into this Item 3.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

~~- 16 -~~23

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following summary sets forth certain information concerning the Company's executive officers as of ~~February~~March 288, 2020:

Name	Age	Title	Served in Such Capacity Since
Jeremy D. Edgecliffe-Johnson	4950	Chief Executive Officer	2019 (1)
John R. Barnett	5253	Chief Financial Officer	2019 (2)
Bahr D. Omidfar	5960	Chief Information Officer	2019 (3)
Jeremy F. Goldstein	4849	Executive Vice President	2017 (4)
Patrick S. Schmiedt	3940	Chief Underwriting Officer	2018 (5)

(1)

Mr. Edgecliffe-Johnson joined the Company in May 2019 as Chief Executive Officer. Prior to joining the Company, Mr. Edgecliffe-Johnson served as President, U.S. Commercial of American International Group, Inc. (“AIG”) from February 2016 to December 2017, with responsibility for underwriting, operations, claims and distribution in the U.S., Canada, Brazil, Mexico and Puerto Rico. He served as Chief Executive Officer and President of Lexington Insurance Company, AIG’s excess and surplus lines unit, from February 2013 to December 2017. Mr. Edgecliffe-Johnson served in various executive leadership roles at AIG between 2000 and 2013, including Specialty Product Line Executive, U.S. & Canada; President of Cat Excess Liability; U.S. Executive for Energy Excess Casualty; and Regional Vice President for the Mid-Atlantic territory. Prior to joining AIG, Mr. Edgecliffe-Johnson served as a broker for Sedgwick, Inc. and Marsh, Inc.

(2)

Mr. Barnett joined the Company in September 2019 as Chief Financial Officer. Prior to joining the Company, Mr. Barnett served as Chief Financial Officer and Executive Vice President of First Acceptance Corporation, a non-standard auto insurance underwriter (“First Acceptance”), since October 2018 and served as Senior Vice President, Finance of First Acceptance from May 2007 to March 2013. Mr. Barnett’s responsibilities at First Acceptance included financial reporting, accounting, planning and analysis, investments, actuarial, and treasury operations. From March 2013 to October 2018, Mr. Barnett served as Vice President, Finance of Broadcast Music, Inc., a music rights management company. Prior to his time at First Acceptance, Mr. Barnett served in various management and manufacturing roles during his career, including as Senior Manager, Planning and Analysis of Anheuser-Busch Companies from 1999 to 2007.

(3) Mr. Omidfar joined the Company in September 2019 as Chief Information Officer. Prior to joining the Company, Mr. Omidfar most recently served as Chief Technology Officer at CNA Financial Corporation from January 2018 to April 2019, where he developed, executed and led various initiatives, including the implementation of a new operating model; led strategic partnerships; and created a technology strategy and roadmap for the enterprise. Mr. Omidfar served in various Senior Vice President roles with Fidelity Investments, Inc. from August 2013 until January 2018, ~~focusing~~including onSVP, ~~technology~~Technology and ~~security~~Software Security from May 2015 to January 2018, SVP, Quality Assurance Testing and Software Security from October 2014 to April 2015 and SVP, Quality Assurance and Testing from August 2013 to September 2014. Mr. Omidfar ~~has~~ also held roles at Rockwell Automation, Inc., Raytheon Company, Motorola, Inc., Deloitte LLP and Northrop Grumman Corporation and holds multiple certifications, including a Six Sigma Black Belt.

(4) Mr. Goldstein was ~~elected~~appointed Executive Vice President in November 2017. He previously served as Senior Vice President of the Company from 2015 to 2017, as Vice President from 2011 to 2015 and as Corporate Secretary from 2016 to 2018.

(5) Mr. Schmiedt was ~~elected~~appointed Chief Underwriting Officer in October 2018. He previously served as Senior Vice President of Underwriting from 2016 to 2018, as Vice President of Underwriting from 2015 to 2016 and as Assistant Vice President of Underwriting from 2013 to 2015.

~~- 17 -~~24

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, ~~AND~~ RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of the Company's Class A and Class B Common Stock are traded on Nasdaq under the symbols PTVCA and PTVCB, respectively. The Class A and Class B common shares have identical rights and privileges, except that Class B shares have no voting rights other than on matters for which Indiana law requires class voting. As of ~~February~~March 288, ~~2020~~2021, there were approximately 2728 record holders of Class A Common Stock and approximately 5642 record holders of Class B Common Stock.

The Company has paid quarterly cash dividends continuously since 1974. The Company paid a quarterly dividend of $0.10 per share during ~~2019~~2020. In the first quarter of ~~2020~~2021, the Company declared a dividend of $0.10 per share. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements and financial conditions and are subject to regulatory restrictions. At December 31, ~~2019~~2020, $~~131~~136.65 million, or 3637.16% of shareholders' equity, represented net assets of the Company's Insurance Subsidiaries which, at that time, could not be transferred in the form of dividends, loans or advances to Protective because of minimum statutory capital requirements. However, management believes that these restrictions do not currently pose any material dividend payment concerns for the Company. The Board intends to address the subject of dividends at each of its future meetings and will consider the Company's earnings, returns on investments and its capital needs.

The following table presents information regarding the Company's repurchases of its Common Stock for the periods indicated:

Period	Total number of shares purchased ⁽¹⁾		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs ⁽²⁾		Maximum number of shares that may yet be purchased under the plans or programs ⁽²⁾
October 1 - October 31, 2020		8,737	$	14.17		-		1,375,729
November 1 - November 30, 2020		-				-		1,375,729
December 1 - December 31, 2020		4,921		13.71		-		1,375,729
Total		13,658				-

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under the plans or programs (1)
October 1 - October 31, 2019		16,136	$	16.73		16,136		1,561,599
November 1 - November 30, 2019		30,598		16.03		30,598		1,531,001
December 1 - December 31, 2019		28,508		16.03		28,508		1,502,493
Total		75,242				75,242

(1)	Amounts represent shares withheld by the Company in connection with employee payroll tax withholding upon the vesting of stock awards. Stock amounts in the consolidated statements of shareholders’ equity are shown net of these shares withheld.

(12) On August 31, 2017, ~~the~~our ~~Company's~~ Board of Directors authorized the reinstatement of the Company's share repurchase program for up to 2,464,209 shares of ~~the~~its ~~Company's~~ Class A or Class B Common Stock. On August 6, 2019, the Company's Board of Directors reaffirmed the Company's 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 $25.0 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. ~~Pursuant~~The ~~to this~~ share repurchase program, ~~the~~may ~~Company~~be ~~entered~~amended, ~~into~~suspended aor ~~Rule~~discontinued ~~10b5-1~~at ~~plan~~any ontime ~~December~~and ~~30,~~does ~~2019,~~not ~~which~~commit ~~authorized~~ the ~~repurchase~~Company ~~of up~~ to ~~$0.6~~repurchase ~~million~~any shares of ~~the~~its ~~Company's outstanding~~ common ~~shares~~stock. atThe ~~various~~Company ~~pricing~~has ~~thresholds~~funded, inand ~~accordance~~intends ~~with~~to ~~guidelines~~continue ~~specified~~to ~~under~~fund, ~~Rule 10b5-1 of~~ the ~~Exchange~~share ~~Act.~~repurchase ~~The~~program ~~Rule~~from ~~10b5-1~~cash ~~plan expired~~ on ~~February 26, 2020~~hand. No ~~duration~~share ~~has~~repurchases have been ~~placed~~made onby the Company's ~~share~~under ~~repurchase~~the program, ~~and~~since ~~the~~March ~~Company~~20, ~~reserves~~2020. ~~the right to amend~~Additionally, ~~suspend~~in orconnection ~~discontinue~~with itthe atMerger ~~any~~Agreement ~~time.~~with ~~The~~Progressive, ~~share repurchase program does not commit~~ the Company tois ~~repurchase~~prohibited ~~any~~from ~~shares~~repurchasing any of its ~~Common~~Class ~~Stock.~~A ~~The~~or ~~Company~~Class ~~has~~B ~~funded,~~Common ~~and~~Stock ~~intends~~under ~~to continue to fund,~~ the ~~share~~ repurchase program ~~from cash on hand~~.

~~- 18 -~~25

Corporate Performance

The following graph shows a five-year comparison of cumulative total return for the Company's Class B Common Stock, the Russell 2000 Index and the Company's peer group as determined by management (the "PTVCB Peer Group"). The basis of comparison is a $100 investment at December 31, ~~2014~~2015, in each of (i) Protective, (ii) the Russell 2000 Index and (iii) the PTVCB Peer Group. All dividends are assumed to be reinvested.

Year Ended December 31

Index

~~2014~~2015

~~2015~~2016

~~2016~~2017

~~2017~~2018

~~2018~~2019

~~2019~~2020

Protective Insurance Corporation

100.00

97109.3425

~~106~~108.3482

~~105~~79.9354

7778.4268

7668.5998

Russell 2000 Index

100.00

95121.5931

~~115~~139.9508

~~132~~123.9476

~~118~~155.3035

~~148~~186.4936

PTVCB Peer Group

100.00

~~107~~120.5665

~~128~~131.1777

~~139~~136.7311

~~144~~152.2267

~~161~~123.6813

PTVCB Peer Group Amerisafe, Inc. ~~HCI~~Heritage ~~Group~~Insurance Holdings, Inc. Atlas Financial Holdings, Inc. ~~Heritage Insurance Holdings, Inc. Donegal Group Inc.~~ James River Group Holdings, Ltd. ~~EMC~~Donegal ~~Insurance~~ Group Inc. NMI Holdings, Inc. Employers Holdings, Inc. Safety Insurance Group, Inc. FedNat Holding Company United Insurance Holdings Corp. Hallmark Financial Services, Inc. Universal Insurance Holdings, Inc. HCI Group, Inc.

~~- 19 -~~26

Item 6. SELECTED FINANCIAL DATA

The table below provides selected consolidated financial data of the Company. The information has been derived from our consolidated financial statements for each of the years in the five-year period ended December 31, ~~2019~~2020. You should read this selected consolidated financial data in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, ~~2019~~2020 included in Part II, Item 8 "Financial Statements and Supplementary Data"," and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.

Year Ended December 31

2019

2018

2017

2016

2015

2020

2019

2018

2017

2016

(Dollars in thousands, except per share data)

Gross premiums written

~~574~~547,~~918~~561

~~582~~574,~~500~~918

~~504~~582,~~737~~500

~~403~~504,~~004~~737

~~383~~403,~~553~~004

Net premiums earned

~~447~~445,~~288~~515

~~432~~447,~~880~~288

~~328~~432,~~145~~880

~~276~~328,~~011~~145

~~263~~276,~~335~~011

Net investment income

2625,~~249~~422

2226,~~048~~249

1822,~~095~~048

1418,~~483~~095

1214,~~498~~483

Net realized and unrealized gains (losses) on investments

12(9,~~889~~236

)

~~(25~~12,~~691~~889

)

19(25,~~686~~691

)

2319,~~228~~686

(123,~~261~~228

)

Losses and loss expenses incurred

~~348~~318,~~468~~958

~~345~~348,~~864~~468

~~247~~345,~~518~~864

~~186~~247,~~481~~518

~~155~~186,~~750~~481

Net income (loss)

74,~~347~~463

~~(34~~7,~~075~~347

)

18(34,~~323~~075

)

2818,~~945~~323

2328,~~283~~945

Earnings (loss) per share -- net income (loss) (1)

0.5031

(20.2850

)

1(2.2128

)

1.9221

1.5592

Cash dividends per share

0.40

10.1240

1.0812

1.0408

1.0004

Investment portfolio (2)

~~968~~1,~~205~~043,704

~~878~~968,~~638~~205

~~854~~878,~~595~~638

~~749~~854,~~501~~595

~~729~~749,~~877~~501

Total assets

1,~~634~~722,~~360~~827

1,~~490~~634,~~131~~360

1,~~357~~490,~~016~~131

1,~~154~~357,~~137~~016

1,~~085~~154,~~771~~137

Shareholders' equity

~~364~~363,~~316~~082

~~356~~364,~~082~~316

~~418~~356,~~811~~082

~~404~~418,~~345~~811

~~394~~404,~~498~~345

Book value per share

25.5143

2325.9551

2723.8395

2627.8183

26.2581

(1) Earnings (loss) per share are adjusted for the dilutive effect of restricted stock outstanding for ~~2015-2017~~each ~~and~~year ~~2019~~presented other than 2018.

(2)	Includes money market instruments classified as cash equivalents in the consolidated balance sheets.

~~- 20 -~~27

Item 7. 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 ~~commercial~~public ~~automobile~~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.

Effective August 1, 2018, we changed our name to Protective Insurance Corporation to better align our holding company's and Insurance Subsidiaries' identities and to reflect our position within the insurance industry.

Effective January 1, 2018, we adopted Accounting Standards Update ("ASU") 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01, resulting in a cumulative-effect adjustment of $71.0 million ($46.2 million, net of tax). This adjustment moved our historical unrealized gains and losses, net of tax, on our equity portfolio from accumulated other comprehensive income (loss) to retained earnings, but had no impact on overall shareholders' equity. In addition, for 2018 and forward, the change in fair value for equity securities is required to be recognized in net earnings rather than in other comprehensive income (loss). The impact to our consolidated statements of operations will vary depending upon the level of volatility in the performance of the securities held in our equity portfolio and the overall market.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the "U.S. Tax Act") was signed into law, which lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, we recorded a tax benefit of $9.6 million related to the remeasurement of our deferred tax assets and liabilities at December 31, 2017. As of December 31, 2017, the Internal Revenue Service ("IRS") had not yet published all of the detailed regulations resulting from the enactment of the U.S. Tax Act; therefore, while we had not completed our accounting for the tax effects, we made a reasonable estimate of the tax effects on our existing deferred tax balances at December 31, 2017. We finalized our accounting for the tax effects of the U.S. Tax Act during 2018. No material adjustments to income tax expense (benefit) were recorded during 2018.

On ~~August~~September 234, ~~2019~~2020, A.M. Best Company, Inc. ("A.M. Best") affirmed our financial strength rating of "A" (Excellent). A.M. Best continues to categorize our balance sheet as "very strong" and our operating performance as "adequate," but its outlook remains negative. On February 16, 2021, in connection with the announced Merger Agreement discussed below, A.M. Best placed our financial strength rating under review with positive implications.

Special Committee and Contingent Sale Agreement

On May 5, 2020, the Board of Directors (the “Board”) of Protective formed a special committee of independent directors (the “Special Committee”) to evaluate a Stockholder Support and Contingent Sale Agreement (the “Contingent Sale Agreement”) entered into by and among certain prospective third party purchasers (the “Offering Parties”), certain of Protective’s shareholders and the other parties thereto (The Contingent Sale Agreement was amended and restated on August 17, 2020).

In June 2020, Protective announced that the Board determined the transactions contemplated by the Contingent Sale Agreement were not in the best interests of Protective and our stakeholders. As part of this evaluation, the Board determined that it would also recommend against the potential tender offer contemplated by the Contingent Sale Agreement if it were commenced, and that if the transactions contemplated by the Contingent Sale Agreement were consummated, it expects to take the necessary actions to redeem all or certain of the Class A shares of Protective purchased by the Offering Parties pursuant to Protective’s Code of By-laws. Protective also announced that the Special Committee of the Board was exploring, with the assistance of its independent financial and legal advisors, strategic alternatives that may be available to Protective.

During 2020, we incurred an aggregate of $2.9 million ($2.3 million, net of tax) of expenses in conjunction with the Board’s review of the Contingent Sale Agreement and the activities of the Special Committee.

Proposed Merger with The Progressive Corporation

Merger Agreement

The Board, at the unanimous recommendation of the Special Committee, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, Protective and its shareholders, and approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby. The Merger is expected to close prior to the end of the third quarter of 2021. At the effective time of the Merger, each issued and outstanding share of common stock, without par value, of Protective (other than each share of Protective's common stock that is owned by Protective as treasury stock or by any subsidiary of Protective and each share of Protective's common stock owned by Progressive, Merger Sub or any other subsidiary of Progressive immediately prior to the effective time of the Merger) will be automatically canceled and converted into the right to receive $23.30 in cash, without interest, for a total transaction value of approximately $338 million.

The Merger Agreement contains various customary representations and warranties from each of Protective, Progressive and Merger Sub. Protective has also agreed to various customary covenants, including but not limited to conducting its business in the ordinary course and not engaging in certain types of transactions during the period between the execution of the Merger Agreement and the closing of the Merger. However, the Merger Agreement permits Protective to continue to pay regular quarterly dividends not to exceed $0.10 per share of its common stock. The consummation of the Merger is subject to certain conditions, including approval of the Merger by Protective's Class A shareholders, legal and regulatory approvals including from the Indiana Department of Insurance and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary closing conditions.

For additional information regarding the risks associated with the Merger, please see Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

Voting and Support Agreement

On February 14, 2021, Protective also entered into a Voting and Support Agreement (the “Voting Agreement”) with Progressive and certain of Protective's shareholders. The Voting Agreement requires that the Protective shareholders party to the Voting Agreement: (i) appear at the meeting of the holders of Protective's Class A common stock to consider resolutions to approve the Merger Agreement and the Merger or otherwise cause their shares of Protective's common stock to be counted as present for purposes of calculating a quorum, and (ii) vote their shares (a) in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and any action reasonably requested by Progressive or the Board in furtherance of the foregoing, (b) against any action or agreement that would result in a material breach of any covenant, representation or warranty or other obligation or agreement of Protective contained in the Merger Agreement and (c) against any takeover proposal or superior proposal (provided, that if the Board changes its recommendation with respect to the Merger, any shares of Class A common stock owned by such shareholders in excess of approximately 35% of the outstanding shares of Class A common stock will be voted in the same proportion as those shares of Class A common stock voted by the holders of Protective's Class A common stock that are not party to the Voting Agreement).

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 with $15.0 million ($11.9 million, net of tax) attributed to our ongoing litigation with Personnel Staffing Group ("PSG") discussed in Note T, "Litigation, Commitments and Contingencies," to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. During the third quarter of 2020, we performed an update to our CECL allowance calculation related to the PSG matter and recorded an additional allowance of $1.5 million ($1.2 million, net of tax). No additional allowance was recorded in the fourth quarter of 2020. This allowance is included within other operating expenses in the consolidated statement of operations for the year ended December 31, 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 limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. We adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date. For those securities in an unrealized loss position where we intended to sell as of December 31, 2020, we recorded a write down to earnings of $1.8 million during the year ended December 31, 2020. We also analyzed securities in an unrealized loss position for credit losses and recorded an allowance for credit losses of $1.0 million as of December 31, 2020. We reviewed our remaining fixed income securities in an unrealized loss position as of December 31, 2020 and determined the losses were primarily the result of non-credit factors, such as the increase in market volatility due to the disruption in global financial markets as a result of the novel coronavirus ("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.

COVID-19 Impacts

Beginning in March 2020 and continuing through the date of this Annual Report on Form 10-K, the global pandemic associated with COVID-19 and related economic conditions have impacted the global economy and our results of operations. For the year ended December 31, 2020, net premiums earned within our commercial automobile products, specifically public transportation, were negatively impacted due to a reduction in miles driven, which is the basis for premiums we receive, as well as an overall reduction in public transportation units insured. The declines in public transportation persisted throughout the year and have continued into 2021, but we saw a recovery in the third and fourth quarters within other commercial automobile products that has continued through the date of this Annual Report on Form 10-K. However, losses and loss expenses incurred during the same period reflected favorable impacts within all commercial automobile products as a result of declines in accident frequency due to lower traffic density. In addition to these impacts on our underwriting loss, as defined below, we incurred net realized and unrealized losses on investments of $9.2 million for the year ended December 31, 2020, primarily due to investment losses realized as a result of the significant declines in the global financial markets experienced during the first and second quarters due to the COVID-19 pandemic. As of December 31, 2020, both our fixed income and equity security investments have recovered to a net gain position. 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. Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during 2020. For further discussion regarding the potential impacts of COVID-19 and related economic conditions on our results, see Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

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~~flows 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. On December 30, 2019, we entered into a stock repurchase plan for the purpose of repurchasing up to $0.6 million of shares of our common stock, at various pricing thresholds, in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Rule 10b5-1 Plan"). The ~~Rule 10b5-1 Plan was established pursuant to, and as part of, our~~ share repurchase program and permits shares to be repurchased in accordance with pre-determined criteria when repurchases would otherwise be prohibited, such as during self-imposed blackout periods, or under insider trading laws. The Rule 10b5-1 Plan expired on February 26, 2020. 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 year ended December 31, ~~2019~~2020, we paid $111.58 million to repurchase 11126,~~989~~764 shares of Class AB ~~and~~Common ~~665~~Stock under the share repurchase program. No share repurchases have been made since March 20,~~099~~ ~~shares~~2020. Additionally, in connection with the Merger Agreement with Progressive discussed above, we are prohibited from repurchasing any of our Class A or Class B Common Stock under the share repurchase program.

