What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-03 · 194 added, 114 removed, 186 unchanged (62% of the section changed)

33 unchanged sentences

Our insurance subsidiaries do not discount their liabilities for losses and loss

Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’

internal operations.

subsidiaries’ internal operations.

For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years.

In addition, the COVID-19 pandemic

and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors,

including supply chain disruption, higher used automobile values, lengthening of repair completion times, increases in the cost of replacement automobile parts and rising labor rates.

These trend changes give rise to greater uncertainty as to the

pattern of future loss settlements.

Related uncertainties regarding future trends include social inflation, availability and cost of building materials, availability of skilled labor, the rate of plaintiff attorney involvement in claims and the cost

of medical technologies and procedures.

Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial

interpretations of insurance coverage and policy provisions and the rate of loss cost inflation.

Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case

reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and

collectability of reinsured losses, among other items.

To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they

consider appropriate for such changes.

Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at March 31, 2024.

At March 31, 2024, for every 1% change in our

insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $6.9 million.

In addition, the

COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number

of factors, including supply chain disruption, higher used automobile values, lengthening of repair completion times, increases in the cost of replacement automobile parts and rising labor rates.

These trend changes give rise to greater uncertainty

as to the pattern of future loss settlements.

the cost of medical technologies and procedures.

judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation.

Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and

case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance

coverage and collectability of reinsured losses, among other items.

To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves

that they consider appropriate for such changes.

Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at June 30, 2024.

At June 30, 2024, for every 1% change in

our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million.

The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and

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However, pooled business represents the

predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business.

predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse loss development relating to the pooled business.

The business in the pool is homogeneous and each

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pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies.

Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at March 31, 2024 and December 31, 2023 consisted of the following:

Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at June 30, 2024 and December 31, 2023 consisted of the following:

(in thousands)

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Total liabilities for losses and loss expenses

We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in

establishing the loss and loss expense reserves of our insurance subsidiaries.

We established the range of reasonably likely changes based on a review of changes in accident-year development by line of business and applied those changes to our

insurance subsidiaries’ loss and loss expense reserves as a whole.

We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in establishing the loss

and loss expense reserves of our insurance subsidiaries.

We established the range of reasonably likely changes based on a review of changes in accident-year development by line of business and applied those changes to our insurance subsidiaries’ loss

and loss expense reserves as a whole.

The range we selected does not necessarily indicate what could be the potential best or worst case or the most likely scenario.

The following table sets forth the estimated effect on

our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:

Percentage Change in Loss and Loss Expense Reserves

The following table sets forth the estimated effect on our insurance subsidiaries’

loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:

Percentage Change in Loss

and Loss Expense Reserves

Net of Reinsurance

Adjusted Loss and Loss Expense Reserves Net of Reinsurance at

March 31, 2024

Percentage Change in Stockholders’ Equity at

March 31, 2024(1)

Adjusted Loss and Loss Expense Reserves Net of Reinsurance at

Adjusted Loss and Loss

Expense Reserves Net of

Reinsurance at

June 30, 2024

Percentage Change

in Stockholders’ Equity at

June 30, 2024(1)

Adjusted Loss and Loss

Expense Reserves Net of

Reinsurance at

December 31, 2023

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written in the preceding 12-month period compared to the comparable period one year earlier.

The following table provides a reconciliation of our net premiums earned to our net premiums written for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table provides a reconciliation of our net premiums earned to our net premiums written for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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The combined ratio is a standard measurement of underwriting profitability for an insurance company.

The combined ratio does not reflect investment income, net investment gains or losses, federal

income taxes or other non-operating income or expense.

The combined ratio does not reflect investment income, net investment gains or losses, federal income taxes or other

non-operating income or expense.

A combined ratio of less than 100% generally indicates underwriting profitability.

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The calculation of our statutory combined ratio differs from the calculation of our GAAP combined ratio.

In calculating our GAAP combined ratio, we do not deduct installment payment fees from

incurred expenses, and we base the expense ratio on net premiums earned instead of net premiums written.

Differences between our GAAP loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our GAAP

loss ratio but not for our statutory loss ratio.

In calculating our GAAP combined ratio, we do not deduct installment payment fees from incurred expenses, and we

base the expense ratio on net premiums earned instead of net premiums written.

Differences between our GAAP loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our GAAP loss ratio but not for our

statutory loss ratio.