For several years, our investment philosophy has emphasized the purchase of short-term 21bonds 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 December 31, 2020 would be expected to fall by approximately 2.8%. The credit quality of our fixed income securities remains high with a weighted average rating of AA-, including cash. The average contractual life of our fixed income and short-term investment portfolio was 7.1 years at December 31, 2020 compared to 6.9 years at 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. 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.

~~For~~Net ~~several~~cash ~~years,~~provided ~~our~~by ~~investment~~operating ~~philosophy~~activities ~~has~~was ~~emphasized~~$74.9 ~~the~~million ~~purchase~~during of2020 ~~short-term~~compared ~~bonds~~to ~~with~~$86.7 ~~high~~million ~~quality~~for ~~and liquidity~~2019. ~~Our~~The ~~fixed~~$11.8 ~~income~~million ~~investment~~decrease ~~portfolio~~in ~~continues~~operating tocash ~~emphasize~~flows ~~shorter-duration~~during ~~instruments. If~~2020 ~~there~~reflected ~~was~~lower apremium ~~hypothetical~~volume ~~increase~~and inlower ~~interest~~investment ~~rates~~income offrom ~~100 basis points, the price of~~ our fixed income ~~portfolio,~~securities ~~including~~when ~~cash,~~compared ~~at December 31, 2019 would be expected~~ to ~~fall~~the bysame ~~approximately~~period 2of 2019.~~6%.~~ ~~The~~Additionally, ~~credit~~net ~~quality~~cash offrom ~~our~~operations ~~fixed~~in ~~income securities~~2019 ~~remains~~benefited ~~high~~from ~~with~~the aimpact ~~weighted average rating~~ of ~~AA-,~~growth ~~including~~in ~~cash. The~~premiums ~~average~~and ~~contractual~~the ~~life~~timing of ~~our~~related ~~fixed~~claims ~~income~~payments. Net ~~and~~cash ~~short-term~~provided ~~investment~~by ~~portfolio~~operating activities was 6$86.97 ~~years~~million atfor ~~December 31,~~ 2019 compared to 5$100.57 ~~years~~million atin ~~December 31,~~ 2018. The ~~average~~ ~~duration~~$14.0 ofmillion ~~our~~decrease ~~fixed~~was ~~income~~primarily ~~portfolio~~related ~~remains~~to ~~shorter than the average duration of our liabilities. We also remain~~ an ~~active~~increase ~~participant~~ in ~~the~~payments ~~equity securities market, using capital in excess of amounts considered necessary to fund our current operations. The long-term horizon~~ for ~~our~~losses ~~equity~~and ~~investments~~loss ~~allows~~adjustment usexpenses ~~to invest in positions where ultimate value,~~ and ~~not~~operating ~~short-term market fluctuation~~expenses, ispartially ~~the~~offset ~~primary focus. Investments made~~ by ~~our~~higher ~~domestic~~premium ~~property/casualty~~volume ~~Insurance Subsidiaries~~as ~~are~~well ~~regulated~~as byhigher ~~guidelines~~investment ~~promulgated~~income byduring ~~the National Association of Insurance Commissioners (the "NAIC"), which are designed to provide protection for both policyholders and shareholders~~2019.

Net cash ~~flows~~used ~~from~~in ~~operations~~investing ~~decreased~~activities was $1486.0 million for 2020 compared to $86151.79 million ~~for~~in 2019. ~~compared~~The to $~~100~~65.79 million inchange ~~2018~~was primarily due to a $31. ~~The~~3 million decrease in ~~operating~~the investment of cash ~~flows~~and ~~was~~cash ~~primarily~~equivalents ~~related~~into tofixed anincome ~~increase~~securities, in$52.0 ~~payments~~million ~~for~~higher ~~losses~~proceeds ~~and loss~~from ~~adjustment~~maturities ~~expenses~~of fixed income securities and ~~operating~~a ~~expenses~~$30.1 million increase in net proceeds from sales of equity securities, partially offset by ~~higher~~$18.8 ~~premium~~million ~~volume~~less asin ~~well~~limited aspartnership ~~higher~~distributions ~~investment~~during ~~income~~2020 ~~during~~compared to 2019. Net cash ~~flows~~used ~~from~~in ~~operations~~investing ~~increased~~activities was $3151.09 million for 2019 compared to net cash provided by investing activities of $~~100~~23.7 million ~~for~~in 2018. The $175.6 million change was primarily the result of a decrease in proceeds from sales of our fixed income and equity securities of $229.7 million compared to 2018. We also had higher purchases of fixed income and equity securities of $978.72 million ~~in 2017,~~during ~~primarily~~2019 ~~due~~compared to ~~higher~~2018. These ~~premium~~cash ~~volume~~outflows were partially offset by $33.4 million in distributions received from our limited partnership investments in 2019 compared to $6.9 million in 2018 and $20.4 million higher proceeds from maturities of fixed income securities during 2019 compared to ~~2017~~2018. Additionally, during 2018, we purchased $10.0 million of company-owned life insurance, which did not recur in 2019.

Net cash used in investing activities was $151.9 million for 2019 compared to net cash provided by investing activities of $23.7 million in 2018. The $175.6 million change was primarily the result of a decrease in proceeds from sales of our fixed income and equity securities of $229.7 million compared to 2018. We also had higher purchases of fixed income and equity securities of $8.2 million during 2019 compared to 2018. These cash outflows were partially offset by $33.4 million in distributions received from our limited partnership investments in 2019 compared to $6.9 million in 2018 and $20.4 million higher proceeds from maturities of fixed income securities during 2019 compared to 2018. Additionally, during 2018, we purchased $10.0 million of company-owned life insurance, which did not recur in 2019. Net cash provided by investing activities was $23.7 million for 2018 compared to net cash used in investing activities of $74.3 million in 2017. The $98.0 million change was primarily related to higher proceeds from sales of fixed income and equity securities and lower purchases of fixed income and equity security investments. These increases were partially offset by lower proceeds from maturities of our fixed income securities and lower distributions from out limited partnership investments during 2018, in addition to the purchase of $10.0 million of company-owned life insurance in the first quarter of 2018.31

Net cash used in financing activities for ~~2019~~2020 consisted of regular cash dividend payments to shareholders of $5.97 million ($0.40 per share) and $111.58 million to repurchase ~~677~~126,~~088~~764 shares of our Class B common stock. Financing activities for ~~2018~~2019 consisted of regular cash dividend payments to shareholders of $165.89 million ($10.1240 per share) and $411.65 million to repurchase ~~199~~677,~~668~~088 shares of our Class A and Class B common stock. Financing activities for ~~2017~~2018 consisted of regular cash dividend payments to shareholders of $16.38 million ($1.0812 per share) and $14.96 million to repurchase 84199,~~960~~668 shares of our Class A and Class B common stock.

Our assets at December 31, ~~2019~~2020 included $5947.80 million of investments included within cash and cash equivalents on the consolidated balance sheet that are readily convertible to cash without market penalty and an additional $86117.40 million of fixed income investments maturing in less than one year. We believe these liquid investments, plus the expected cash flow from premium collections, are sufficient to provide for projected claim payments and operating cost demands. In the event competitive conditions produce inadequate premium rates and we choose to further restrict volume or our premiums are further restricted due to market conditions, including related to the impact of COVID-19, we believe the liquidity of our investment portfolio would permit us to continue to pay claims as settlements are reached without requiring the disposal of investments at a loss, regardless of interest rates in effect at the time. ~~In addition, our reinsurance program is structured to avoid significant cash outlays that accompany large losses.~~

We maintain a revolving credit facility with a $40.0 million limit, with the option for up to an additional $35.0 million in incremental loans at the discretion of the lenders, which has an expiration date of August 9, 2022. Interest on this revolving credit facility is referenced to the London Interbank Offered Rate ("LIBOR") 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 December 31, ~~2019~~2020. At December 31, ~~2019~~2020, the effective interest rate was 21.8825% 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 December 31, ~~2019~~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 ~~2019~~2020 equaled approximately ~~120~~126.79% 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 December 31, ~~2019~~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 December 31, ~~2019~~2020, $3750.96 million may be transferred by dividend or loan to Protective without approval by, or prior notification to, regulatory authorities. An additional $~~201~~151.01 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 $712.1 9 million at December 31, ~~2019~~2020.

~~- 22 -~~32

Non-GAAP Measures

We believe investors’ understanding of our performance is enhanced by our disclosure of underwriting income (loss), which is a measure that is not calculated in accordance with GAAP. Underwriting income (loss) represents the pre-tax profitability or loss of our insurance operations and is derived by subtracting net realized and unrealized gains (losses) on investments and net investment income from income (loss) before federal income tax expense (benefit). For ~~2018~~ the year ended December 31, 2020, we also excluded corporate charges incurred in conjunction with the Board's review of the Contingent Sale Agreement, activities of the Special Committee as well as the CECL allowance adjustment related to the PSG matter discussed above from the calculation of underwriting income (loss). For the year ended December 31, 2018 we had a goodwill impairment charge, which was excluded from the calculation of 2018 underwriting income (loss). We believe the exclusion of these charges and the CECL allowance adjustment increases the period-to-period comparability of our operational results. We use underwriting income (loss) as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations, our underlying business performance and our ongoing operating trends. Underwriting income (loss) should not be viewed as a substitute for income (loss) before federal income tax expense (benefit) calculated in accordance with GAAP, and other companies may define underwriting income (loss) differently.

The ratio of consolidated other operating expenses, less commissions and other income, to net premiums earned, or our expense ratio, and the ratio of losses and loss expenses incurred, plus other operating expenses, less commissions and other income, to net premiums earned, or our combined ratio, are measures of our profitability that we believe increase the period-to-period comparability of our operational results. For the year ended December 31, 2020, we also excluded the corporate charges and CECL allowance adjustment, and for the year ended December 31, 2018, we also excluded the goodwill impairment charge, ~~was excluded~~discussed above from other operating expenses when calculating our expense ratio and our combined ratio, as these ratios are intended to depict our underlying business performance and ongoing operating trends. We believe the exclusion of these charges and the CECL allowance adjustment improves the comparability of our expense and combined ratios with our ratios in prior years. Our management uses these ratios to evaluate performance, allocate resources and forecast future operating periods. While expense ratios and combined ratios are widely used within our industry, our use of such ratios may not be directly comparable to similarly titled measures reported by other companies.

(dollars in thousands)	~~2019~~2020			~~2018~~2019			~~2017~~2018
Income (loss) before federal income tax expense (benefit)	$	86,~~673~~363		$	~~(43~~8,~~872~~673	)	$	10(43,~~122~~872	)
Less: Net realized and unrealized gains (losses) on investments		12(9,~~889~~236	)		~~(25~~12,~~691~~889	)		19(25,~~686~~691	)
Less: Net investment income		2625,~~249~~422			2226,~~048~~249			1822,~~095~~048
Less: Goodwill impairment charge included in other operating expenses (see below)		–			(3,152	)		–
Less: Corporate charges and CECL allowance adjustment included in other operating expenses 1		(4,422	)		–			–
Underwriting income (loss)	$	(30,465	)	$	(37,077	)	$	(27,659	)
Less: Goodwill impairment charge included in other operating expenses		–			–			(3,152	)
Other operating expenses	$	138,456		$	137,177		$	113,594
Underwriting loss	$	(5,401	)	$	(30,465	)	$	(37,077	)
Less: Goodwill impairment charge		–			3,152			–
Other operating expenses	$	143,428		$	138,456		$	137,177
Other operating expenses, excluding goodwill impairment charge	$	138,456		$	134,025		$	113,594
Less: Corporate charges and CECL allowance adjustment 1		4,422			–			–
Less: Goodwill impairment charge		–			–			3,152
Other operating expenses, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge	$	139,006		$	138,456		$	134,025
Ratios
Losses and loss expenses incurred	$	~~348~~318,~~468~~958		$	~~345~~348,~~864~~468		$	~~247~~345,~~518~~864
Net premiums earned		~~447~~445,~~288~~515			~~432~~447,~~880~~288			~~328~~432,~~145~~880
Loss ratio		7771.96	%		7977.9	%		7579.49	%
Other operating expenses	$	~~138~~143,~~456~~428		$	~~137~~138,~~177~~456		$	~~113~~137,~~594~~177
Less: Commissions and other income		97,~~171~~048			9,~~932~~171			59,~~308~~932
Other operating expenses, less commissions and other income		~~129~~136,~~285~~380			~~127~~129,~~245~~285			~~108~~127,~~286~~245
Net premiums earned		~~447~~445,~~288~~515			~~432~~447,~~880~~288			~~328~~432,~~145~~880
Expense ratio		2830.96	%		2928.49	%		3329.04	%
Impact of goodwill impairment charge		–			(0.7	)%		–
Impact of corporate charges and CECL allowance adjustment 1		(1.0	)%		–			–
Expense ratio, excluding goodwill impairment charge		28.9	%		28.7	%		33.0	%
Impact of goodwill impairment charge		–			0.0	%		(0.7	)%
Combined ratio		106.8	%		109.3	%		108.4	%
Expense ratio, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge		29.6	%		28.9	%		28.7	%
Combined ratio, excluding goodwill impairment charge		106.8	%		108.6	%		108.4	%
Combined ratio		102.2	%		106.8	%		109.3	%
Combined ratio, excluding corporate charges, CECL allowance adjustment and goodwill impairment charge		101.2	%		106.8	%		108.6	%

-1 23Represents -the corporate charges incurred in conjunction with the Board's review of the Contingent Sale Agreement, activities of the Special Committee and an adjustment to our CECL allowance related to the PSG litigation matter discussed above.

Results of Operations

2020 Compared to 2019

	2020			2019			Change			% Change
Gross premiums written	$	547,561		$	574,918		$	(27,357	)		(4.8	)%
Ceded premiums written		(106,561	)		(122,676	)		16,115			(13.1	)%
Net premiums written	$	441,000		$	452,242		$	(11,242	)		(2.5	)%
Net premiums earned	$	445,515		$	447,288		$	(1,773	)		(0.4	)%
Net investment income		25,422			26,249			(827	)		(3.2	)%
Commissions and other income		7,048			9,171			(2,123	)		(23.1	)%
Net realized and unrealized gains (losses) on investments		(9,236	)		12,889			(22,125	)		(171.7	)%
Total revenue		468,749			495,597
Losses and loss expenses incurred		318,958			348,468			(29,510	)		(8.5	)%
Other operating expenses		143,428			138,456			4,972			3.6	%
Total expenses		462,386			486,924
Income (loss) before federal income tax expense (benefit)		6,363			8,673			(2,310	)
Federal income tax expense (benefit)		1,900			1,326			574
Net income (loss)	$	4,463		$	7,347		$	(2,884	)

Gross premiums written for 2020 decreased $27.4 million (4.8%), while net premiums earned decreased $1.8 million (0.4%), as compared to 2019. The lower net premiums earned in 2020 were primarily the result of declines in premiums within our commercial automobile products, specifically public transportation, as a result of a reduction in miles driven, which is the basis for premiums we receive, as well as an overall reduction in public transportation units insured, both due to the impact of COVID-19. During the second half of the year, we saw a recovery in premiums within certain commercial automobile products due to a return to a more normal level of miles driven, but the declines in public transportation continued. Additionally, we experienced reduced premiums associated with lower retention rates as we continue to take actions to improve profitability, including rate increases and non-renewal of certain risks. These decreases were partially offset by rate increases, growth in existing business lines and new business policies sold mainly in our commercial automobile products. 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 19.5% of gross premiums written for 2020 compared to 21.3% for 2019. The decrease in premiums ceded was the result of growth in our commercial automobile products, which carry a lower ceded reinsurance percentage when compared to ceding rates on our workers' compensation products, in addition to the non-renewal of the reinsurance treaty, which impacted the second half of 2020, discussed below.

Losses and loss expenses incurred during 2020 decreased $29.5 million (8.5%) to $319.0 million compared to $348.5 million in 2019, while the loss ratio decreased to 71.6% for 2020 compared to 77.9% for 2019. The loss ratio is calculated as the percentage of losses and loss expenses incurred to net premiums earned. The lower losses and loss expenses and lower loss ratio for 2020 reflected the results of our underwriting actions, including non-renewal of unprofitable business as well as significant rate increases in commercial automobile. Additionally, losses and loss expenses incurred reflected favorable impacts from COVID-19 within all commercial automobile products as a result of declines in accident frequency due to lower traffic density.

Commercial automobile products covered by our reinsurance treaties from July 3, 2013 through July 2, 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 under these reinsurance treaties. Commercial automobile products covered by our reinsurance treaty from July 3, 2019 through July 2, 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 under this reinsurance treaty. 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 average policy loss limits, 2) a higher cost for this coverage and 3) our confidence in profitability improvements given the limits reductions and rate increases on our commercial automobile products. In 2020, due to continued rate achievement in commercial automobile, improvements in our mix of business and reductions to our average policy loss limits, we decided to non-renew the annual aggregate deductible treaty for policies written on or after July 3, 2020.

Net investment income for 2020 decreased 3.2% to $25.4 million compared to $26.2 million for 2019. The decrease reflected lower interest rates earned on cash and cash equivalent balances in 2020, partially offset by an increase in average funds invested resulting from positive cash flow from operations, 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 $9.2 million during 2020 were primarily driven by $6.8 million in net realized losses on sales of securities, excluding impairment losses, $2.9 million in impairments and a $1.4 million decrease in the value of our limited partnership investments, partially offset by $1.9 million in unrealized gains on equity securities during the period. Comparative 2019 net realized and unrealized gains on investments of $12.9 million were primarily driven by $9.3 million in unrealized gains on equity securities during the period, net realized gains on sales of securities, excluding impairment losses, of $2.5 million and a $1.6 million increase in the value of our limited partnership investments, partially offset by impairments on our fixed income securities of $0.5 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 2020 increased $5.0 million (3.6%) to $143.4 million compared to $138.5 million in 2019. This increase was primarily due to the $2.9 million of corporate charges incurred during 2020 for third party advisors to the Special Committee in connection with their review of the Contingent Sale Agreement as well as other strategic alternatives, as discussed above, and the $1.5 million increase to the CECL allowance related to our ongoing litigation with PSG recorded in the third quarter of 2020, as discussed above. The ratio of consolidated other operating expenses less commissions and other income to net premiums earned (the "expense ratio") was 30.6% during 2020, or 29.6% excluding the corporate charges and CECL allowance adjustment discussed above, compared to 28.9% during 2019.

Federal income tax expense was $1.9 million for the year ended December 31, 2020 compared to $1.3 million for the year ended December 31, 2019. The effective tax rate on consolidated income for 2020 was 29.9% compared to 15.3% during 2019. The difference in the effective federal income tax rate from the normal statutory rate was primarily related to the impact of a valuation allowance on our deferred tax assets recorded in the current period, in addition to the effects of tax-exempt investment income and the dividends received deduction. In assessing the valuation of deferred tax assets, we consider 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. We considered several factors when analyzing the need for a valuation allowance, including our current three year cumulative GAAP loss through December 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. As of December 31, 2020 and 2019, we had no valuation allowance. However, the application of intra-period tax allocation rules to benefits associated with deferred tax assets resulted in a charge to continuing operations as of December 31, 2020 of $1.3 million in the consolidated statement of operations, offset by a corresponding benefit in shareholders' equity within accumulated other comprehensive income (loss).

As a result of the factors discussed above, net income for 2020 was $4.5 million compared to net income of $7.3 million in 2019, a decrease of $2.8 million.

2019 Compared to 2018

	2019			2018			Change			% Change
Gross premiums written	$	574,918		$	582,500		$	(7,582	)		(1.3	)%
Ceded premiums written		(122,676	)		(138,102	)		15,426			(11.2	)%
Net premiums written	$	452,242		$	444,398		$	7,844			1.8	%

Net premiums earned	$	447,288		$	432,880		$	14,408			3.3	%
Net investment income		26,249			22,048			4,201			19.1	%
Commissions and other income		9,171			9,932			(761	)		(7.7	)%
Net realized and unrealized gains (losses) on investments		12,889			(25,691	)		38,580			(150.2	)%
Total revenue		495,597			439,169
Losses and loss expenses incurred		348,468			345,864			2,604			0.8	%
Other operating expenses		138,456			137,177			1,279			0.9	%
Total expenses		486,924			483,041
Income (loss) before federal income tax expense (benefit)		8,673			(43,872	)		52,545
Federal income tax expense (benefit)		1,326			(9,797	)		11,123
Net income (loss)	$	7,347		$	(34,075	)	$	41,422

Gross premiums written for 2019 decreased $7.6 million (1.3%) due to the non-renewal of unprofitable business during the year, while net premiums earned increased $14.4 million (3.3%), as compared to 2018. The higher net premiums earned in 2019 were primarily the result of lower premiums ceded when compared to 2018, as discussed below. 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 21.3% of gross premiums written for 2019 compared to 23.7% for 2018. During 2018, we had reserve strengthening that resulted in ceding an additional $17.3 million in premium from prior treaty years related to the variable premium adjustment provisions in our historical reinsurance treaties. In comparison the 2019 period reflected the ceding of only an additional $1.6 million in commercial automobile premium from prior treaty years related to variable premium adjustment provisions in our historical reinsurance treaties. This was partially offset by higher gross premiums written in workers' compensation coverages, which carry a higher reinsurance ceding rate in 2019 compared to 2018.

Losses and loss expenses incurred during 2019 increased $2.6 million (0.8%) to $348.5 million compared to $345.9 million in 2018, while the loss ratio decreased to 77.9% for 2019 compared to 79.9% for 2018. The loss ratio is calculated as the percentage of losses and loss expenses incurred to net premiums earned. The increased losses and loss expenses incurred reflected an increase in current accident year losses driven by continued emergence of severity. This current accident year development was partially offset by prior accident year net savings of $0.6 million that developed during 2019, primarily due to favorable loss development in workers' compensation coverages. Including the impact of the additional $1.6 million of ceded premium discussed above, total prior accident years had an unfavorable impact of $1.0 million in 2019. Losses and loss expenses for 2018 reflected reserve adjustments of $16.8 million related to unfavorable prior accident year loss development in commercial automobile coverages. Including the impact of the additional $17.3 million of ceded premium discussed above, total prior accident years had an unfavorable impact of $34.1 million in 2018.

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. The following table illustrates the benefit of these reinsurance treaties based on select theoretical scenarios. For these theoretical scenarios, the net financial loss to the Company is approximately 25% of the gross loss.

	5% Increase in Ultimate Loss Ratio		10% Increase in Ultimate Loss Ratio
	5% Increase inUltimate LossRatio		10% Increase inUltimate LossRatio
Gross loss expense from further strengthening current reserve position	$	47.2	$	94.5
Net financial loss	$	11.8	$	23.6
$/share (after tax)	$	0.64	$	1.28

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 limits reductions and rate increases on our commercial automobile products.

Net investment income for 2019 increased 19.1% to $26.2 million compared to $22.0 million for 2018. The increase reflected an increase in average funds invested resulting from positive cash flow, as well as a reallocation from equity investments held in limited partnerships into short-duration, high-quality bonds.

- 24 -

Net realized and unrealized gain on investments of $12.9 million during 2019 were primarily driven by $9.3 million in unrealized gains on equity securities during the period, net realized gains on sales of securities, excluding impairment losses, of $2.5 million and a $1.6 million increase in the value of our limited partnership investments, partially offset by other-than-temporary impairments on our fixed income securities of $0.5 million recognized during the period. Comparative 2018 net realized and unrealized losses on investments of $25.7 million were driven by $9.7 million in unrealized losses on equity securities during the period, a $9.3 million decrease in the value of our limited partnership investments and net realized losses on sales of fixed income and equity securities of $6.6 million. 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 2019 increased $1.3 million (0.9%), to $138.5 million compared to 2018. The increase was driven primarily by higher commission expenses as a result of premium written mix and higher salary and benefit expenses during 2019, partially offset by a non-cash goodwill impairment charge of $3.2 million recorded in 2018, which did not recur in 2019. The ratio of consolidated other operating expenses less commissions and other income to net premiums earned (the "expense ratio") was 28.9% during 2019, compared to 28.7% for 2018.36

Other operating expenses for 2019 increased $1.3 million (0.9%), to $138.5 million compared to 2018. The increase was driven primarily by higher commission expenses as a result of premium written mix and higher salary and benefit expenses during 2019, partially offset by a non-cash goodwill impairment charge of $3.2 million recorded in 2018, which did not recur in 2019. The expense ratio was 28.9% during 2019, compared to 28.7% for 2018.

Federal income tax expense was $1.3 million for 2019 compared to a federal income tax benefit of $9.8 million in 2018. The effective tax rate for 2019 was 15.3% compared to 22.3% in 2018. The effective federal income tax rate in 2019 differed from the normal statutory rate primarily as a result of tax-exempt investment income and the dividends received deduction.

As a result of the factors discussed above, net income for 2019 was $7.3 million compared to net loss of $34.1 million in 2018, a change of $41.4 million.

2018 Compared to 2017

	2018			2017			Change			% Change
Gross premiums written	$	582,500		$	504,737		$	77,763			15.4	%
Ceded premiums written		(138,102	)		(151,348	)		13,246			(8.8	)%
Net premiums written	$	444,398		$	353,389		$	91,009			25.8	%
Net premiums earned	$	432,880		$	328,145		$	104,735			31.9	%
Net investment income		22,048			18,095			3,953			21.8	%
Commissions and other income		9,932			5,308			4,624			87.1	%
Net realized and unrealized gains (losses) on investments		(25,691	)		19,686			(45,377	)		(230.5	)%
Total revenue		439,169			371,234
Losses and loss expenses incurred		345,864			247,518			98,346			39.7	%
Other operating expenses		137,177			113,594			23,583			20.8	%
Total expenses		483,041			361,112
Income (loss) before federal income tax benefit		(43,872	)		10,122			(53,994	)
Federal income tax benefit		(9,797	)		(8,201	)		(1,596	)
Net income (loss)	$	(34,075	)	$	18,323		$	(52,398	)

Gross premiums written for 2018 increased $77.8 million (15.4%), while net premiums earned increased $104.7 million (31.9%), as compared to 2017. The higher gross premiums written and net premiums earned were the result of continued growth in our commercial automobile and workers' compensation products in both our retail and program distribution channels. 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 23.7% of gross premiums written for 2018 compared to 30.0% for 2017. The percentage of premiums ceded to reinsurance decreased as a result of changes in our reinsurance structure. In the third quarter of 2017, we lowered the quota share rate on our workers' compensation premiums to reflect growing profitability and confidence in this book of business. We also restructured our commercial automobile reinsurance treaty, moving away from variable premium ceded rates (based on loss performance) to a flat ceding arrangement with no material changes to the economic risks taken for these products (i.e., ceded losses will decrease by a similar amount as ceded premiums). The impact of these changes to our reinsurance structure was partially offset by reserve strengthening in 2018 that resulted in ceding an additional $17.3 million in premium from prior treaty years related to variable premium adjustment provisions in our historical reinsurance treaties. Our historical commercial automobile reinsurance treaties cause an adjustment to premiums ceded when the ultimate loss estimate changes for a reinsurance treaty year. Reserve strengthening in 2017 also resulted in ceding an additional $13.7 million in premium related to these variable premium adjustment provisions in 2017.

Losses and loss expenses incurred during 2018 increased $98.3 million (39.7%) to $345.9 million compared to $247.5 million in 2017. The loss ratio also increased to 79.9% for 2018 compared to a loss ratio of 75.4% for 2017. The loss ratio is calculated as the percentage of losses and loss expenses incurred to net premiums earned. The increased losses and loss expenses and loss ratio in 2018 reflected reserve adjustments of $16.8 million related to unfavorable prior accident year loss development in commercial automobile coverages. These unfavorable loss developments were the result of increased claim severity due to a more challenging litigation environment, as well as an unexpected increase in the time to settle claims leading to an unfavorable change in claim settlement patterns. The 2018 loss ratio also reflected an increase in current accident year losses driven by severe commercial automobile losses, including continued emergence of severity. The 2017 loss ratio also reflected a $19.2 million reserve strengthening related to prior accident year deficiencies that developed as a result of unfavorable loss development from commercial automobile coverages, particularly from severe transportation loss events that occurred primarily during the first six months of 2017 and higher than expected loss development for discontinued lines of business.

- 25 -

Commercial automobile products covered by our reinsurance treaties are subject to an aggregate stop-loss provision. Once this aggregate stop-loss level is reached, for every $100 of additional loss, we are responsible only for our $25 retention. The following table illustrates the financial impact of a further 5% or 10% increase in ultimate losses for the 2013-2017 reinsurance treaty years covering these commercial automobile products:

	5% Increase in Ultimate Loss Ratio		10% Increase in Ultimate Loss Ratio
Gross loss expense from further strengthening current reserve position	$	34.3	$	68.7
Net financial loss	$	9.0	$	17.6
$/share (after tax)	$	0.48	$	0.94

Net investment income for 2018 increased 21.8% to $22.0 million compared to $18.1 million for 2017. The increase reflected an increase in average funds invested resulting from positive cash flow, as well as higher interest rates, which led to higher reinvestment yields for our short-duration fixed income portfolio.

Net realized and unrealized losses on investments of $25.7 million during 2018 were driven by $9.7 million in unrealized losses on equity securities during the period, a $9.3 million decrease in the value of our limited partnership investments and net realized losses on sales of fixed income and equity securities of $6.6 million. During 2018, we sold $149.2 million in equity securities resulting in a gain on sale of $51.9 million. The majority of this gain was included in unrealized gains within other comprehensive income (loss) at December 31, 2017 and, as a result of the adoption of ASU 2016-01, was reclassified to retained earnings as of January 1, 2018 and not recognized in the consolidated statements of operations for 2018. These equity sales further solidified the conservative nature of our high quality, short-duration investment portfolio; opportunistically utilized the new lower corporate tax rate of 21%, which was beneficial given the low tax basis of many of these equity positions; and were accretive to income, given the increase in yields at the shorter end of the yield curve. Comparative 2017 net realized investment gains were $19.7 million, consisting primarily of $12.5 million in gains reported from our investments in limited partnerships and $7.4 million in net realized gains from sales of securities. Realized investment gains and losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

Other operating expenses for 2018 increased $23.6 million, or 20.8%, to $137.2 million compared to 2017. The increase in other operating expenses was primarily due to increased commission expenses as a result of increased premiums written, higher salary and benefit expense and a non-cash impairment charge of $3.2 million recorded in the fourth quarter of 2018 to write off our entire goodwill balance. See Note M, "Acquisition and Related Goodwill and Intangibles" to the consolidated financial statements in Part II, Item 8 of this Annual Report on form 10-K for further discussion. The expense ratio was 29.4% during 2018, or 28.7% excluding the impact of the goodwill impairment charge, compared to 33.0% for 2017. The decrease in the expense ratio was primarily related to the leveraging effect of higher net premiums earned in 2018 compared to 2017.

Federal income tax benefit was $9.8 million for 2018 compared to $8.2 million in 2017. The effective tax rate for 2018 was 22.3% compared to (81.0%) in 2017. The effective federal income tax rate in 2018 differed only slightly from the normal statutory rate primarily as a result of tax-exempt investment income. In the fourth quarter of 2017, we recorded a benefit of $9.6 million related to the remeasurement of deferred tax assets and liabilities pursuant to the U.S. Tax Act, which impacted our effective federal income tax rate for 2017.

As a result of the factors discussed above, the net loss for 2018 was $34.1 million compared to net income of $18.3 million in 2017, a change of $52.4 million.

Critical Accounting Policies

The Company's significant accounting policies that are material and/or subject to significant degrees of judgment are highlighted below.

Investment Valuation

All marketable securities are included in the Company's balance sheets at current fair market value.

Approximately 6062% of the Company's assets are composed of investments at December 31, ~~2019~~2020. Approximately 9093% of these investments are publicly-traded, owned directly and have readily-ascertainable market values. The remaining 107% of investments are composed primarily of mortgage loans and minority interests in several limited partnerships. These mortgage loans are 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. These limited partnerships are engaged in long-short equities, private equity, country-focused funds and real estate development as an alternative to direct equity investments. These partnerships do not have readily-determinable market values themselves. Rather, the values recorded are those provided to the Company by the respective partnerships based on the underlying assets of the limited partnerships. While a substantial portion of the underlying assets are publicly-traded securities, those which are not publicly-traded have been valued by the respective limited partnerships using their experience and judgment.

-Under 26Financial Accounting Standards Board ("FASB") guidance, if a fixed income security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the decline in value is recorded within impairment losses on investments in the consolidated statements of operations. The new cost basis of the investment is the previously amortized cost basis less the impairment recognized. The new cost basis is not adjusted for any subsequent recoveries in fair value. For a fixed income security that the Company does not intend to sell or in cases where it is more likely than not that the Company will not have to sell the security, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the 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.

~~Under~~ The ~~Financial~~Company ~~Accounting~~considers ~~Standards~~the ~~Board~~extent ~~("FASB")~~to ~~guidance,~~which iffair avalue ~~fixed~~is ~~income~~below ~~security~~amortized iscost in andetermining ~~unrealized~~whether ~~loss~~a ~~position~~credit-related ~~and~~loss ~~the~~exists. The Company ~~has~~also considers the ~~intent~~credit toquality ~~sell~~rating of the security, orfocusing iton isthose ~~more~~below ~~likely~~investment ~~than~~grade, ~~not~~with ~~that~~emphasis ~~the Company~~on ~~will~~securities ~~have~~downgraded tobelow ~~sell~~investment ~~the~~grade. The ~~security~~credit ~~before~~loss ~~recovery~~is ofdetermined ~~its~~by ~~amortized~~comparing ~~cost basis,~~ the ~~decline~~net inpresent value isof ~~deemed~~projected tofuture becash ~~other-than-temporary~~flows ~~and~~with isthe ~~recorded~~amortized tocost ~~net~~basis ~~realized~~of ~~gains (losses) on investments in~~ the ~~consolidated statements of operations. For impaired~~ fixed income ~~securities~~security. The ~~that~~net ~~the~~present ~~Company~~value ~~does not intend to sell or it~~ is ~~more~~calculated ~~likely~~by ~~than~~discounting ~~not that~~ the Company's ~~will~~best ~~not~~estimate ~~have~~of toprojected ~~sell~~future ~~such~~cash ~~securities,~~flows ~~but~~at the ~~Company~~appropriate ~~expects~~effective ~~that~~interest itrate. Additionally, ~~will not fully recover~~ the ~~amortized~~Company ~~cost~~may ~~basis,~~conclude ~~the credit~~that ~~component~~a ofqualitative ~~the~~analysis ~~other-than-temporary impairment~~ is ~~recognized~~sufficient into ~~net~~support ~~realized~~its ~~gains~~conclusion ~~(losses)~~that ~~on investments in~~ the ~~consolidated~~present ~~statements~~value of ~~operations and~~ the ~~non-credit~~expected ~~component~~cash offlows ~~the~~equals ~~other-than-temporary~~or ~~impairment~~exceeds isa ~~recognized directly~~security’s inamortized ~~shareholders' equity within accumulated other comprehensive income (loss)~~cost.

InEquity ~~conjunction~~securities ~~with~~are ~~the~~recorded ~~adoption~~at offair ~~ASU 2016-01~~value, with unrealized net gains or losses reflected as a component of net unrealized gains (losses) on equity securities ~~are~~and ~~now~~limited ~~recognized~~partnership ininvestments within the consolidated statements of operations. Realized gains and losses on disposals of equity securities are norecorded ~~longer~~on ~~evaluated~~the ~~for~~trade ~~other-than-temporary declines~~date and included in net realized gains (losses) on investments, excluding impairment losses.

ItThe ~~is important to note that all available-for-sale securities included in the~~ Company's ~~consolidated~~reports ~~financial~~investment ~~statements~~income ~~are~~due ~~valued~~and ataccrued ~~current~~separately ~~fair~~from ~~market values. The evaluation process~~ available-for ~~determination of an other~~-~~than-temporary~~sale ~~decline~~fixed inincome ~~the~~securities ~~value~~and ofhas ~~investments,~~elected ~~as described above, does~~ not ~~change~~to ~~these~~measure ~~valuations~~an ~~but,~~allowance ~~rather,~~for ~~determines~~credit ~~when~~losses afor ~~decline~~investment inincome ~~value~~due ~~will~~and ~~be recognized in the consolidated statements of operations (other-than-temporary decline), as opposed to a charge to shareholders' equity (temporary decline)~~accrued. ~~This~~ ~~evaluation~~Investment ~~process~~income isdue ~~subject to risks~~ and ~~uncertainties~~accrued ~~because it~~ is ~~not~~written ~~always~~off ~~clear~~through ~~what~~net ~~has~~realized ~~caused~~gains a(losses) ~~decline~~on ~~in value of an individual security or because some declines may be associated with market conditions or economic factors~~investments, ~~which~~excluding ~~relate~~impairment tolosses an industry in general, but not necessarily to an individual issue. The Company has attempted to minimize many of these uncertainties by adopting a largely objective evaluation process as described above. However, to the extent that certain declines in value are reported as unrealized at ~~December 31, 2019, it is possible that future earnings charges will result should~~ the ~~declines~~time ~~in value increase or persist or should~~ the ~~security~~issuer ~~actually~~defaults be disposed of while market values are less than cost. At December 31, 2019, the total gross unrealized loss included in the Company's fixed income portfolio was approximately $3.6 million. No individual issue constituted a material amount of this total. Had this entire amount been considered other-than-temporary at December 31, 2019, there would have been no impact on total shareholders' equity or ~~book~~is ~~value~~expected ~~since the decline in value of these securities was previously recognized as a reduction~~ to ~~shareholders'~~default ~~equity~~on payments.

Reinsurance Recoverable

Reinsurance ceded transactions were as follows for the years ended December 31 (dollars in thousands):

2019

2018

2017

2020

2019

2018

Reinsurance recoverable

~~432~~455,~~067~~564

~~392~~432,~~436~~067

~~318~~392,~~331~~436

Premium ceded (reduction to premium earned)

~~124~~113,~~446~~125

~~131~~124,~~080~~446

~~145~~131,~~201~~080

Losses ceded (reduction to losses incurred)

~~121~~105,~~963~~895

~~148~~121,~~285~~963

~~128~~148,~~086~~285

Reinsurance ceded credits (reduction to operating expenses)

2524,~~932~~764

2325,~~124~~932

23,~~187~~124

A discussion of the Company's reinsurance strategies is presented in Part I, Item 1, "Business"," of this Annual Report on Form 10-K.

Amounts recoverable under the terms of reinsurance contracts comprised approximately 26% of total Company assets as of December 31, ~~2019~~2020. In order to be able to provide the high limits required by the Company's insureds, the Company shares a significant amount of the insurance risk of the underlying contracts with various insurance entities through the use of reinsurance contracts. Some reinsurance contracts provide that a loss will be shared among the Company and its reinsurers on a predetermined pro-rata basis ("quota share"), while other contracts provide that the Company will keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount ("excess of loss"). Some risks are covered by a combination of quota share and excess of loss contracts. The computation of amounts due from reinsurers is based upon the terms of the various contracts and follows the underlying estimation process for loss and loss expense reserves, as described below. Accordingly, the uncertainties inherent in the loss and loss expense reserving process also affect the amounts recorded as recoverable from reinsurers. Estimation uncertainties are greatest for claims which have occurred but which have not yet been reported to the Company. Further, the high limits provided by certain of the Company's insurance policies for commercial automobile liability, workers' compensation and professional liability risks provide more variability in the estimation process than lines of business with lower coverage limits.

It should be noted, however, that a change in the estimate of amounts due from reinsurers on unpaid claims will not, in itself, result in charges or credits to losses incurred. This is because any change in estimated recovery follows the estimate of the underlying loss. Thus, it is the computation of the gross underlying loss that is critical.

As with any receivable, credit risk exists in the recoverability of reinsurance. This may be even more pronounced than in normal receivable situations since recoverable amounts are not generally due until the loss is settled which, in some cases, may be many years after the contract was written. If a reinsurer is unable, in the future, to meet its financial commitments under the terms of the contracts, the Company would be responsible to satisfy the reinsurer's portion of the loss. The financial condition of each of the Company's reinsurers is vetted upon the execution of a given treaty, and only reinsurers with superior credit ratings are utilized. However, as noted above, reinsurers are often not called upon to satisfy their obligations for several years and changes in credit worthiness can occur in the interim period. Reviews of the current financial strength of each reinsurer are made frequently and, should impairment in the ability of a reinsurer be determined to exist, current year operations would be charged in amounts sufficient to provide for the Company's additional liability. Such charges are included in other operating expenses, rather than losses and loss expenses incurred, since the inability of the Company to collect from reinsurers is a credit loss rather than a deficiency associated with the loss reserving process.