Combined Ratios

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

GAAP Combined Ratios (Total Lines)

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Total commercial and personal lines

Results of Operations - Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Results of Operations - Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net Premiums Earned.

Our insurance subsidiaries’ net premiums earned for the first quarter of 2024 were $227.7 million, an increase of $12.5 million, or 5.8%, compared to

$215.2 million for the first quarter of 2023, primarily reflecting solid premium retention and renewal premium increases.

Our insurance subsidiaries’ net premiums earned for the second quarter of 2024 were $234.3 million, an increase of $18.0 million, or 8.3%, compared to

$216.3 million for the second quarter of 2023, primarily reflecting solid premium retention and renewal premium increases.

Net Premiums Written.

Our insurance subsidiaries’ net premiums written for the first quarter of 2024 were $251.4 million, an increase of $14.1 million, or 6.0%, from the $237.3

million of net premiums written for the first quarter of 2023.

Commercial lines net premiums written decreased $0.9 million, or 0.5%, for the first quarter of 2024 compared to the first quarter of 2023.

Personal lines net premiums written increased

$15.0 million, or 18.5%, for the first quarter of 2024 compared to the first quarter of 2023.

We attribute the decrease in commercial lines net premiums written primarily to planned attrition in states we are exiting or have targeted for profit

improvement, offset partially by higher new business writings and a continuation of renewal premium increases in lines other than workers’ compensation.

We attribute the increase in personal lines net premiums written primarily to renewal premium

increases and strong policy retention.

Our insurance subsidiaries’ net premiums written for the second quarter of 2024 were $247.2 million, an increase of $20.7 million, or 9.1%, from the

$226.5 million of net premiums written for the second quarter of 2023.

Commercial lines net premiums written increased $9.4 million, or 7.1%, for the second quarter of 2024 compared to the second quarter of 2023.

Personal lines net premiums written

increased $11.3 million, or 12.1%, for the second quarter of 2024 compared to the second quarter of 2023.

We attribute the increase in commercial lines net premiums written primarily to higher new business writings and a continuation of renewal

premium increases in lines other than workers’ compensation, offset partially by planned attrition in states we are exiting or have targeted for profit improvement.

We attribute the increase in personal lines net premiums written primarily to renewal

premium increases and strong policy retention.

Investment Income.

Our net investment income was $11.0 million for the first quarter of 2024, an increase of $1.6 million, or 16.1%, compared to $9.4 million for the first

Our net investment income was $11.1 million for the second quarter of 2024, an increase of $911,040, or 9.0%, compared to $10.2 million for the second

quarter of 2023.

We attribute the increase primarily to an increase in the average investment yield relative to the first quarter of 2023.

Net Investment Gains (Losses).

Net investment gains for the first quarter of 2024 were $2.1 million, compared to net investment losses of $331,189 for the first quarter of

The net investment gains for the first quarter of 2024 resulted primarily from the net change in unrealized gains and losses within our equity securities portfolio at March 31, 2024.

We attribute the increase primarily to an increase in the average investment yield relative to the second quarter of 2023.

Net Investment Gains.

Net investment gains for the second quarter of 2024 were $736,669, compared to $2.5 million for the second quarter of 2023.

The net investment gains for

the second quarter of 2024 and 2023 resulted primarily from the net change in unrealized gains and losses within our equity securities portfolio at June 30, 2024 and 2023, respectively.

We did not recognize any impairment losses for individual

securities in our investment portfolio during the first quarter of 2024 or 2023.

securities in our investment portfolio during the second quarter of 2024 or 2023.

Losses and Loss Expenses.

Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 66.3% for the first quarter of

2024, an increase from our insurance subsidiaries’ loss ratio of 64.2% for the first quarter of 2023.

Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 70.6% for the second quarter

of 2024, an increase from our insurance subsidiaries’ loss ratio of 69.9% for the second quarter of 2023.

We attribute this increase primarily to increased weather-related losses, offset partially by decreased large fire losses, which we define as

individual fire losses in excess of $50,000.

The core loss ratio, which excludes weather-related losses, large fire losses and net favorable development of reserves for losses incurred in prior accident years, was 55.0% for the second quarter of 2024

For the commercial lines segment, the core loss ratio of 54.8% for the second quarter of 2024 increased modestly from 54.0% for the second quarter of 2023.

For the personal lines segment, the core loss ratio of 55.3% for the second quarter

of 2024 decreased from 56.5% for the second quarter of 2023.