- 27 -

Loss and Loss Expense Reserves

The Company's reserves for losses and loss expenses ("reserves") are determined based on complex estimation processes using historical experience, current economic information and available industry statistics. The Company's claims range from routine "fender benders" to the highly complex and costly third-party bodily injury claims involving large tractor-trailer rigs. Reserving for each class of claims requires a set of assumptions based upon historical experience, knowledge of current industry trends and seasoned judgment. The high limits provided in many of the Company's policies provide for greater volatility in the reserving process for more serious claims. Court rulings, legislative actions and trends in jury awards also play a significant role in the estimation process of larger claims. The Company continuously reviews and evaluates loss developments subsequent to each measurement date and adjusts its reserve estimation assumptions, as necessary, in an effort to achieve the best possible estimate of the ultimate remaining loss costs at any point in time. Changes to previously established loss and loss expense reserve amounts are charged or credited to losses and loss expenses incurred in the accounting periods in which they are determined. See Note C, "Loss and Loss Expense Reserves," to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information relating to loss and loss expense reserve development.

The Company's methods for determining loss and loss expense reserves are essentially identical for interim and annual reporting periods.

A detailed analysis and discussion for each of the above basic reserve categories follows:

Reserves for known losses (Case reserves)

Each known claim, regardless of complexity, is handled by a claims adjuster experienced with claims of a similar nature, and a "case" reserve appropriate for the individual loss occurrence is established. For routine "short-tail" claims, such as physical damage, the Company records an initial reserve that is based upon historical loss settlements adjusted for current trends. As information regarding the loss occurrence is gathered in the claim handling process, the initial reserve is adjusted to reflect the anticipated ultimate cost to settle the claim. For more complex claims, which can tend toward being "long-tail" in nature, an experienced claims adjuster will review the facts and circumstances surrounding the loss occurrence to make a determination of the reserve to be established. Many of the more complex claims involve litigation and necessitate an evaluation of potential jury awards, in addition to the factual information, to determine the value of each claim. Each claim is frequently monitored and the recorded reserve is increased or decreased relative to information gathered during the settlement life cycle.

Reserves for incurred but not reported losses

The Company uses both standard actuarial techniques common to most insurance companies as well as proprietary techniques developed by the Company in connection with its specialty business products. For its short-tail lines of business, the Company uses predominantly the incurred or paid loss development factor methods. The Company has found that the use of accident quarter loss development triangles, rather than those based upon accident year, are most responsive to claim settlement trends and fluctuations in premium exposure for its short-tail lines. A minimum of 12 running accident quarters is used to project the reserve necessary for incurred but not reported ("IBNR") losses for its short-tail lines.

The Company also uses the loss development factor approach for its long-tail lines of business. A minimum of 15 accident years is included in the loss development triangles used to calculate link ratios and the selected loss development factors used to determine the reserves for IBNR losses. A minimum of 20 accident years is used for long-tail workers' compensation reserve projections. Significant emphasis is placed on the use of tail factors for the Company's long-tail lines of business.

For the Company's commercial automobile risks, which are covered by regularly changing reinsurance agreements and which contain wide-ranging self-insured retentions ("SIR"), traditional actuarial methods are supplemented by other methods, as described below, in consideration of the Company's exposures to loss. In situations where the Company's reinsurance structure, the insured's SIR selections, policy volume, and other factors are changing, current accident period loss exposures may not be homogenous enough with historical loss data to allow for reliable projection of future developed losses. Therefore, the Company supplements the above-described actuarial methods with loss ratio reserving techniques developed from the Company's proprietary databases to arrive at the reserve for IBNR losses for the calendar/accident period under review. As losses for a given calendar/accident period develop with the passage of time, management evaluates such development on a monthly and quarterly basis and adjusts reserve factors, as necessary, to reflect current judgment with regard to the anticipated ultimate incurred losses. This process continues until all losses are settled for each period subject to this method.

Reserves for loss adjustment expenses

While certain of the Company's products involve case basis reserving for allocated loss adjustment expenses, the majority of such reserves are determined on a bulk basis. The Company uses historical analysis of the ratios of allocated loss adjustment expenses paid to losses paid on closed claims to arrive at the expected ultimate incurred loss adjustment expense factors applicable to each affected product. Once developed, the factors are applied to the expected ultimate incurred losses, including IBNR, on all open claims. The resulting ultimate incurred allocated loss adjustment expense is then reduced by amounts paid to date on all open claims to arrive at the reserve for allocated loss adjustment expenses to be incurred in the future for the handling of specific claims.

- 28 -

For those loss adjustment expenses not specific to individual claims (general claims handling expenses referred to as unallocated loss adjustment expenses), the Company uses a variation of the standard industry loss adjustment expenses paid to losses paid (net of reinsurance) ratio analysis that equally weighs paid and incurred losses to establish the necessary reserves. The selected factors are applied to 100% of IBNR reserves and to case reserves, with consideration given for that portion of loss adjustment expense already paid at the reserve measurement date. Such factors are monitored and revised, as necessary, on a quarterly basis.

Sensitivity Analysis - Potential impact on reserve volatility from changes in key assumptions

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 Company's reserve selections are developed to be a "best estimate" of unpaid losses at a point in time and, due to the unique nature of its exposures, particularly in the large commercial automobile excess product, ranges of reserve estimates are not established during the reserving process. However, basic assumptions that could potentially impact future volatility of the Company's valuations of current loss and loss expense reserve estimates include, but are not limited to, the following:

●

Consistency in the individual case reserving processes;

●

The selection of loss development factors in the establishment of bulk reserves for incurred but not reported losses and loss expenses;

●

Projected future loss trend; and

●

Expected loss ratios for the current book of business, particularly the Company's commercial automobile products, where the number of accounts insured, selected SIRs, policy limits and reinsurance structures may vary widely from period to period.

Under reasonably possible scenarios, it is conceivable that the Company's selected loss estimates could be 10% or more redundant or deficient. The majority of the Company's reserves for losses and loss expenses, on a net of reinsurance basis, relate to its commercial automobile products. Perhaps the most significant example of sensitivity to variation in the key assumptions is the loss ratio selection for the Company's commercial automobile products for policies subject to certain major reinsurance treaties. The following table presents the approximate impacts on gross and net loss reserves of both a hypothetical 10 percentage point and a hypothetical 20 percentage point increase or decrease in the loss factors actually utilized in the Company's reserve determination at December 31, ~~2019~~2020 for the prior seven treaty periods, which covers exposures earned on policies written between July 3, ~~2013~~2014 and December 31, ~~2019~~2020. The Company's selection of the range of values presented should not be construed as the Company's prediction of future events, but rather simply an illustration of the impact of such events, should they occur.

The variation in impact from loss ratio increases and decreases is attributable to minimum and maximum premium rate factors included in the various reinsurance contracts. In between the minimum and maximum ceded premium provisions within the treaty terms, net premiums earned can be increased or decreased based on a change in loss expectation. The total impact to profitability in the same scenarios is shown below ($ in millions):

	10% Loss Ratio Increase			10% Loss Ratio Decrease			20% Loss Ratio Increase			20% Loss Ratio Decrease
	10% LossRatio Increase			10% LossRatio Decrease			20% LossRatio Increase			20% LossRatio Decrease
Gross Reserves	$	98114.02		$	(98114.02	)	$	~~196~~228.03		$	(~~196~~220.0	)
Net Reserves	$	2539.94		$	(3240.18	)	$	5178.8		$	(8198.37	)
Net premiums earned	$	–(2.9	)	$	1116.16		$	–(2.9	)	$	2935.97
Cumulative Net Underwriting Income (Loss)	$	(2542.93	)	$	4357.24		$	(5181.87	)	$	~~111~~134.24

Federal Income Tax Considerations

The liability method is used in accounting for federal income taxes. Using this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The provision for deferred federal income tax is based on items of income and expense that are reported in different years in the consolidated financial statements and tax returns and are measured at the tax rate in effect in the year the difference originated.

On December 22, 2017, the U.S. Tax Act was signed into law. The U.S. Tax Act lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. GAAP requires the impact of tax legislation to be recognized in the period in which the law was enacted. As a result of the U.S. Tax Act, the Company recorded a tax benefit of $9.6 million related to the remeasurement of its deferred tax assets and liabilities during the fourth quarter of 2017. As of December 31, 2017, the IRS had not yet published all of the detailed regulations resulting from the enactment of the U.S. Tax Act; therefore, while the Company had not completed its accounting for the tax effects, it made a reasonable estimate of the tax effects on its existing deferred tax balances at December 31, 2017. The Company finalized its accounting for the tax effects of the U.S. Tax Act during 2018. No material adjustments to income tax expense (benefit) were recorded in 2018.

~~- 29 -~~40

Net deferred tax assets (liabilities) reported at December 31 are as follows (dollars in thousands):

	2019			2018
	2020			2019
Total deferred tax liabilities	$	(15,~~484~~083	)	$	(1215,~~906~~484	)
Total deferred tax assets		1724,~~519~~063			1917,~~168~~519
Net deferred tax assets (liabilities)	$	28,~~035~~980		$	62,~~262~~035

Deferred tax assets at December 31, ~~2019~~2020 included approximately $1112.59 million related to the timing of deductibility of loss and loss expense reserves, the majority of which relate to policy liability discounts required by the Internal Revenue Code of 1986, as amended, which are perpetual in nature and, in the absence of the termination of the Company's business, will not, in the aggregate, reverse to a material degree in the foreseeable future. ~~Unearned~~ The allowance for CECL under ASU 2016-13 represents $3.6 million of deferred tax assets, while unearned premiums discount and deferred ceding commissions represent $2.53 million and $1.0.5 million of deferred tax assets, respectively. An additional $1.2.0 million relates to timing differences in the expensing of our stock compensation plans. The ~~unrealized gains in the Company's investment portfolios would allow for the recovery of this deferred tax at any time. The~~ balance of deferred tax assets consists of various normal operating expense accruals and is not considered to be material. As ~~a result~~ of ~~its~~ ~~analysis~~December 31, ~~management~~2020 ~~has~~and ~~determined~~2019, ~~that~~the Company had no valuation allowance. However, isthe ~~necessary~~application atof intra-period tax allocation rules to benefits associated with deferred tax assets resulted in a charge to continuing operations as of December 31, ~~2019~~2020 of $1.3 million within the consolidated statement of operations, offset by a corresponding benefit in shareholders' equity within accumulated other comprehensive income.

FASB provides guidance for recognizing and measuring uncertain tax positions and prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the consolidated financial statements. Based on this guidance, management regularly analyzes tax positions taken or expected to be taken in a tax return based on the threshold condition prescribed. Tax positions that do not meet or exceed this threshold condition are considered uncertain tax positions. Interest related to uncertain tax positions, if any, would be recognized in income tax expense. Penalties, if any, related to uncertain tax positions would be recorded in income tax expense (benefit).

Impact of Inflation

To the extent possible, the Company attempts to recover the impact of inflation on loss costs and operating expenses by increasing the premiums it charges. Within the commercial automobile business, a majority of the Company's accounts are charged as a percentage of an insured's gross revenue, mileage or payroll. As these charging bases increase with inflation, premium revenues are immediately increased. The remaining premium rates charged are adjustable only at periodic intervals and often require state regulatory approval. Such periodic increases in premium rates may lag far behind cost increases.

To the extent inflation influences yields on investments, the Company is also affected. The Company's short-term and fixed investment portfolios are structured in direct response to available interest rates over the yield curve. As available market interest rates fluctuate in response to the presence or absence of inflation, the yields on the Company's investments are impacted. Further, as inflation affects current market rates of return, previously committed investments might increase or decline in value depending on the type and maturity of the investment. For additional information, see Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk", " in this Annual Report on Form 10-K.

Inflation must also be considered by the Company in the creation and review of loss and loss adjustment expense reserves, as portions of these reserves are expected to be paid over extended periods of time. The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and loss adjustment expenses.

Contractual Obligations

The table below sets forth the amounts of the Company's contractual obligations at December 31, ~~2019~~2020.

Payments Due by Period

Total

Less than 1 year

1 - 3 Years

3 - 5 Years

More Than 5 Years

(dollars in millions)

Loss and loss expense reserves

~~988~~1,089.37

~~345~~381.94

~~326~~359.16

~~118~~130.68

~~197~~217.79

Investment commitment

0.4

–

Operating leases

0.1

–

Borrowings

20.0

–

Total

1,~~008~~110.82

~~366~~401.49

~~326~~359.16

~~118~~130.68

~~197~~217.79

-The 30Company's -loss and loss expense reserves do not have contractual maturity dates, and the exact timing of the payment of claims cannot be predicted with certainty. However, based upon historical payment patterns, the above table presents an estimate of when the Company might expect its direct loss and loss expense reserves (without the benefit of reinsurance recoveries) to be paid. Timing of the collection of the related reinsurance recoverable, estimated to be $455.6 million at December 31, 2020, or 42% of the loss and loss expense reserves presented in the above table, would approximate that of the above projected direct reserve payout but could lag behind such payments by several months in some instances.

The ~~Company's~~investment ~~loss~~commitment ~~and~~in ~~loss expense reserves do not have contractual maturity dates, and~~ the ~~exact timing of the payment of claims cannot be predicted with certainty. However, based upon historical payment patterns, the~~ above table ~~presents~~relates ~~an estimate of when the Company might expect its direct loss and loss expense reserves (without the benefit of reinsurance recoveries)~~ to bea ~~paid. Timing~~maximum ofunfunded ~~the~~capital ~~collection~~obligation offor ~~the~~a ~~related~~limited ~~reinsurance~~partnership ~~recoverable,~~investment ~~estimated to be $432.1 million~~ at December 31, ~~2019,~~2020. The oractual ~~44%~~call ofdates ~~the~~for ~~loss~~such ~~and~~funding ~~loss~~could ~~expense~~vary ~~reserves~~from ~~presented in the above table, would approximate~~ that ~~of the above projected direct reserve payout but could lag behind such payments by several months in some instances~~presented.

~~The~~Borrowings ~~investment~~made ~~commitment~~under in the ~~above~~Company's ~~table~~line ~~relates~~of tocredit acan ~~maximum~~be ~~unfunded~~called ~~capital~~by ~~obligation~~the ~~for~~lender, aunder ~~limited~~certain ~~partnership~~circumstances, ~~investment~~with atshort ~~December 31, 2019~~notice. The ~~actual~~Company ~~call~~entered ~~dates~~into ~~for~~a ~~such~~line ~~funding~~of ~~could~~credit ~~vary~~on ~~from~~August ~~that presented~~9, 2018 with an expiration date of August 9, 2022.

Borrowings made under the Company's line of credit can be called by the lender, under certain circumstances, with short notice. The Company entered into a new line of credit on August 9, 2018 with an expiration date of August 9, 2022.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

~~- 31 -~~42

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company operates within the property and casualty insurance industry and, accordingly, has significant invested assets that are exposed to various market risks. These market risks relate to interest rate fluctuations, credit risks, equity security market prices and, to a lesser extent, foreign currency rate fluctuations. All of the Company's invested assets, with the exception of investments in limited partnerships and equity securities, are classified as available-for-sale.

Based on the structure of the Company's investment portfolio, one of the most significant of the four identified market risks relates to prices in the equity securities markets. Although not the largest category of the Company's invested assets, equity securities and limited partnerships, which are predominately invested in equities, have a high potential for short-term price fluctuation. The market value of the Company's equity and limited partnerships positions at December 31, ~~2019~~2020 was $~~100~~65.14 million, or approximately:

● 106% of the Company's consolidated investment portfolio of $~~968~~1,043.27 million; and

● 2718% of the Company's shareholders' equity of $~~364~~363.31 million.

Funds invested in the equities markets are not considered to be assets necessary for the Company to conduct its daily operations and, therefore, can be committed for extended periods of time. The long-term nature of the Company's equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuations, is the primary focus.

Reference is made to the discussion of limited partnership investments in "Critical Accounting Policies" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K. All of the market risks attendant to equity securities also apply to the underlying assets in these limited partnerships, and to a greater degree because of the generally more aggressive investment philosophies utilized by the limited partnerships. In addition, these investments are illiquid. There is no primary or secondary market on which these limited partnerships trade and, in most cases, the Company is prohibited from disposing of its limited partnership interests for some period of time and must seek approval from the general partner for any such disposal. Distributions of earnings from these limited partnerships are largely at the sole discretion of the general partners, and distributions are generally not received by the Company for many years after the earnings have been reported. Finally, through the application of the equity method of accounting, the Company's share of net income reported by the limited partnerships often includes significant amounts of unrealized appreciation on the underlying investments.

The Company's fixed income portfolio totaled $~~795~~919.57 million at December 31, ~~2019~~2020. Approximately 3128% of this portfolio is made up of U.S. Government and municipal debt securities, and the average contractual maturity of the Company's fixed income investments is approximately 67.91 years with an average modified duration of approximately 2.68 years. Although the Company is exposed to interest rate risk on its fixed income investments, given the anticipated duration of the Company's liabilities (principally insurance loss and loss expense reserves) relative to investment maturities, even a 100 to 200 basis point increase in interest rates would not have a material impact on the Company's ability to conduct daily operations or to meet its obligations and would, in fact, result in higher investment income in a relatively short period of time, as short-term investments and maturing bonds could be reinvested in the higher yielding securities.

There is an inverse relationship between interest rate fluctuations and the fair value of the Company's fixed income investments. Additionally, the fair value of interest rate sensitive instruments may be affected by 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. The Company monitors its sensitivity to interest rate risk by measuring the change in fair value of its fixed income investments relative to hypothetical changes in interest rates.

The following tables present the estimated effects on the fair value of financial instruments at December 31, ~~2019~~2020 and ~~2018~~2019 that would result from an instantaneous change in yield rates of varying magnitudes on a static balance sheet to determine the effect such a change in rates would have on current fair value. The analysis presents the sensitivity of the fair value of the Company's financial instruments to selected changes in market rates and prices. The range of rates chosen reflects the Company's view of changes that the Company believes are reasonably possible over a one-year period. The Company's selection of the range of values chosen to represent changes in interest rates should not be construed as the Company's prediction of future market events, but rather, as an illustration of the impact of such events, should they occur. The equity portfolio was compared to the S&P 500 Index due to its correlation with the vast majority of the Company's current equity portfolio. The limited partnership portfolio was compared to the S&P 500 Index and the S&P BSE 500 Index due to their significant correlation with the vast majority of the Company's limited partnership portfolio. As previously indicated, several other factors 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 below.

~~- 32 -~~43

The following tables present the estimated effects on the fair value of financial instruments at December 31, ~~2019~~2020 and ~~2018~~2019 due to an instantaneous increase in yield rates of 100 basis points and a 10% decline in the S&P 500 Index and the S&P BSE 500 Index (dollars in thousands).

			Increase (Decrease)
	Fair Value		Interest Rate Risk			Equity Risk
	FairValue		InterestRate Risk			EquityRisk
2020
Fixed income securities
Agency collateralized mortgage obligations	$	11,931	$	(495	)	$	–
Agency mortgage-backed securities		102,107		(2,076	)		–
Asset-backed securities		107,696		(1,703	)		–
Bank loans		11,361		(57	)		–
Collateralized mortgage obligations		5,118		(219	)		–
Corporate securities		360,241		(11,804	)		–
Mortgage-backed securities		38,056		(1,104	)		–
Municipal obligations		45,143		(2,137	)		–
Non-U.S. government obligations		30,600		(422	)		–
U.S. government obligations		207,439		(6,969	)		–
Total fixed income securities		919,692		(26,986	)		–
Equity securities:
Consumer		11,598		–			(1,160	)
Energy		1,227		–			(123	)
Financial		29,064		–			(2,906	)
Industrial		5,180		–			(518	)
Technology		2,851		–			(285	)
Other		8,249		–			(825	)
Total equity securities		58,169		–			(5,817	)
Limited partnerships		7,214		–			(494	)
Short-term		1,000		–			–
Total	$	986,075	$	(26,986	)	$	(6,311	)
2019
Fixed income securities
Agency collateralized mortgage obligations	$	12,093	$	(414	)	$	–
Agency mortgage-backed securities		56,280		(607	)		–
Asset-backed securities		106,397		(691	)		–
Bank loans		14,568		(73	)		–
Certificates of deposit		2,835		(18	)		–
Collateralized mortgage obligations		5,616		(166	)		–
Corporate securities		281,381		(8,735	)		–
Mortgage-backed securities		47,463		(1,682	)		–
Municipal obligations		36,286		(1,618	)		–
Non-U.S. government obligations		24,179		(480	)		–
U.S. government obligations		208,440		(7,082	)		–
Total fixed income securities		795,538		(21,566	)		–
Equity securities:
Consumer		16,707		–			(1,671	)
Energy		3,074		–			(307	)
Financial		31,577		–			(3,158	)
Industrial		4,927		–			(493	)
Technology		2,817		–			(282	)
Funds (e.g., mutual funds, closed end funds, ETFs)		9,460		–			(946	)
Other		8,250		–			(825	)
Total equity securities		76,812		–			(7,682	)
Limited partnerships		23,292		–			(1,670	)
Short-term		1,000		–			–
Total	$	896,642	$	(21,566	)	$	(9,352	)
2018
Fixed income securities
Agency collateralized mortgage obligations	$	10,687	$	(404	)	$	–
Agency mortgage-backed securities		37,385		(2,012	)		–
Asset-backed securities		64,422		(2,612	)		–
Bank loans		9,750		(49	)		–
Certificates of deposit		2,835		(48	)		–
Collateralized mortgage obligations		5,423		(176	)		–
Corporate securities		190,450		(5,417	)		–
Mortgage-backed securities		38,540		(1,270	)		–
Municipal obligations		29,155		(769	)		–
Non-U.S. government obligations		25,180		(549	)		–
U.S. government obligations		178,818		(5,864	)		–
Total fixed income securities		592,645		(19,170	)		–
Equity securities:
Consumer		17,945		–			(1,795	)
Energy		3,179		–			(318	)
Financial		25,253		–			(2,525	)
Industrial		6,920		–			(692	)
Technology		2,303		–			(230	)
Funds (e.g., mutual funds, closed end funds, ETFs)		5,489		–			(549	)
Other		5,333		–			(533	)
Total equity securities		66,422		–			(6,642	)
Limited partnerships		55,044		–			(4,022	)
Short-term		1,000		–			–
Total	$	715,111	$	(19,170	)	$	(10,664	)

~~- 33 -~~44

The following tables present the estimated effects on the fair value of financial instruments at December 31, ~~2019~~2020 and ~~2018~~2019 due to an instantaneous increase in yield rates of 150 basis points and a 15% decline in the S&P 500 Index and the S&P BSE 500 Index (dollars in thousands).

			Increase (Decrease)
	Fair Value		Interest Rate Risk			Equity Risk
	FairValue		InterestRate Risk			EquityRisk
2020
Fixed income securities
Agency collateralized mortgage obligations	$	11,931	$	(744	)	$	–
Agency mortgage-backed securities		102,107		(3,114	)		–
Asset-backed securities		107,696		(2,554	)		–
Bank loans		11,361		(85	)		–
Collateralized mortgage obligations		5,118		(328	)		–
Corporate securities		360,241		(17,708	)		–
Mortgage-backed securities		38,056		(1,655	)		–
Municipal obligations		45,143		(3,205	)		–
Non-U.S. government obligations		30,600		(633	)		–
U.S. government obligations		207,439		(10,454	)		–
Total fixed income securities		919,692		(40,480	)		–
Equity securities:
Consumer		11,598		–			(1,740	)
Energy		1,227		–			(184	)
Financial		29,064		–			(4,360	)
Industrial		5,180		–			(777	)
Technology		2,851		–			(428	)
Other		8,249		–			(1,237	)
Total equity securities		58,169		–			(8,726	)
Limited partnerships		7,214		–			(741	)
Short-term		1,000		–			–
Total	$	986,075	$	(40,480	)	$	(9,467	)
2019
Fixed income securities
Agency collateralized mortgage obligations	$	12,093	$	(622	)	$	–
Agency mortgage-backed securities		56,280		(911	)		–
Asset-backed securities		106,397		(1,037	)		–
Bank loans		14,568		(109	)		–
Certificates of deposit		2,835		(27	)		–
Collateralized mortgage obligations		5,616		(248	)		–
Corporate securities		281,381		(13,103	)		–
Mortgage-backed securities		47,463		(2,523	)		–
Municipal obligations		36,286		(2,426	)		–
Non-U.S. government obligations		24,179		(720	)		–
U.S. government obligations		208,440		(10,623	)		–
Total fixed income securities		795,538		(32,349	)		–
Equity securities:
Consumer		16,707		–			(2,506	)
Energy		3,074		–			(461	)
Financial		31,577		–			(4,737	)
Industrial		4,927		–			(739	)
Technology		2,817		–			(423	)
Funds (e.g., mutual funds, closed end funds, ETFs)		9,460		–			(1,419	)
Other		8,250		–			(1,238	)
Total equity securities		76,812		–			(11,523	)
Limited partnerships		23,292		–			(2,506	)
Short-term		1,000		–			–
Total	$	896,642	$	(32,349	)	$	(14,029	)
2018
Fixed income securities
Agency collateralized mortgage obligations	$	10,687	$	(607	)	$	–
Agency mortgage-backed securities		37,385		(3,021	)		–
Asset-backed securities		64,422		(3,917	)		–
Bank loans		9,750		(73	)		–
Certificates of deposit		2,835		(71	)		–
Collateralized mortgage obligations		5,423		(263	)		–
Corporate securities		190,450		(8,125	)		–
Mortgage-backed securities		38,540		(1,904	)		–
Municipal obligations		29,155		(1,154	)		–
Non-U.S. government obligations		25,180		(824	)		–
U.S. government obligations		178,818		(8,794	)		–
Total fixed income securities		592,645		(28,753	)		–
Equity securities:
Consumer		17,945		–			(2,692	)
Energy		3,179		–			(477	)
Financial		25,253		–			(3,788	)
Industrial		6,920		–			(1,038	)
Technology		2,303		–			(345	)
Funds (e.g., mutual funds, closed end funds, ETFs)		5,489		–			(823	)
Other		5,333		–			(800	)
Total equity securities		66,422		–			(9,963	)
Limited partnerships		55,044		–			(6,034	)
Short-term		1,000		–			–
Total	$	715,111	$	(28,753	)	$	(15,997	)

~~- 34 -~~45

ANNUAL REPORT ON FORM 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

YEAR ENDED DECEMBER 31, ~~2019~~2020

PROTECTIVE INSURANCE CORPORATION

CARMEL, INDIANA

~~- 35 -~~46

Report of Independent Registered Public Accounting ~~Firm~~FirmTo the Shareholders and the Board of Directors of Protective Insurance Corporation

To the Shareholders and the Board of Directors of Protective Insurance Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Protective Insurance Corporation and subsidiaries (the Company) as of December 31, ~~2019~~2020 and ~~2018~~2019, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, ~~2019~~2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2019~~2020 and ~~2018~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2019~~2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 511, ~~2020~~2021 expressed an unqualified opinion thereon.

Adoption of ~~ASU~~Accounting Standards Update No. 2016-0113

As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for the recognition and measurement of expected credit losses for certain types of financial instruments in ~~2018~~2020 due to the adoption of ~~ASU~~ Accounting Standards Update No. 2016-0113, ~~Recognition~~Financial ~~and~~Instruments – Credit Losses (Topic 326): Measurement of ~~Financial~~Credit ~~Assets~~Losses ~~and~~on Financial ~~Liabilities~~Instruments. See below for a discussion of our related critical audit matter for the Personnel Staffing Group recoverable allowance.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical ~~/s/~~Audit ~~ERNST & YOUNG LLP~~ Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

		Valuation of Incurred but Not Reported Loss and Loss Expense Reserves

Description of the Matter		As of December 31, 2020, the liability for incurred but not reported loss and loss expense reserves, net of reinsurance (“IBNR”), represented a significant portion of the loss and loss expense reserve, net of reinsurance. As discussed in Note A and Note C to the consolidated financial statements, the carrying amount of the loss and loss expense reserve, net of reinsurance, is management’s best estimate of the ultimate liability for indemnity costs and related adjustment expense necessary to investigate and settle claims and is based upon individual case estimates for reported claims and actuarial estimates for IBNR. The estimate for IBNR is determined based on evaluations of individual reported claims and by actuarial estimation processes considering historical experience, relevant economic information, and available industry statistics. The IBNR estimate is driven by management’s expected loss ratio assumption, which is comprised of various factors, including historical payment patterns and expected future trends in claim severity and frequency. Auditing management’s best estimate of IBNR was complex and required the involvement of our actuarial specialists due to the significant measurement uncertainty associated with the estimation and high degree of subjectivity in management’s determination of the expected loss ratio assumption. Management’s expected loss ratio assumption has a significant effect on the valuation of IBNR.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating IBNR. These audit procedures included, among others, testing management’s review and approval controls over the expected loss ratio assumption for estimating IBNR. With the assistance of actuarial specialists, our audit procedures included, among others, an evaluation of the Company’s expected loss ratio assumption, which included a comparison of historical payment patterns, expected future trends in claim severity and frequency, and consideration of relevant economic information and other industry factors to our prior year analysis and actual current year loss activity. To evaluate the expected loss ratio assumption, we developed an independent range of reasonable reserve estimates that we compared to management’s best estimate of IBNR. We also analyzed year-to-year movements within our independently developed range. Additionally, we performed a review of the development of prior years’ reserve estimates.

		Personnel Staffing Group Recoverable Allowance

Description of the Matter		As of December 31, 2020, the Company has a recoverable due from a single customer, Personnel Staffing Group, for $47.3 million related to claims that have been paid or will be paid on behalf of Personnel Staffing Group by the Company for which the Company has recorded a $16.5 million credit impairment allowance. As discussed above and in Note A and Note T to the consolidated financial statements, the allowance amount is management’s best estimate of the ultimate credit impairment for the recoverable based on the expected timing and amount of cash flows from Personnel Staffing Group. This estimate is particularly sensitive to the default and recovery in default assumptions which have a significant impact on the allowance. These assumptions involve significant uncertainty and management judgment. Auditing management’s best estimate of the Personnel Staffing Group recoverable allowance (the allowance) required the involvement of our valuation specialists due to the significant measurement uncertainty associated with management’s estimation. The uncertainty is primarily driven by the high degree of subjectivity in management’s determination of the default and recovery in default assumptions.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating the allowance. These audit procedures included, among others, testing management review and approval controls over the assumptions for estimating the allowance. With the assistance of our valuation specialists, our audit procedures included, among others, reviewing contract terms between Personnel Staffing Group and the Company, reading minutes of the meetings of the committees of the board of directors, reading summaries of the lawsuits with Personnel Staffing Group, reviewing legal letters pertinent to the matter, reviewing historical bankruptcy data from similar entities within the industry, and evaluating the Company’s selection of methods used to estimate the allowance compared with those methods used in the industry for similar types of analyses. To evaluate the significant assumptions used by management, we compared the significant assumptions to industry data for entities with similar characteristics to Personnel Staffing Group and financial data specific to Personnel Staffing Group. With the assistance of the valuation specialists, we developed an independent range of reasonable allowance estimates that we compared to management’s best estimate.

We have served as the Company’s auditor since 1970.

/s/ ERNST & YOUNG LLP

Indianapolis, Indiana

March 511, ~~2020~~2021

~~- 36 -~~48

Consolidated Balance Sheets

Protective Insurance Corporation and Subsidiaries

(in thousands, except share data)

	December 31
	2019		2018
	2020		2019
Assets
Investments:
Fixed income securities (Amortized cost: 2019, $783,047; 2018, $600,504)	$	795,538	$	592,645
Fixed income securities (Amortized cost: $894,468, $783,047; allowance for credit losses of $1,035 and $0)	$	919,692	$	795,538
Equity securities		7658,~~812~~169		6676,~~422~~812
Limited partnerships		237,~~292~~214		5523,~~044~~292
Commercial mortgage loans		11,782		6,672
Commercial mortgage loans (less allowance of $195 and $0)		10,602		11,782
Short-term and other		1,000		1,000
		908,424		721,783
		996,677		908,424
Cash and cash equivalents		6758,~~851~~301		~~163~~67,~~996~~851
Restricted cash and cash equivalents		2112,~~037~~128		621,~~815~~037
Accounts receivable--less allowance (2019, $2,233; 2018, $403)		111,762		102,972
Accounts receivable (less allowance of $19,960 and $2,233)		100,921		111,762
Accrued investment income		4,~~882~~816		4,~~358~~882
Reinsurance recoverable		432,067		392,436
Reinsurance recoverable (less allowance of $972 and $1,171)		455,564		432,067
Prepaid reinsurance premiums		511,~~820~~747		65,~~095~~820
Deferred policy acquisition costs		89,~~496~~744		68,~~568~~496
Property and equipment--less accumulated depreciation (2019, $20,091; 2018, $19,531)		42,542		46,645
Property and equipment (less accumulated depreciation of $25,959 and $20,091)		38,144		42,542
Other assets		2425,~~566~~805		24,~~760~~566
Current federal income taxes		~~4,878~~–		74,~~441~~878
Deferred federal income taxes		28,~~035~~980		62,~~262~~035
	$	1,~~634~~722,~~360~~827	$	1,~~490~~634,~~131~~360
Liabilities and Shareholders' Equity
Reserves:
Losses and loss expenses	$	~~988~~1,~~305~~089,669	$	~~865~~988,~~339~~305
Unearned premiums		7463,~~810~~731		7174,~~625~~810
		1,063,115		936,964
		1,153,400		1,063,115
Reinsurance payable		6576,~~835~~617		6665,~~632~~835
Short-term borrowings		20,000		20,000
Depository liabilities		18110		~~173~~18
Accounts payable and other liabilities		~~121~~108,~~076~~852		~~110~~121,~~280~~076
		1,270,044		1,134,049
Current federal income taxes payable		766		–
		1,359,745		1,270,044
Shareholders' equity:
Common stock:
Class A voting -- authorized 3,000,000 shares; outstanding -- 2019 - 2,603,350; 2018 - 2,615,339 shares		111		112
Class A voting -- authorized 3,000,000 shares; outstanding -- 2020 - 2,603,350; 2019 - 2,603,350 shares		111		111
Class B non-voting -- authorized 20,000,000 shares; outstanding -- 2019 - 11,675,956; 2018 - 12,253,922 shares		499		522
Class B non-voting -- authorized 20,000,000 shares; outstanding -- 2020 - 11,674,345; 2019 - 11,675,956 shares		498		499
Additional paid-in capital		5354,~~349~~571		5453,~~720~~349
Accumulated other comprehensive income (loss)		9,369		(7,347	)
Accumulated other comprehensive income		21,759		9,369
Retained earnings		~~300~~286,~~988~~143		~~308~~300,~~075~~988
		364,316		356,082
		363,082		364,316
	$	1,~~634~~722,~~360~~827	$	1,~~490~~634,~~131~~360

See notes to consolidated financial statements.

~~- 37 -~~49

Consolidated Statements of Operations

Protective Insurance Corporation and Subsidiaries

(in thousands, except per share data)

	Year Ended December 31
	2019			2018			2017
	2020			2019			2018
Revenue:
Net premiums earned	$	~~447~~445,~~288~~515		$	~~432~~447,~~880~~288		$	~~328~~432,~~145~~880
Net investment income		2625,~~249~~422			2226,~~048~~249			1822,~~095~~048
Commissions and other income		97,~~171~~048			9,~~932~~171			59,~~308~~932
Net realized gains (losses) on investments, excluding impairment losses		2(6,~~455~~876	)		(62,~~632~~455	)		7(6,~~366~~632	)
Other-than-temporary impairment losses on investments		(497	)		(19	)		(149	)
Impairment losses on investments		(2,861	)		(497	)		(19	)
Net unrealized gains (losses) on equity securities and limited partnership investments		~~10,931~~501			~~(19~~10,~~040~~931	)		12(19,~~469~~040	)
Net realized and unrealized gains (losses) on investments		12(9,~~889~~236	)		~~(25~~12,~~691~~889	)		19(25,~~686~~691	)
		495,597			439,169			371,234
		468,749			495,597			439,169
Expenses:
Losses and loss expenses incurred		~~348~~318,~~468~~958			~~345~~348,~~864~~468			~~247~~345,~~518~~864
Other operating expenses		~~138~~143,~~456~~428			~~137~~138,~~177~~456			~~113~~137,~~594~~177
		486,924			483,041			361,112
		462,386			486,924			483,041
Income (loss) before federal income tax expense (benefit)		86,~~673~~363			~~(43~~8,~~872~~673	)		10(43,~~122~~872	)
Federal income tax expense (benefit)		1,~~326~~900			(91,~~797~~326	)		(89,~~201~~797	)
Net income (loss)	$	74,~~347~~463		$	~~(34~~7,~~075~~347	)	$	18(34,~~323~~075	)
Per share data:
Net income (loss) per share:
Basic and diluted earnings (loss)	$	0.50		$	(2.28	)	$	1.21
Basic	$	0.32		$	0.51		$	(2.28	)
Diluted	$	0.31		$	0.50		$	(2.28	)
Weighted average number of shares outstanding:
Basic		14,140			14,521			14,965
Dilutive effect of share equivalents		130			99			n/a
Diluted		14,270			14,620			14,965

See notes to consolidated financial statements.

~~- 38 -~~50

Consolidated Statements of Comprehensive Income (Loss)

Protective Insurance Corporation and Subsidiaries

(in thousands)

	Year Ended December 31
	2019		2018			2017
	2020		2019			2018
Net income (loss)	$	74,~~347~~463	$	~~(34~~7,~~075~~347	)	$	18(34,~~323~~075	)
Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on fixed income securities		1612,~~071~~141		(616,~~868~~071	)		12(6,~~649~~868	)
Foreign currency translation adjustments		~~645~~249		~~(830~~645	)		~~522~~(830	)
Other comprehensive income (loss)		1612,~~716~~390		(716,~~698~~716	)		13(7,~~171~~698	)
Comprehensive income (loss)	$	2416,~~063~~853	$	~~(41~~24,~~773~~063	)	$	31(41,~~494~~773	)

See notes to consolidated financial statements.

~~- 39 -~~51

Consolidated Statements of Shareholders' Equity

Protective Insurance Corporation and Subsidiaries

(in thousands)

	Common Stock												Additional			Accumulated Other
	Class A						Class B						Paid-In			Comprehensive			Retained			Total
	Shares			Amount			Shares			Amount			Capital			Income (Loss)			Earnings			Equity
Balance at January 1, 2017		2,623		$	112			12,461		$	532		$	54,286		$	33,220		$	316,195		$	404,345
Balance at January 1, 2018		2,623		$	112			12,424		$	530		$	55,078		$	46,391		$	316,700		$	418,811
Net income		–			–			–			–			–			–			18,323			18,323
Foreign currency translation adjustment, net of tax		–			–			–			–			–			522			–			522
Change in unrealized gain (loss) on investments, net of tax		–			–			–			–			–			12,649			–			12,649
Common stock dividends		–			–			–			–			–			–			(16,302	)		(16,302	)
Repurchase of common stock		–			–			(85	)		(4	)		(360	)		–			(1,516	)		(1,880	)
Restricted stock grants		–			–			48			2			1,152			–			–			1,154
Balance at December 31, 2017		2,623			112			12,424			530			55,078			46,391			316,700			418,811
Cumulative effect of adoption of ASU 2016-01, net of tax		–			–			–			–			–			(46,157	)		46,157			–
Cumulative effect of adoption of ASU 2018-02		–			–			–			–			–			117			(117	)		–
Net loss		–			–			–			–			–			–			(34,075	)		(34,075	)
Foreign currency translation adjustment, net of tax		–			–			–			–			–			(830	)		–			(830	)
Change in unrealized gain (loss) on investments, net of tax		–			–			–			–			–			(6,868	)		–			(6,868	)
Common stock dividends		–			–			–			–			–			–			(16,835	)		(16,835	)
Repurchase of common stock		(8	)		–			(192	)		(9	)		(832	)		–			(3,755	)		(4,596	)
Restricted stock grants		–			–			22			1			474			–			–			475
Balance at December 31, 2018		2,615		$	112			12,254		$	522		$	54,720		$	(7,347	)	$	308,075		$	356,082
Net income		–			–			–			–			–			–			7,347			7,347
Foreign currency translation adjustment, net of tax		–			–			–			–			–			645			–			645
Change in unrealized gain (loss) on investments, net of tax		–			–			–			–			–			16,071			–			16,071
Common stock dividends		–			–			–			–			–			–			(5,857	)		(5,857	)
Repurchase of common stock		(12	)		(1	)		(665	)		(27	)		(2,896	)		–			(8,577	)		(11,501	)
Restricted stock grants		–			–			87			4			1,525			–			–			1,529
Balance at December 31, 2019		2,603		$	111			11,676		$	499		$	53,349		$	9,369		$	300,988		$	364,316
Cumulative effect of adoption of ASU 2016-13, net of tax		–			–			–			–			–			–			(12,281	)		(12,281	)
Net income		–			–			–			–			–			–			4,463			4,463
Foreign currency translation adjustment, net of tax		–			–			–			–			–			249			–			249
Change in unrealized gain (loss) on investments, net of tax		–			–			–			–			–			12,141			–			12,141
Common stock dividends		–			–			–			–			–			–			(5,813	)		(5,813	)
Repurchase of common stock		–			–			(127	)		(5	)		(563	)		–			(1,214	)		(1,782	)
Restricted stock grants		–			–			126			4			1,785			–			–			1,789
Balance at December 31, 2020		2,603		$	111			11,675		$	498		$	54,571		$	21,759		$	286,143		$	363,082

See notes to consolidated financial statements.