Weather-related losses were $24.7 million, or 10.6 percentage points of the loss ratio, for the second quarter of 2024, compared to $19.7 million, or 9.1 percentage points of the loss

ratio, for the second quarter of 2023.

The impact of weather-related loss activity to the loss ratio for the second quarter of 2024 was higher than our previous five-year average of 8.8 percentage points for second quarter weather-related losses.

Large fire losses for the second quarter of 2024 were $12.5 million, or 5.3 percentage points of the loss ratio, compared to $12.7 million, or 5.9 percentage points of the loss ratio, for the second quarter of 2023.

On a statutory basis, our

insurance subsidiaries’ commercial lines loss ratio was 70.9% for the second quarter of 2024, compared to 67.9% for the second quarter of 2023, primarily due to an increase in the workers’ compensation loss ratio.

The personal lines statutory loss

ratio of our insurance subsidiaries decreased to 71.3% for the second quarter of 2024, compared to 73.4% for the second quarter of 2023.

We attribute this decrease primarily to a decrease in the personal automobile loss ratio.

Our insurance

subsidiaries experienced favorable loss reserve development for the second quarter of 2024 of $757,866 that decreased the loss ratio by 0.3 percentage points, compared to negligible favorable loss reserve development for the second quarter of 2023.

Our insurance subsidiaries experienced favorable development primarily in the commercial automobile and personal automobile lines of business for the second quarter of 2024, offset partially by unfavorable development in the workers’ compensation

line of business that we attribute to higher-than-expected severity for a relatively small number of previously reported claims.

Underwriting Expenses.

The expense ratio for an insurance company is the ratio of policy acquisition costs and other underwriting expenses to premiums earned.

The expense ratio

of our insurance subsidiaries was 31.9% for the second quarter of 2024, compared to 34.2% for the second quarter of 2023.

The decrease in the expense ratio primarily reflected impacts of expense reduction initiatives, including agency incentive

program revisions, commission schedule adjustments, targeted staffing reductions, and deferred replacement of open employment positions, among others, offset partially by higher technology costs related to our ongoing systems modernization

initiatives for the second quarter of 2024 compared to the prior-year quarter.

We expect the impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project will peak at approximately

1.3 percentage points of the expense ratio for the full year of 2024 before beginning to subside gradually in subsequent years.

Combined Ratio.

The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of policyholder dividends incurred to

premiums earned.

Our insurance subsidiaries’ combined ratios were 103.0% and 104.7% for the second quarter of 2024 and 2023, respectively.

We attribute the decrease in the combined ratio primarily to a decrease in the expense ratio for the second

quarter of 2024 compared to the second quarter of 2023.

Income Tax Expense.

We recorded income tax expense of $859,665 for the second quarter of 2024, representing an effective tax rate of 17.2%.

We recorded income tax expense of

$256,055 for the second quarter of 2023, representing an effective tax rate of 11.4%.

The income tax expense for the second quarter of 2024 and 2023 represented estimates based on our projected annual taxable income and effective tax rates.

Net Income and Net Income Per Share.

Our net income for the second quarter of 2024 was $4.2 million, or $.13 per share of Class A common stock on a diluted basis and $.11 per

share of Class B common stock, compared to $2.0 million, or $.06 per share of Class A common stock on a diluted basis and $.05 per share of Class B common stock, for the second quarter of 2023.

We had 27.9 million and 27.5 million Class A shares

outstanding at June 30, 2024 and 2023, respectively.

We had 5.6 million Class B shares outstanding at the end of both periods.

Results of Operations - Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net Premiums Earned.

Our insurance subsidiaries’ net premiums earned for the first half of 2024 were $462.1 million, an increase of $30.6 million, or 7.1%, compared to $431.5

million for the first half of 2023, primarily reflecting solid premium retention and renewal premium increases.

Net Premiums Written.

Our insurance subsidiaries’ net premiums written for the first half of 2024 were $498.6 million, an increase of $34.8 million, or 7.5%, from the $463.8

million of net premiums written for the first half of 2023.

Commercial lines net premiums written increased $8.5 million, or 3.0%, for the first half of 2024 compared to the first half of 2023.

Personal lines net premiums written increased $26.3

million, or 15.1%, for the first half of 2024 compared to the first half of 2023.