~~- 40 -~~52

Consolidated Statements of Cash Flows

Protective Insurance Corporation and Subsidiaries

(in thousands)

	Year Ended December 31
	2019			2018			2017
	2020			2019			2018
Operating activities
Net income (loss)	$	74,~~347~~463		$	~~(34~~7,~~075~~347	)	$	18(34,~~323~~075	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in accounts receivable and unearned premium		(39,~~835~~024	)		(3,~~904~~835	)		2(3,~~678~~904	)
Change in accrued investment income		~~(524~~65	)		(~~199~~524	)		(~~278~~199	)
Change in reinsurance recoverable on paid losses		(193,~~083~~799	)		~~956~~(19,083	)		~~(446~~956	)
Change in losses and loss expenses reserves, net of reinsurance		~~100~~75,~~648~~103			~~117~~100,~~027~~648			47117,~~229~~027
Change in other assets, other liabilities and current income taxes		10(2,~~140~~322	)		810,~~204~~140			498,~~221~~204
Amortization of net policy acquisition costs		55,~~802~~183			5455,~~981~~802			4754,~~387~~981
Net policy acquisition costs deferred		(5756,~~731~~431	)		(5557,~~940~~731	)		(5155,~~824~~940	)
Provision for deferred income tax expense (benefit)		(515,244	)		(~~18,794~~51	)		(318,~~866~~794	)
Bond amortization		(~~725~~26	)		~~184~~(725	)		~~1,865~~184
Loss on sale of property and equipment		–			–			235
Depreciation		5,869			6,052			6,102
Depreciation		6,052			6,102			5,752
Net realized and unrealized (gains) losses on investments		9,236			(12,889	)		25,691
Net realized (gains) losses on investments		(12,889	)		25,691			(19,686	)
Compensation expense related to restricted stock		1,789			1,529			475
Compensation expense related to restricted stock		1,529			475			1,154
Net cash provided by operating activities		74,862			86,680			100,708
Net cash provided by operating activities		86,680			100,708			97,744
Investing activities
Purchases of fixed income securities and equity securities		(~~423~~392,~~544~~223	)		(~~415~~423,~~326~~544	)		(~~436~~415,~~932~~326	)
Purchases of limited partnership interests		–			~~(450~~–	)		(~~1,097~~450	)
Distributions from limited partnerships		3314,~~396~~636			633,~~869~~396			196,~~230~~869
Proceeds from maturities		84136,~~387~~390			6484,~~035~~387			~~131~~64,~~623~~035
Proceeds from sales of fixed income securities		~~139~~103,~~310~~938			~~241~~139,~~429~~310			~~148~~241,~~652~~429
Proceeds from sales of equity securities		2151,~~621~~713			~~149~~21,~~195~~621			69149,~~756~~195
Net sales of short-term investments		–			–			500
Purchase of insurance company-owned life insurance		–			–			(10,000	)
Purchase of insurance company-owned life insurance		–			(10,000	)		–
Purchase of commercial mortgage loans		(555	)		(7,082	)		(6,672	)
Purchase of commercial mortgage loans		(7,082	)		(6,672	)		–
Proceeds from commercial mortgage loans		1,539			1,972			–
Proceeds from commercial mortgage loans		1,972			–			–
Purchases of property and equipment		(1,470	)		(1,953	)		(5,439	)
Purchases of property and equipment		(1,953	)		(5,439	)		(6,661	)
Proceeds from disposals of property and equipment		–			3			10
Proceeds from disposals of property and equipment		3			10			582
Net cash provided by (used in) investing activities		(86,032	)		(151,890	)		23,651
Net cash provided by (used in) investing activities		(151,890	)		23,651			(74,347	)
Financing activities
Dividends paid to shareholders		(5,~~857~~692	)		(165,~~835~~857	)		(16,~~302~~835	)
Repurchase of common shares		(111,~~501~~782	)		(411,~~596~~501	)		(14,~~880~~596	)
Net cash used in financing activities		(177,~~358~~474	)		(2117,~~431~~358	)		(1821,~~182~~431	)
Effect of foreign exchange rates on cash and cash equivalents		~~645~~185			~~(830~~645	)		~~522~~(830	)
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents		(8118,~~923~~459	)		~~102~~(81,~~098~~923	)		5102,~~737~~098
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year		~~170~~88,~~811~~888			68170,~~713~~811			6268,~~976~~713
Cash, cash equivalents and restricted cash and cash equivalents at end of year	$	8870,~~888~~429		$	~~170~~88,~~811~~888		$	68170,~~713~~811
Supplemental Disclosures of Cash Flow Information
Cash paid (refunds received) for income taxes	$	(1,~~186~~500	)	$	9(1,~~500~~186	)	$	–9,500
Cash paid for interest	$	~~723~~433		$	~~504~~723		$	~~456~~504

See notes to consolidated financial statements.

~~- 41 -~~53

Notes to Consolidated Financial Statements

Protective Insurance Corporation and Subsidiaries

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

Note A - 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 Annual Report on Form 10-K, refers to Protective Insurance Company, Protective Specialty Insurance Company, Sagamore Insurance Company and B&L Insurance, Ltd.

Effective August 1, 2018, the Company changed its name to Protective Insurance Corporation to better align its holding company's and Insurance Subsidiaries' identities and to reflect its position within the insurance industry.

Basis of Presentation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company transactions and accounts have been eliminated in consolidation.

Use of Estimates: Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results will differ from those estimates.

Cash and Cash Equivalents: The Company considers investments in money market funds to be cash equivalents. Carrying amounts for these instruments approximate their fair values.

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 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. There was no valuation allowance on the Company's commercial mortgage loans as of December 31, 2019.

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 December 31, 2020 in conjunction with the adoption of the 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 consolidated statements of operations, its proportionate share of the investee's unrealized, as well as realized, investment gains or losses within net unrealized gains (losses) on equity securities and limited partnership investments.

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

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

Effective January 1, 2018, the Company adopted new accounting guidance that requires equity securities to be 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 consolidated statements of operations. Realized gains and losses on disposals of equity securities are recorded on the trade date and included in net realized gains (losses) on investments, excluding impairment losses. Prior to adoption of the new accounting guidance, unrealized gains and losses related to equity securities were reflected directly in shareholders’ equity unless a decline in value was determined to be other-than-temporary, in which case the loss was charged to income.54

InEquity ~~accordance~~securities ~~with~~are ~~the~~recorded ~~Financial~~at ~~Accounting~~fair ~~Standards Board's ("FASB") other-than-temporary impairment guidance~~value, ifwith ~~a fixed income security is in an~~ unrealized ~~loss~~net ~~position~~gains ~~and the Company has the intent to sell the fixed income security,~~ or itlosses isreflected ~~more~~as ~~likely~~a ~~than~~component ~~not that the Company will have to sell the fixed income security before recovery~~ of ~~its~~net ~~amortized~~unrealized ~~cost~~gains ~~basis,~~(losses) ~~the~~on ~~decline~~equity insecurities ~~value is deemed to be other-than-temporary~~ and islimited ~~recorded~~partnership ~~to other-than-temporary impairment losses on~~ investments inwithin the consolidated statements of operations. ~~For~~ Realized ~~impaired~~gains ~~fixed~~and ~~income~~losses ~~securities~~on ~~that~~disposals ~~the~~of ~~Company~~equity ~~does not intend to sell or in cases where it is more likely than not that the Company will not have to sell such~~ securities, ~~but~~are ~~the~~recorded ~~Company~~on ~~expects that it will not fully recover~~ the ~~amortized~~trade ~~cost~~date ~~basis,~~and ~~the~~included ~~credit component of the other-than-temporary impairment is recognized~~ in ~~other-than-temporary~~net ~~impairment~~realized gains (losses) on investments, inexcluding ~~the consolidated statements of operations and the non-credit component of the other-than-temporary~~ impairment ~~is recognized directly in shareholders' equity~~losses.

-Investment 42Impairments: 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 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.

~~The~~For ~~credit~~a ~~component~~fixed ofincome ansecurity ~~other-than-temporary~~that ~~impairment~~the Company does not intend to sell or in cases where it is ~~determined~~more bylikely ~~comparing~~than not that the ~~net~~Company ~~present~~will ~~value~~not ofhave ~~projected~~to ~~future~~sell ~~cash~~the ~~flows~~security, ~~with~~the Company separates the ~~amortized~~credit ~~cost~~loss ~~basis~~component of the ~~fixed~~impairment ~~income~~from ~~security~~the amount related to all other factors and reports the credit loss component within net realized gains (losses) on investments, excluding impairment losses in the consolidated statements of operations. The ~~net~~impairment ~~present value~~related to all other factors (non-credit factors) is ~~calculated~~reported byin ~~discounting~~other ~~the~~comprehensive ~~Company's~~income ~~best~~(loss). ~~estimate~~The ofallowance ~~projected~~is ~~future~~adjusted ~~cash~~for ~~flows~~any atadditional credit losses and subsequent recoveries. Upon recognizing a credit loss, the ~~appropriate~~cost ~~effective~~basis ~~interest~~is ~~rate~~not adjusted.

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

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

Deductible Receivables: Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a net of allowance basis in the 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 uncollateralized deductible receivables. As of December 31, 2020, the Company recorded an allowance for expected credit losses of $16,500 ($13,035, net of tax). See Note T – Litigation, Commitments and Contingencies for further discussion.

Property and Equipment: Property and equipment are carried at cost, less accumulated depreciation. Depreciation is computed principally by the straight-line method.

Goodwill and Other Intangible Assets: In the fourth quarter of 2018, the Company concluded the entire goodwill balance was impaired, resulting in an impairment loss of $3,152. See Note M for further discussion. This impairment charge is included within other operating expenses in the consolidated ~~statements~~statement of operations for the year ended December 31, 2018. Intangible assets determined to have finite lives, such as customer relationships and employment agreements, are amortized over their estimated useful lives in a manner that best reflects the economic benefits of the intangible asset. In addition, impairment testing is performed on these amortizing intangible assets if impairment indicators are noted..

Reserves for Losses and Loss Expenses: The reserves for losses and loss expenses are determined using case basis evaluations and statistical analyses and represent estimates of the ultimate cost of all reported and unreported losses which are unpaid at year-end. These reserves include estimates of future trends in claim severity and frequency and other factors which could vary as the losses are ultimately settled. While actual results will differ from such estimates, management believes that the reserves for losses and loss expenses are adequate. The estimates are continually reviewed, and as adjustments to these reserves become necessary, such adjustments are reflected in current operations.

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 consolidated balance sheet at December 31, 2019.55

~~Reinsurance~~Recognition of Revenue and Costs: ~~Reinsurance~~Premiums ~~premiums,~~are ~~commissions,~~earned ~~expense~~over ~~reimbursements~~the ~~and~~period ~~reserves~~for ~~related~~which toinsurance ~~the~~protection ~~Company's~~is ~~reinsured~~provided. A ~~business~~reserve ~~are~~for ~~accounted~~unearned ~~for~~premiums onis ~~bases consistent~~established ~~with~~to ~~those~~reflect ~~used~~amounts inapplicable ~~accounting~~to ~~for~~subsequent ~~the~~accounting ~~original~~periods. Commissions ~~policies~~to ~~issued~~unaffiliated companies and ~~the~~premium ~~terms~~taxes ofapplicable to unearned premiums are deferred and expensed as the ~~reinsurance~~related ~~contracts~~premiums are earned. ~~Premiums~~The ~~ceded~~Company todoes ~~other~~not ~~insurers~~defer ~~have~~acquisition ~~been~~costs ~~reported~~that asare anot ~~reduction~~directly ofvariable ~~premium~~with ~~earned~~the production of premiums. ~~Amounts~~If ~~applicable~~it tois ~~reinsurance~~determined ~~ceded~~that ~~for unearned~~expected ~~premium~~losses and ~~claim~~deferred ~~loss~~expenses ~~reserves~~will ~~have~~likely ~~been~~exceed ~~reported~~the asrelated ~~reinsurance~~unearned ~~recoverable~~premiums, ~~assets. Certain~~the ~~reinsurance~~asset ~~contracts~~representing ~~provide~~deferred ~~for~~policy ~~additional~~acquisition orcosts ~~return~~is ~~premiums~~reduced and ~~commissions~~an ~~based~~expense ~~upon~~is ~~profits~~charged oragainst ~~losses~~current operations to ~~the~~reflect ~~reinsurer~~any ~~over~~such ~~prescribed periods~~premium deficiency. ~~Estimates~~In ofthe ~~additional~~event orthat ~~return~~the ~~premiums~~expected ~~and~~premium ~~commissions~~deficiency ~~are~~exceeds ~~adjusted~~deferred ~~quarterly~~policy toacquisition ~~recognize~~costs, ~~actual~~an ~~loss~~additional ~~experience~~liability towould ~~date,~~be asrecorded ~~well~~with asa ~~projected~~corresponding ~~loss~~expense ~~experience~~to ~~applicable~~current tooperations for the ~~various~~amount ~~contract~~of ~~periods~~the excess premium deficiency. ~~Estimates~~Anticipated investment income is considered in determining recoverability of ~~reinstatement premiums~~deferred ~~on reinsurance~~acquisition ~~contracts~~costs. The ~~covering~~Company ~~catastrophic~~had ~~events~~no ~~are~~material contract assets, tocontract ~~the~~liabilities, ~~extent~~or ~~reasonably~~deferred ~~determinable,~~contract costs recorded ~~concurrently~~on ~~with~~its ~~the~~consolidated ~~related~~balance ~~loss~~sheet at December 31, 2020.

Reinsurance: Reinsurance premiums, commissions, expense reimbursements and reserves related to the Company's reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other insurers have been reported as a reduction of premiums earned. Amounts applicable to reinsurance ceded for unearned premiums and claim loss reserves have been reported as reinsurance recoverable assets. Certain reinsurance contracts provide for additional or return premiums and commissions based upon profits or losses to the reinsurer over prescribed periods. Estimates of additional or return premiums and commissions are adjusted quarterly to recognize actual loss experience to date, as well as projected loss experience applicable to the various contract periods. Estimates of reinstatement premiums on reinsurance contracts covering catastrophic events are, to the extent reasonably determinable, recorded concurrently with the related loss.

Should impairment in the ability of a reinsurer to satisfy its obligations to the Company be determined to exist, current year operations would be charged in amounts sufficient to provide for the Company's additional liability. Such charges, when incurred, are included in other operating expenses, rather than losses and loss expenses incurred, because the inability of the Company to collect from reinsurers is a credit risk rather than a deficiency associated with the loss reserving process.

Deferred Taxes: Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement and tax return bases of assets and liabilities based on enacted tax rates and laws. The deferred tax benefits of the deferred tax assets are recognized to the extent realization of such benefits is more likely than not. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred income tax expense or benefit generally represents the net change in deferred income tax assets and liabilities during the year. Current income tax expense represents the tax liability associated with revenues and expenses currently taxable or deductible on various income tax returns for the year reported.

Restricted Stock: Shares of restricted stock vest over the vesting period from the date of grant and certain shares of restricted stock are accelerated for retirement-eligible recipients in accordance with the non-substantive, post-grant date vesting clause of Accounting Standards Codification ("ASC") Topic 715, Compensation—Retirement Benefits. Restricted stock is valued based on the closing price of the Company's Class B Common Stock on the day the award is granted. Non-vested shares of restricted stock will be forfeited should an executive's employment terminate for any reason other than death, disability, or retirement as defined by the Compensation Committee (the "Compensation Committee") of the Board of Directors (the "Board") of the Company.

Earnings (Loss) Per Share: Diluted earnings (loss) per share of common stock are based on the average number of shares of Class A and Class B Common Stock outstanding during the year, adjusted for the dilutive effect, if any, of restricted stock awards outstanding. Basic earnings (loss) per share are presented exclusive of the effect of share-based awards outstanding.

Comprehensive Income (Loss): The Company records accumulated other comprehensive income (loss) from unrealized gains and losses on available-for-sale securities and from foreign exchange adjustments as a separate component of shareholders' equity. A reclassification adjustment to other comprehensive income (loss) is made for gains or losses during the period included in net income (loss).

- 43 -

Fair Value Measurements: The Company provides disclosures related to recurring and non-recurring fair value measurements with separate disclosures for the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements, along with an explanation for the transfers. Additionally, separate disclosures are provided for purchases, sales, issuances and settlements on a gross basis for Level 3 fair value measurements as well as additional clarification for both the level of disaggregation reported for each class of assets or liabilities and disclosures of inputs and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for assets and liabilities categorized as Level 2 or Level 3.

Insurance Company-Owned Life Insurance: Included within other assets on the consolidated balance ~~sheet~~sheets at December 31, 2020 and 2019 iswas $11,458 and $11,049 of company-owned life insurance. The carrying value of the company-owned life insurance policies represents the cash surrender value as reported by the respective insurer, which approximates fair value.

Recently Adopted Accounting Pronouncements: In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01. The amendments in ASU 2016-01 changed the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Previously, the Company's equity securities were classified as available-for-sale and changes in fair value were recognized in accumulated other comprehensive income (loss) as a component of shareholders' equity. The Company adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective approach and recorded a cumulative-effect adjustment to reclassify unrealized gains on equity securities of $71,012 ($46,157, net of tax) from other comprehensive income (loss) to retained earnings within the consolidated balance sheet as of December 31, 2018. Going forward, unrealized gains or losses on equity securities will be recognized in the consolidated statements of operations within net unrealized gains (losses) on equity securities and limited partnership investments.56

Recently Adopted Accounting Pronouncements: In ~~February~~January 2016, the FASB issued ~~Accounting Standards Update ("~~ASU") ~~No.~~ 2016-0201, ~~Leases~~Financial ~~(Topic~~Instruments ~~842),~~- orOverall ~~ASU~~(Subtopic ~~2016~~825-~~02. ASU~~10): ~~2016-02~~Recognition ~~superseded~~and ~~the~~Measurement ~~prior~~of ~~lease~~Financial ~~guidance~~Assets inand ~~Accounting~~Financial ~~Standards~~Liabilities, ~~Codification~~or ~~("ASC")~~ASU ~~Topic 840, Leases~~2016-01. ~~Under~~ ~~the~~The ~~new~~amendments ~~guidance,~~in ~~lessees~~ASU ~~are~~2016-01 ~~required~~changed tothe ~~recognize~~accounting for ~~all~~non-consolidated ~~leases,~~equity ~~with~~investments ~~the~~that ~~exception~~are ofnot ~~short-term~~accounted ~~leases,~~for aunder ~~lease~~the ~~liability,~~equity ~~which~~method isof aaccounting ~~lessee's~~by ~~obligation~~requiring tochanges ~~make~~in ~~lease~~fair ~~payments~~value ~~arising~~to ~~from~~be arecognized ~~lease,~~in ~~measured on a discounted basis~~income. ~~Concurrently~~Previously, ~~lessees are required to recognize a right-of-use asset, which is an asset that represents~~ the ~~lessee~~Company's ~~right~~equity tosecurities ~~use,~~were orclassified ~~control~~as ~~the use of, a specified asset~~ available-for-sale ~~the~~and ~~lease~~changes ~~term. The~~in ~~guidance~~fair ~~provided~~value ~~for~~were arecognized ~~modified retrospective~~in ~~transition~~accumulated ~~approach~~other ~~for~~comprehensive ~~leases~~income ~~existing~~(loss) ~~at,~~as ora ~~entered~~component ~~into after, the beginning~~ of ~~the~~shareholders' ~~earliest comparative periods presented in the financial statements~~equity. InThe ~~July~~Company ~~2018,~~adopted ~~the FASB issued~~ ASU ~~2018~~2016-~~11,~~01 ~~Leases~~as ~~(Topic~~of ~~842):~~January ~~Targeted Improvements~~1, ~~or ASU~~ 2018~~-11,~~ ~~which~~using ~~provided~~the ~~adopters~~modified anretrospective ~~additional~~approach ~~transition method by allowing entities to initially apply ASU 2016-02,~~ and ~~subsequent~~recorded ~~related standards, at the adoption date and recognize~~ a cumulative-effect adjustment to ~~the opening~~reclassify ~~balance~~unrealized ofgains ~~retained~~on ~~earnings~~equity insecurities ~~the period~~ of ~~adoption. The Company adopted the new guidance on January 1~~$71,012 ~~2019 utilizing the transition method allowed per ASU 2018-11~~($46, ~~and accordingly~~157, ~~comparative~~net ~~period financial information was not adjusted for the effects~~ of ~~the~~tax) ~~new~~from ~~guidance. No~~other ~~cumulative-effect~~comprehensive ~~adjustment~~income ~~was~~(loss) ~~required~~ to ~~the opening balance of~~ retained earnings onwithin the ~~adoption~~consolidated ~~date.~~balance ~~The~~sheet ~~Company's~~as ~~adoption~~ of ~~the~~December ~~new~~31, ~~standard~~2018. Unrealized ~~did~~gains ~~not~~or ~~have~~losses ~~any impact~~ on ~~the~~equity ~~Company's consolidated~~securities ~~statements~~are ofnow ~~operations~~recognized ~~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 consolidated ~~balance~~statements ~~sheet as~~ of ~~December~~operations ~~31,~~within ~~2019,~~net ~~each~~unrealized ~~of approximately $127,~~gains ~~which~~(losses) ~~are~~on ~~included~~equity ~~within~~securities ~~other assets~~ and ~~accounts~~limited ~~payable~~partnership ~~and other liabilities~~investments.

In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), or ASU 2016-02. ASU 2016-02 superseded the prior lease guidance in ASC Topic 840, Leases. 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 guidance provided for a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, or ASU 2018-11, which provided adopters an additional transition method by allowing entities to initially apply ASU 2016-02, and subsequent related standards, at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the new guidance on January 1, 2019 utilizing the transition method allowed per ASU 2018-11, and accordingly, comparative period financial information was not adjusted for the effects of the new guidance. No cumulative-effect adjustment was required to the opening balance of retained earnings on the adoption date. The Company's adoption of the new standard did not have any impact on the Company's consolidated statements of operations or cash flows. As of December 31, 2020 the Company had a right-of-use asset and a lease liability recorded within the consolidated balance sheet, each of approximately $120, which are included within other assets and accounts payable and other liabilities.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. This update provided clarification, corrected errors in and made minor improvements to various ASC topics. Many of the amendments in this update had transition guidance with effective dates for annual periods beginning after December 15, 2018, and some amendments in this update did not require transition guidance and were effective upon issuance of this update. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

~~Recently Issued Accounting Pronouncements:~~ In June 2016, the FASB issued 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. 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 aan pre-tax cumulative effect adjustment ~~between~~of ~~approximately~~$15,545 ($~~13.0~~12,281, ~~million~~net ~~and~~of ~~$18.0 million~~ 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 with $15,000 ($11,850, net of tax) attributed to the ongoing litigation with Personnel Staffing Group ("PSG") discussed in Note T - Litigation, Commitments and Contingencies.

The updated guidance in ASU 2016-13 also amended the ~~current~~previous other-than-temporary impairment (“OTTI”) model for available-for-sale fixed income securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted the guidance related to available-for-sale fixed income securities on January 1, 2020 using a prospective transition approach for available-for-sale fixed income securities that were purchased with credit deterioration or had recognized an OTTI write-down prior to the effective date. The effect of the prospective transition approach was to maintain the same amortized cost basis before and after the effective date.

~~- 44 -~~57

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 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 isbecame effective ~~for~~on ~~fiscal~~January ~~years beginning after December 15~~1, ~~2020,~~2021 ~~including~~and ~~interim periods within those annual periods. Early adoption~~ is ~~permitted. The~~not ~~Company~~expected isto ~~currently~~have ~~evaluating~~a ~~the~~material ~~effects~~effect ~~the adoption of ASU 2019-12 will have~~ on ~~its~~the Company's consolidated financial statements.

- 45 -

Note B - Investments

The following is a summary of available-for-sale securities at December 31:

	Fair Value		Cost or Amortized Cost		Gross Unrealized Gains			Gross Unrealized Losses			Net Unrealized Gains (Losses)
	FairValue		Cost orAmortized Cost		Allowancefor Credit Losses			GrossUnrealizedGains			GrossUnrealizedLosses			Net UnrealizedGains (Losses)
December 31, 2019
December 31, 2020
Fixed income securities
Agency collateralized mortgage obligations	$	1211,~~093~~931	$	11,~~557~~448	$	~~536~~–		$	–483		$	~~536~~–		$	483
Agency mortgage-backed securities		56102,~~280~~107		5499,~~286~~060		~~2,005~~–			~~(11~~3,062	)		~~1,994~~(15	)		3,047
Asset-backed securities		~~106~~107,~~397~~696		~~107~~108,~~028~~686		~~499~~–			~~(1,130~~596	)		(~~631~~1,586	)		(990	)
Bank loans		1411,~~568~~361		1411,~~932~~590		~~106~~–			~~(470~~128	)		(~~364~~357	)		(229	)
Certificates of deposit		2,835		2,835		–			–			–
Collateralized mortgage obligations		5,118		5,061		–			151			(94	)		57
Collateralized mortgage obligations		5,616		5,123		493			–			493
Corporate securities		360,241		344,059		–			16,380			(198	)		16,182
Corporate securities		281,381		274,340		7,492			(451	)		7,041
Mortgage-backed securities		38,056		40,675		(1,035	)		659			(2,243	)		(1,584	)
Mortgage-backed securities		47,463		46,685		1,047			(269	)		778
Municipal obligations		45,143		43,353		–			1,820			(30	)		1,790
Municipal obligations		36,286		35,749		684			(147	)		537
Non-U.S. government obligations		30,600		29,882		–			718			–			718
Non-U.S. government obligations		24,179		23,889		290			–			290
U.S. government obligations		207,439		200,654		–			7,000			(215	)		6,785
U.S. government obligations		208,440		206,623		2,891			(1,074	)		1,817
Total fixed income securities	$	919,692	$	894,468	$	(1,035	)	$	30,997		$	(4,738	)	$	26,259
Total fixed income securities	$	795,538	$	783,047	$	16,043		$	(3,552	)	$	12,491

Fair Value

Cost or Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Net Unrealized Gains (Losses)

FairValue

Cost orAmortized Cost

GrossUnrealizedGains

GrossUnrealizedLosses

Net UnrealizedGains (Losses)

December 31, 2018

December 31, 2019

Fixed income securities

Agency collateralized mortgage obligations

1012,~~687~~093

1011,~~636~~557

~~145~~536

~~(94~~–

)

51536

Agency mortgage-backed securities

3756,~~385~~280

3754,~~168~~286

~~371~~2,005

(~~154~~11

)

~~217~~1,994

Asset-backed securities

64106,~~422~~397

66107,~~241~~028

14499

(1,~~833~~130

)

(~~1,819~~631

)

Bank loans

914,~~750~~568

1014,~~208~~932

27106

(~~485~~470

)

(~~458~~364

)

Certificates of deposit

2,835

—–

–

—–

Collateralized mortgage obligations

5,~~423~~616

5,~~095~~123

~~376~~493

~~(48~~–

)

~~328~~493

Corporate securities

~~190~~281,~~450~~381

~~196~~274,~~925~~340

~~127~~7,492

(~~6,602~~451

)

(67,~~475~~041

)

Mortgage-backed securities

3847,~~540~~463

3846,~~586~~685

~~377~~1,047

(~~423~~269

)

~~(46~~778

)

Municipal obligations

2936,~~155~~286

2935,~~102~~749

~~239~~684

(~~186~~147

)

53537

Non-U.S. government obligations

2524,~~180~~179

2523,~~339~~889

6290

~~(165~~–

)

~~(159~~290

)

U.S. government obligations

~~178~~208,~~818~~440

~~178~~206,~~369~~623

12,~~252~~891

(~~803~~1,074

)

~~449~~1,817

Total fixed income securities

~~592~~795,~~645~~538

~~600~~783,~~504~~047

216,~~934~~043

(103,~~793~~552

)

(712,~~859~~491

)

~~- 46 -~~58

The following table summarizes, for available-for-sale fixed income securities in an unrealized loss position at December 31, ~~2019~~2020 and December 31, ~~2018~~2019, the aggregate fair value and gross unrealized loss categorized by the duration individual securities have been continuously in an unrealized loss position.

2019

2018

2020

2019

Number of Securities

Fair Value

Gross Unrealized Loss

Number of Securities

Fair Value

Gross Unrealized Loss

Number ofSecurities

FairValue

GrossUnrealized Loss

Number ofSecurities

FairValue

GrossUnrealized Loss

Fixed income securities:

12 months or less

88100

~~108~~120,~~387~~630

(23,~~452~~405

)

~~275~~88

~~282~~108,~~646~~387

(72,~~296~~452

)

Greater than 12 months

6924

6633,~~860~~065

(1,~~100~~333

)

~~217~~69

~~131~~66,~~001~~860

(31,~~497~~100

)

Total fixed income securities

~~157~~124

~~175~~153,~~247~~695

(34,~~552~~738

)

~~492~~157

~~413~~175,~~647~~247

(103,~~793~~552

)

~~Unrealized~~The ~~losses~~fair invalue ~~the~~and ~~Company's fixed income portfolio are generally~~ the ~~result~~cost ~~of interest rate~~ or ~~foreign~~amortized ~~currency~~costs ~~fluctuations. The~~of ~~Company does not intend to sell any~~ fixed income ~~securities~~investments ~~in an unrealized loss position~~ at December 31, ~~2019~~2020, ~~and~~organized itby iscontractual ~~not~~maturity, ~~more~~are ~~likely~~shown ~~than~~below. Actual ~~not~~maturities ~~that~~may ~~the~~ultimately ~~Company~~differ ~~will~~from ~~have~~contractual tomaturities ~~sell~~because ~~any~~borrowers ~~such~~have, ~~fixed~~in ~~income~~some ~~security~~cases, ~~before~~the ~~recovery~~right ofto ~~its~~call ~~amortized~~or ~~cost~~prepay ~~basis. Accordingly,~~obligations ~~the~~with ~~Company~~or ~~does~~without ~~not~~call ~~believe~~or ~~any~~prepayment ~~unrealized~~penalties. Pre-refunded ~~losses represent~~municipal ~~OTTIs~~bonds asare ofclassified ~~December~~based ~~31,~~on ~~2019~~their pre-refunded call dates.

The fair value and the cost or amortized costs of fixed income investments at December 31, 2019, 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	$	117,017	12.7	%	$	115,774	12.9	%
Excess of one year to five years		359,314	39.1			346,150	38.7
Excess of five years to ten years		161,700	17.6			151,446	16.9
Excess of ten years		21,871	2.4			22,264	2.6
Total contractual maturities		659,902	71.8			635,634	71.1
Asset-backed securities		259,790	28.2			258,834	28.9
Total	$	919,692	100.0	%	$	894,468	100.0	%

	Fair Value				Cost or Amortized Cost
One year or less	$	86,368	10.9	%	$	86,144	11.0	%
Excess of one year to five years		336,689	42.3			330,026	42.1
Excess of five years to ten years		135,169	17.0			132,985	17.0
Excess of ten years		15,079	1.9			14,337	1.9
Total contractual maturities		573,305	72.1			563,492	72.0
Asset-backed securities		222,233	27.9			219,555	28.0
Total	$	795,538	100.0	%	$	783,047	100.0

Major categories of investment income for the years ended December 31, 2020, 2019 and 2018 are summarized as follows:

Major categories of investment income for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:

	2020			2019			2018
Interest on fixed income securities	$	24,874		$	24,620		$	19,092
Dividends on equity securities		1,868			2,320			4,380
Money market funds, Short-term and other		1,070			1,976			1,529
		27,812			28,916			25,001
Investment expenses		(2,390	)		(2,667	)		(2,953	)
Net investment income	$	25,422		$	26,249		$	22,048

	2019			2018			2017
Interest on fixed income securities	$	24,620		$	19,092		$	15,340
Dividends on equity securities		2,320			4,380			4,611
Money market funds, Short-term and other		1,976			1,529			471
		28,916			25,001			20,422
Investment expenses		(2,667	)		(2,953	)		(2,327	)
Net investment income	$	26,249		$	22,048		$	18,095

-Following 47is -a summary of the components of net realized and unrealized gains (losses) for the years ended December 31, 2020, 2019 and 2018:

Gains and losses on investments, including equity method earnings from limited partnerships, for the years ended December 31 are summarized below:

	2020			2019			2018

Gross gains on available-for-sale fixed income securities during the period:	$	11,125		$	11,009		$	10,807

Gross losses on available-for-sale fixed income securities during the period:		(9,943	)		(10,492	)		(14,367	)

Impairment losses on investments		(2,861	)		(497	)		(19	)

Change in value of limited partnership investments		(1,442	)		1,644			(9,343	)

Gains (losses) on equity securities:
Realized gains (losses) on equity securities sold during the period⁽¹⁾		(8,058	)		1,938			(3,072	)
Unrealized gains (losses) on equity securities held at the end of the period		1,943			9,287			(9,697	)
Total realized and unrealized gains (losses) on equity securities		(6,115	)		11,225			(12,769	)

Net realized and unrealized gains (losses) on investments	$	(9,236	)	$	12,889		$	(25,691	)

	2019			2018			2017
Gross gains on available-for-sale investments sold during the period:
Fixed income securities	$	11,009		$	10,807		$	9,135
Equity securities (1)		–			–			10,481
Total gains		11,009			10,807			19,616
Gross losses on available-for-sale investments sold during the period:
Fixed income securities		(10,492	)		(14,367	)		(9,882	)
Equity securities (1)		–			–			(2,368	)
Total losses		(10,492	)		(14,367	)		(12,250	)
Other-than-temporary impairments		(497	)		(19	)		(149	)
Change in value of limited partnership investments		1,644			(9,343	)		12,469
Gains (losses) on equity securities:
Realized gains (losses) on equity securities sold during the period (2)		1,938			(3,072	)		–
Unrealized gains (losses) on equity securities held at the end of the period		9,287			(9,697	)		–
Total realized and unrealized gains (losses) on equity securities		11,225			(12,769	)		–
Net realized and unrealized gains (losses) on investments	$	12,889		$	(25,691	)	$	19,686

⁽¹⁾

During 2018, the Company sold $149,195 in equity securities, resulting in a gain on sale of $51,900. The majority of these gains were included in unrealized gains within other comprehensive income (loss) at December 31, 2017 and, as a result of the adoption of ASU 2016-01, were reclassified to retained earnings as of January 1, 2018 and were therefore not recognized in the consolidated statements of operations for the year ended December 31, 2018.

~~(1)~~As ~~Effective~~discussed ~~January~~in 1,Note ~~2018~~A, the Company adopted ~~Accounting~~the ~~Standards~~provisions ~~Update~~of ~~("ASU")~~the ~~2016-01,~~new ~~Financial~~CECL ~~Instruments~~model -for ~~Overall~~measuring ~~(Subtopic~~expected ~~825-10):~~credit ~~Recognition~~losses ~~and~~for ~~Measurement~~available-for-sale offixed ~~Financial~~income ~~Assets~~securities ~~and~~as ~~Financial~~of ~~Liabilities,~~January ~~or ASU 2016-01~~1, ~~and~~2020. The ~~equity~~updated ~~securities~~guidance ~~are~~amended nothe ~~longer~~previous ~~classified~~OTTI asmodel for available-for-sale. ~~The~~fixed ~~amendments~~income insecurities ~~ASU~~by ~~2016-01~~requiring ~~changed~~the recognition of impairments relating to credit losses through an allowance account on the ~~accounting~~consolidated ~~for~~balance ~~equity~~sheet ~~securities~~with bya ~~requiring~~corresponding ~~changes~~adjustment into earnings and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. For those securities in an unrealized loss position throughout the year where the Company intended to besell ~~recognized~~the insecurity ~~income.~~at ~~Previously~~the balance sheet date, a write down to earnings of $1,826 was recorded during the year ended December 31, 2020. The Company's ~~equity~~also analyzed securities ~~were~~in ~~classified~~an asunrealized ~~available-~~loss position for~~-sale~~ credit losses and ~~changes~~recorded an allowance for credit losses of $1,035 as of December 31, 2020. The Company reviewed its remaining fixed income securities in ~~fair~~an ~~value~~unrealized loss position as of December 31, 2020 and determined the losses were ~~recognized~~the result of non-credit factors, such as the increase in ~~accumulated~~market ~~other~~volatility ~~comprehensive~~due ~~income~~to ~~(loss)~~the disruption in global financial markets as a ~~component~~result of ~~shareholders'~~the ~~equity~~novel coronavirus ("COVID-19") pandemic and responses to it. The ~~Prior~~Company ~~periods~~currently ~~have~~does not ~~been~~intend ~~restated~~to sell nor does it expect to ~~conform~~be required to ~~the~~sell ~~current~~these ~~presentation~~securities before recovery of their amortized cost.

~~(2)~~Gain ~~During~~and ~~2018,~~loss ~~the~~activity ~~Company~~for ~~sold~~fixed ~~$149,195~~income ~~in equity~~ securities, ~~resulting~~as shown in athe ~~gain~~previous ~~on sale of $51~~table,~~900.~~ ~~The~~includes ~~majority~~adjustments offor ~~these~~impairment ~~gains~~losses ~~were~~on ~~included~~investments infor ~~unrealized~~the ~~gains~~years ~~within~~ended ~~other comprehensive income (loss) at~~ December 31, ~~2017 and~~2020, as2019 aand ~~result~~2018 ofsummarized ~~the adoption of ASU 2016-01, were reclassified to retained earnings~~ as ~~of January 1, 2018 and were therefore not recognized in the consolidated statements of operations for the year ended December 31, 2018.~~follows:

Gain and loss activity for fixed income and equity security investments, as shown in the previous table, includes adjustments for other-than-temporary impairment for the years ended December 31, 2019, 2018 and 2017 summarized as follows:

	2020			2019			2018
Cumulative charges to income at beginning of year	$	889		$	930		$	4,209

Write-downs based on objective and subjective criteria		1,826			497			19
Recovery of prior write-downs upon sale or disposal		(909	)		(538	)		(3,298	)
Net pre-tax realized gain (loss)		(917	)		41			3,279

Cumulative charges to income at end of year	$	1,806		$	889		$	930

	2019			2018			2017
Cumulative charges to income at beginning of year	$	930		$	4,209		$	5,650
Writedowns based on objective and subjective criteria		497			19			149
Recovery of prior writedowns upon sale or disposal		(538	)		(3,298	)		(1,590	)
Net pre-tax realized gain		41			3,279			1,441
Cumulative charges to income at end of year	$	889		$	930		$	4,209

There is no primary market and only a limited secondary market for the Company's investments in limited partnerships and, in most cases, the Company is prohibited from disposing of its limited partnership interests for some period of time and generally must seek approval from the applicable general partner for any such disposal. Distributions of earnings from these partnerships are largely at the sole discretion of the general partners, and distributions are generally not received by the Company for many years after the earnings have been reported. The Company has a commitment to contribute up to an additional $350 to a limited partnership as of December 31, 2020.

The fair value of regulatory deposits with various insurance departments in the United States and Canada totaled $99122,~~763~~896 and $8799,~~981~~763 at December 31, ~~2019~~2020 and ~~2018~~2019, respectively.

Short-term investments at December 31, ~~2019~~2020 included $1,000 in certificates of deposit issued by a Bermuda bank.

The Company's fixed income securities are over 9293% invested in investment grade fixed income investments. The Company has no fixed income investments that were originally issued with guarantees by a third-party insurance company nor does the Company have any direct exposure to any guarantor at December 31, ~~2019~~2020.

Approximately $63,660 of fixed income investments (6.1% of the Company's consolidated investment portfolio, which includes money market instruments classified as cash equivalents) consists of non-rated 48bonds and bonds rated as less than investment grade at year-end. These investments have a $2,230 aggregate net unrealized gain position at December 31, 2020.

Approximately $61,181 of fixed income investments (6.3% of the Company's consolidated investment portfolio, which includes money market instruments classified as cash equivalents) consists of non-rated bonds and bonds rated as less than investment grade at year-end. These investments have a $684 aggregate net unrealized gain position at December 31, 2019.

Note C - Loss and Loss Expense Reserves

Activity in the reserves for losses and loss expenses for the years ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018 is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.

2019

2018

2017

2020

2019

2018

Reserves, gross of reinsurance recoverable, at the beginning of the year

~~865~~988,~~339~~305

~~680~~865,~~274~~339

~~576~~680,~~330~~274

Reinsurance recoverable on unpaid losses at the beginning of the year

~~375~~398,~~935~~305

~~308~~375,~~143~~935

~~251~~308,~~563~~143

Reserves at the beginning of the year

~~489~~590,~~404~~000

~~372~~489,~~131~~404

~~324~~372,~~767~~131

Provision for losses and loss expenses:

Claims occurring during the current year

~~349~~319,~~018~~269

~~329~~349,~~078~~018

~~228~~329,~~303~~078

Claims occurring during prior years

(~~550~~311

)

~~16,786~~(550

)

1916,~~215~~786

Total incurred losses and loss expenses

~~348~~318,~~468~~958

~~345~~348,~~864~~468

~~247~~345,~~518~~864

Loss and loss expense payments:

Claims occurring during the current year

9077,~~364~~880

8490,~~738~~364

6784,~~234~~738

Claims occurring during prior years

~~157~~165,~~508~~777

~~143~~157,~~853~~508

~~132~~143,~~920~~853

Total paid

~~247~~243,~~872~~657

~~228~~247,~~591~~872

~~200~~228,~~154~~591

Reserves at the end of the year

~~590~~665,~~000~~301

~~489~~590,~~404~~000

~~372~~489,~~131~~404

Reinsurance recoverable on unpaid losses at the end of the year

~~398~~424,~~305~~368

~~375~~398,~~935~~305

~~308~~375,~~143~~935

Reserves, gross of reinsurance recoverable, at the end of the year

~~988~~1,~~305~~089,669

~~865~~988,~~339~~305

~~680~~865,~~274~~339

The table above shows that a reserve savings of $550 developed during 2019 in the settlement of claims occurring on or before December 31, 2018, compared to reserve deficiencies of $16,786 in 2018 and $19,215 in 2017. The developments for each year are 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.61

The ~~$550~~table ~~prior~~above ~~accident~~shows ~~year~~that a reserve savings ~~that~~of $311 developed during ~~2019~~2020 ~~related~~in tothe ~~favorable~~settlement ~~loss~~of ~~development~~claims inoccurring ~~the~~on ~~Company's~~or ~~workers'~~before ~~compensation~~December ~~business~~31, ~~partially~~2019, ~~offset~~compared byto ~~unfavorable~~a ~~loss~~reserve ~~development~~savings inof ~~commercial automobile~~$550 ~~coverages. This~~in 2019 ~~savings~~and ~~compares~~reserve todeficiencies ~~a deficiency~~ of $16,786 ~~for~~in 2018 ~~related to unfavorable loss development from commercial automobile coverages~~. ~~This~~The ~~unfavorable~~developments ~~loss~~for ~~development~~each ~~was~~year ~~the~~are ~~result~~composed of ~~increased~~individual claim ~~severity~~savings ~~due~~and todeficiencies ~~a more challenging litigation environment~~which, ~~as well as an unexpected increase~~ in the ~~time~~aggregate, tohave ~~settle~~resulted ~~claims~~from ~~leading~~the ~~to an unfavorable change in claim~~ settlement ~~patterns. The deficiency~~ of ~~$19,215~~claims ~~for~~at ~~2017,~~amounts ~~also~~higher ~~related~~or tolower ~~unfavorable~~than ~~loss~~previously ~~development from~~reserved ~~commercial~~and ~~automobile coverages, particularly~~ from ~~severe~~changes ~~transportation~~in ~~loss~~estimates ~~events~~of ~~that~~losses ~~occurred~~incurred ~~primarily~~but ~~during~~not ~~the~~reported ~~first~~as ~~six~~part ~~months~~ of ~~2017~~the ~~and~~normal ~~higher~~reserving ~~than expected loss development for discontinued lines of business~~process.

~~Loss~~The ~~reserves~~following ~~have~~table ~~been~~reconciles ~~reduced~~the bytriangles ~~estimated~~presented ~~salvage~~in ~~and~~this ~~subrogation~~note ~~recoverable~~to ofthe ~~approximately~~total ~~$4,000~~(savings) ~~and~~/ ~~$7,545~~deficiency atfor ~~December~~the ~~31,~~Company ~~2019~~of ~~and~~$311 ~~2018,~~shown ~~respectively.~~in the table above:

The following is information about incurred and paid claims development as of December 31, 2019, net of reinsurance, as well as cumulative claim frequency and the total of incurred‐but‐not‐reported liabilities plus expected development on reported claims included within the net incurred claims amounts.

	Prior Year (Savings) / Deficiency
	2020			2019			2018
Workers' Compensation	$	1,431		$	(2,733	)	$	(9,601	)
Commercial Auto Liability		10,717			8,893			32,342
Occupational Accident		(7,467	)		688			(4,178	)
Physical Damage		(1,684	)		(4,561	)		(1,066	)
Professional Liability Assumed		189			259			2,343
Other short-duration contracts		(3,497	)		(3,096	)		(3,054	)
Total	$	(311	)	$	(550	)	$	16,786

-The 49$311 -prior accident year savings that developed during 2020 related to favorable loss development in the Company's occupational accident business, partially offset by unfavorable loss development in commercial automobile coverages. This 2020 savings compares to savings of $550 for 2019 related to favorable loss development in the Company's workers' compensation business, and a deficiency of $16,786 for 2018 related to unfavorable development from commercial automobile coverages. This unfavorable loss development was the result of increased claim severity due to a more challenging litigation environment, as well as an unexpected increase in the time to settle claims leading to an unfavorable change in claim settlement patterns.

Loss reserves have been reduced by estimated salvage and subrogation recoverable of approximately $4,000 and $4,000 at December 31, 2020 and 2019, respectively.

The following is information about incurred and paid claims development as of December 31, 2020, net of reinsurance, as well as cumulative claim frequency and the total of incurred‐but‐not‐reported liabilities plus expected development on reported claims included within the net incurred claims amounts.

Workers' Compensation

																					As of December 31, 2019
																					As of December 31, 2020
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				Total ~~of Incurred~~ofIncurred-but-Not-ReportedLiabilitiesPlus ~~Reported Liabilities Plus~~ Expected Development ~~on Reported Claims~~		~~Number~~Numberof of Reported ~~Claims Per Year~~
Accident Year	For the Years Ended December 31 (~~2010~~2011-~~2018~~2019 is Supplementary Information and Unaudited)																				on Reported		Claims
	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		Claims		Per Year
2010	$	20,644	$	20,111	$	19,400	$	19,300	$	18,849	$	18,344	$	19,195	$	19,541	$	19,819	$	19,781	$	1,294		4,226
2011	$	26,057	$	26,628	$	26,958	$	26,767	$	25,515	$	27,293	$	26,617	$	26,631	$	26,452	$	26,356	$	1,989		4,547
2011				26,057		26,628		26,958		26,767		25,515		27,293		26,617		26,631		26,452		2,085		4,547
2012				23,965		25,544		24,887		24,485		25,616		27,020		26,775		25,508		26,397		2,327		4,484
2012						23,965		25,544		24,887		24,485		25,616		27,020		26,775		25,508		2,528		4,484
2013						27,619		30,638		29,913		32,121		32,553		31,131		31,066		31,360		3,137		5,282
2013								27,619		30,638		29,913		32,121		32,553		31,131		31,066		3,596		5,281
2014								36,768		36,968		34,009		33,427		31,031		31,579		31,551		3,772		5,413
2014										36,768		36,968		34,009		33,427		31,031		31,579		4,217		5,410
2015										26,277		23,115		25,889		24,948		25,436		25,167		3,367		6,340
2015												26,277		23,115		25,889		24,948		25,436		3,916		6,328
2016												35,240		29,757		29,317		30,060		29,785		3,693		6,087
2016														35,240		29,757		29,317		30,060		4,745		6,078
2017														42,387		37,731		36,211		34,930		5,921		16,469
2017																42,387		37,731		36,211		7,936		16,349
2018																62,973		61,530		62,451		13,632		14,295
2018																		62,973		61,530		19,836		14,060
2019																		65,837		67,113		19,079		9,480
2019																				65,837		34,680		8,515
2020																				60,204		34,084		7,550
Total																			$	~~353~~395,~~460~~314	$	8491,~~833~~001

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31 (2010-2018 is Supplementary Information and Unaudited)
	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)
Accident Year	~~2010~~2011		~~2011~~2012		~~2012~~2013		~~2013~~2014		~~2014~~2015		~~2015~~2016		~~2016~~2017		~~2017~~2018		~~2018~~2019		~~2019~~2020
2010	$	3,974	$	9,134	$	11,963	$	13,845	$	14,966	$	15,835	$	16,590	$	16,789	$	17,062	$	17,340
2011	$	4,916	$	11,912	$	15,973	$	18,884	$	20,617	$	21,622	$	22,569	$	22,991	$	23,366	$	23,516
2011				4,916		11,912		15,973		18,884		20,617		21,622		22,569		22,991		23,366
2012				4,597		11,004		14,834		17,415		18,946		20,276		21,157		21,636		21,850
2012						4,597		11,004		14,834		17,415		18,946		20,276		21,157		21,636
2013						4,880		12,792		18,065		21,655		23,643		24,968		25,847		26,702
2013								4,880		12,792		18,065		21,655		23,643		24,968		25,847
2014								5,328		13,665		19,075		22,387		23,968		24,714		25,507
2014										5,328		13,665		19,075		22,387		23,968		24,714
2015										2,918		10,128		15,020		17,487		19,385		20,251
2015												2,918		10,128		15,020		17,487		19,385
2016												5,784		13,377		18,461		21,304		23,113
2016														5,784		13,377		18,461		21,304
2017														6,150		15,811		20,863		23,910
2017																6,150		15,811		20,863
2018																10,987		27,862		36,794
2018																		10,987		27,862
2019																		13,171		31,140
2019																				13,171
2020																				10,508
Total																			$	~~215~~243,~~488~~291
Outstanding liabilities prior to 2010, net of reinsurance																				16,437
Outstanding liabilities prior to 2011, net of reinsurance																				16,836
Liabilities for claims and claims adjustment expenses, net of reinsurance																			$	~~154~~168,~~409~~859

~~- 50 -~~63

Commercial Liability

																					As of December 31, 2019
																					As of December 31, 2020
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				Total ~~of Incurred~~ofIncurred-but-Not-ReportedLiabilitiesPlus ~~Reported Liabilities Plus~~ Expected Development ~~on Reported Claims~~		~~Number~~Numberof of Reported ~~Claims Per Year~~
	For the Years Ended December 31 (2010-2018 is Supplementary Information and Unaudited)
	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)																				on Reported		Claims
Accident Year	~~2010~~2011		~~2011~~2012		~~2012~~2013		~~2013~~2014		~~2014~~2015		~~2015~~2016		~~2016~~2017		~~2017~~2018		~~2018~~2019		~~2019~~2020		Claims		Per Year
2010	$	31,124	$	22,161	$	21,899	$	19,139	$	20,300	$	19,764	$	19,377	$	19,081	$	19,985	$	19,994	$	113		2,403
2011	$	46,829	$	43,832	$	31,633	$	36,894	$	35,805	$	37,122	$	36,076	$	37,852	$	37,795	$	38,773	$	21		2,902
2011				46,829		43,832		31,633		36,894		35,805		37,122		36,076		37,852		37,795		32		2,902
2012				49,743		54,269		49,743		51,367		48,708		51,475		51,648		51,962		51,830		443		3,131
2012						49,743		54,269		49,743		51,367		48,708		51,475		51,648		51,962		266		3,131
2013						53,817		39,143		37,701		36,371		46,690		48,857		51,598		51,293		270		3,753
2013								53,817		39,143		37,701		36,371		46,690		48,857		51,598		546		3,751
2014								49,971		52,254		52,483		52,964		64,372		70,841		72,636		1,051		3,325
2014										49,971		52,254		52,483		52,964		64,372		70,841		1,268		3,323
2015										61,420		70,174		64,323		71,088		75,503		77,225		1,736		3,198
2015												61,420		70,174		64,323		71,088		75,503		2,211		3,197
2016												61,638		68,974		77,362		79,015		80,788		2,420		3,751
2016														61,638		68,974		77,362		79,015		4,913		3,737
2017														103,126		103,611		99,287		97,663		12,197		5,403
2017																103,126		103,611		99,287		19,772		5,364
2018																179,589		177,262		186,521		29,518		8,197
2018																		179,589		177,262		28,324		8,003
2019																		198,022		195,273		53,842		8,313
2019																				198,022		98,371		7,286
2020																				173,878		109,654		4,410
Total																			$	~~861~~1,~~279~~025,880	$	~~155~~211,~~816~~152

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31 (2010-2018 is Supplementary Information and Unaudited)
	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)
Accident Year	~~2010~~2011		~~2011~~2012		~~2012~~2013		~~2013~~2014		~~2014~~2015		~~2015~~2016		~~2016~~2017		~~2017~~2018		~~2018~~2019		~~2019~~2020
2010	$	1,649	$	7,166	$	11,635	$	16,052	$	18,627	$	18,517	$	18,866	$	18,662	$	18,791	$	18,791
2011	$	1,809	$	11,350	$	23,615	$	30,795	$	33,255	$	34,009	$	35,561	$	36,400	$	37,263	$	37,267
2011				1,809		11,350		23,615		30,795		33,255		34,009		35,561		36,400		37,263
2012				3,086		23,252		32,942		45,303		47,601		50,036		50,750		50,882		50,908
2012						3,086		23,252		32,942		45,303		47,601		50,036		50,750		50,882
2013						5,167		15,772		25,270		34,481		44,865		46,084		49,522		49,879
2013								5,167		15,772		25,270		34,481		44,865		46,084		49,522
2014								4,023		9,046		28,393		45,075		57,692		68,392		69,183
2014										4,023		9,046		28,393		45,075		57,692		68,392
2015										10,923		27,582		49,267		63,133		71,697		74,276
2015												10,923		27,582		49,267		63,133		71,697
2016												6,843		30,377		52,764		70,324		74,324
2016														6,843		30,377		52,764		70,324
2017														11,415		46,529		58,173		73,496
2017																11,415		46,529		58,173
2018																18,689		66,575		101,803
2018																		18,689		66,575
2019																		19,311		64,294
2019																				19,311
2020																				13,185
Total																			$	~~510~~608,~~930~~615
Outstanding liabilities prior to 2010, net of reinsurance																				4,799
Outstanding liabilities prior to 2011, net of reinsurance																				3,433
Liabilities for claims and claims adjustment expenses, net of reinsurance																			$	~~355~~420,~~148~~698

~~- 51 -~~64

Professional Liability Reinsurance Assumed (in runoff)

																					As of December 31, 2019
																					As of December 31, 2020
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				Total ~~of Incurred~~ofIncurred-but-Not-ReportedLiabilitiesPlus ~~Reported Liabilities Plus~~ Expected Development ~~on Reported Claims~~		~~Number~~Numberof of Reported ~~Claims Per Year~~
Accident Year	For the Years Ended December 31 (~~2010~~2011-~~2018~~2019 is Supplementary Information and Unaudited)																				on Reported		Claims
	2010		2011		2012		2013		2014		2015		2016		2017		2018		2019
	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		Claims		Per Year
2010	$	2,196	$	4,277	$	7,827	$	7,946	$	9,733	$	10,740	$	11,689	$	11,893	$	11,677	$	11,544	$	35		N/A
2011	$	10,492	$	8,314	$	9,017	$	9,859	$	10,779	$	12,735	$	12,744	$	12,725	$	13,018	$	13,228	$	219		N/A
2011				10,492		8,314		9,017		9,859		10,779		12,735		12,744		12,725		13,018		15		N/A
2012				10,041		9,276		5,569		10,157		14,605		16,555		14,949		16,013		16,439		489		N/A
2012						10,041		9,276		5,569		10,157		14,605		16,555		14,949		16,013		335		N/A
2013						14,370		13,034		11,618		17,694		23,256		22,213		23,474		23,381		1,764		N/A
2013								14,370		13,034		11,618		17,694		23,256		22,213		23,474		1,362		N/A
2014								12,675		8,825		7,259		9,837		12,749		10,721		10,619		1,256		N/A
2014										12,675		8,825		7,259		9,837		12,749		10,721		1,251		N/A
2015										11,638		7,859		7,147		10,422		8,753		8,404		1,959		N/A
2015												11,638		7,859		7,147		10,422		8,753		2,741		N/A
2016												6,368		2,482		1,522		2,993		3,090		435		N/A
2016														6,368		2,482		1,522		2,993		471		N/A
2017														–		–		–		–		–		N/A
2017																–		–		–		–		N/A
2018																–		–		–		–		N/A
2018																		–		–		–		N/A
2019																		–		–		–		N/A
2019																				–		–		N/A
2020																				–		–		N/A
Total																			$	8675,~~516~~161	$	6,~~210~~122

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31 (2010-2018 is Supplementary Information and Unaudited)
	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)
Accident Year	~~2010~~2011		~~2011~~2012		~~2012~~2013		~~2013~~2014		~~2014~~2015		~~2015~~2016		~~2016~~2017		~~2017~~2018		~~2018~~2019		~~2019~~2020
2010	$	41	$	729	$	3,505	$	5,844	$	7,758	$	9,904	$	11,132	$	11,334	$	11,334	$	11,410
2011	$	50	$	637	$	2,061	$	4,983	$	8,104	$	10,404	$	11,679	$	12,280	$	12,404	$	12,629
2011				50		637		2,061		4,983		8,104		10,404		11,679		12,280		12,404
2012				103		992		2,388		5,077		8,355		11,239		13,091		13,706		14,403
2012						103		992		2,388		5,077		8,355		11,239		13,091		13,706
2013						123		1,135		5,088		10,988		14,779		18,229		19,201		20,157
2013								123		1,135		5,088		10,988		14,779		18,229		19,201
2014								723		761		2,241		3,999		6,627		7,732		8,890
2014										723		761		2,241		3,999		6,627		7,732
2015										10		390		1,899		3,207		3,964		5,162
2015												10		390		1,899		3,207		3,964
2016												–		5		99		2,254		2,496
2016														–		5		99		2,254
2017														–		–		–		–
2017																–		–		–
2018																–		–		–
2018																		–		–
2019																		–		–
2019																				–
2020																				–
Total																			$	7063,~~671~~737
Outstanding liabilities prior to 2010, net of reinsurance																				234
Outstanding liabilities prior to 2011, net of reinsurance																				534
Liabilities for claims and claims adjustment expenses, net of reinsurance																			$	1611,~~079~~958

~~- 52 -~~65

Occupational Accident

																					As of December 31, 2020 2020
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																				Total of Incurred-but-Not-Reported Liabilities Plus Expected Development		Number of Reported
Accident Year	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)																				on Reported		Claims
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2018		2020		Claims		Per Year
2011	$	6,249	$	6,937	$	6,485	$	6,283	$	6,151	$	6,297	$	6,264	$	6,263	$	6,287	$	6,275	$	2		472
2012				5,272		4,168		3,908		3,758		3,585		3,566		3,551		3,773		3,758		8		380
2013						6,410		5,044		4,403		4,390		4,166		4,107		4,082		4,082		–		337
2014								5,283		4,865		4,147		4,093		4,031		4,061		4,041		38		325
2015										3,897		3,539		3,715		3,846		3,832		3,698		111		275
2016												6,729		6,312		5,847		5,965		4,894		112		704
2017														17,041		13,334		12,976		11,031		111		1,040
2018																16,365		17,053		12,147		412		892
2018																		10,498		11,134		1,469		882
2020																				12,869		2,508		772
Total																			$	73,929	$	4,771

	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31 (2011-2019 is Supplementary Information and Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	2,159	$	4,861	$	6,003	$	6,050	$	6,020	$	6,278	$	6,219	$	6,232	$	6,246	$	6,267
2012				1,082		2,648		3,190		3,390		3,377		3,442		3,482		3,521		3,555
2013						1,989		3,565		3,768		4,108		4,110		4,107		4,082		4,082
2014								2,000		3,685		3,861		3,909		3,948		3,968		3,968
2015										739		1,934		2,670		2,988		3,224		3,285

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