We attribute the increase in commercial lines net premiums written primarily to higher new business writings and a continuation of renewal premium increases in lines

other than workers’ compensation, offset partially by planned attrition in states we are exiting or have targeted for profit improvement.

We attribute the increase in personal lines net premiums written primarily to renewal premium increases and

strong policy retention.

Investment Income.

Our net investment income was $22.0 million for the first half of 2024, an increase of $2.4 million, or 12.4%, compared to $19.6 million for the first half

We attribute the increase primarily to an increase in the average investment yield relative to the first half of 2023.

Net Investment Gains.

Net investment gains for the first half of 2024 were $2.9 million, compared to $2.2 million for the first half of 2023.

The net investment gains for the

first half of 2024 and 2023 resulted primarily from the net change in unrealized gains and losses within our equity securities portfolio at June 30, 2024 and 2023, respectively.

We did not recognize any impairment losses for individual securities in

our investment portfolio during the first half of 2024 or 2023.

Losses and Loss Expenses.

Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 68.4% for the first half of

2024, an increase from our insurance subsidiaries’ loss ratio of 67.1% for the first half of 2023.

We attribute this increase primarily to increased core losses and large fire losses, which we define as individual fire losses in excess of $50,000.

offset partially by decreased weather-related losses.

The core loss ratio, which excludes weather-related losses, large fire losses and net favorable development of reserves for losses incurred in prior accident years, was 58.7% for the first quarter

of 2024, compared to 56.5% for the first quarter of 2023.

For the commercial lines segment, the core loss ratio of 59.0% for the first quarter of 2024 increased modestly from 58.2% for the first quarter of 2023.

For the personal lines segment, the

core loss ratio of 58.1% for the first quarter of 2024 increased from 53.7% for the first quarter of 2023, due largely to ongoing inflationary impacts on loss costs for that segment.

Weather-related losses were $10.8 million, or 4.7 percentage points

of the loss ratio, for the first quarter of 2024, compared to $14.1 million, or 6.5 percentage points of the loss ratio, for the first quarter of 2023.

The impact of weather-related loss activity to the loss ratio for the first quarter of 2024 was in

line with our previous five-year average of 4.7 percentage points for first quarter weather-related losses.

Large fire losses for the first quarter of 2024 were $15.0 million, or 6.6 percentage points of the loss ratio, compared to $10.9 million, or

5.1 percentage points of the loss ratio, for the first quarter of 2023.

On a statutory basis, our insurance subsidiaries’ commercial lines loss ratio was 66.0% for the first quarter of 2024, compared to 63.2% for the first quarter of 2023, primarily

due to increases in the workers’ compensation and commercial automobile loss ratios.

The personal lines statutory loss ratio of our insurance subsidiaries increased to 68.5% for the first quarter of 2024, compared to 66.4% for the first quarter of

We attribute this increase primarily to an increase in the homeowners loss ratio.

Our insurance subsidiaries experienced favorable loss reserve development for the first quarter of 2024 of approximately $8.4 million that decreased the loss

ratio by 3.7 percentage points, compared to $8.3 million that decreased the loss ratio for the first quarter of 2023 by 3.9 percentage points.

Our insurance subsidiaries experienced favorable development primarily in the commercial multi-peril,

commercial automobile and homeowners lines of business for the first quarter of 2024, with the majority of the impact relating to reserves for accident years 2020 through 2023.

The core loss ratio, which excludes weather-related losses, large fire losses and net favorable development of reserves for losses incurred in prior accident years, was 56.8% for the first half of 2024, compared to 55.8% for the first half of 2023.

For the commercial lines segment, the core loss ratio of 56.9% for the first half of 2024 increased modestly from 56.1% for the first half of 2023.

For the personal lines segment, the core loss ratio of 56.6% for the first half of 2024 increased from

55.1% for the first half of 2023.

Weather-related losses were $35.5 million, or 7.7 percentage points of the loss ratio, for the first half of 2024, compared to $33.8 million, or 7.8 percentage points of the loss ratio, for the first half of 2023.

The impact of weather-related loss activity to the loss ratio for the first half of 2024 was higher than our previous five-year average of 6.7 percentage points for first half weather-related losses.

Large fire losses for the first half of 2024 were

$27.4 million, or 5.9 percentage points of the loss ratio, compared to $23.6 million, or 5.5 percentage points of the loss ratio, for the first half of 2023.

On a statutory basis, our insurance subsidiaries’ commercial lines loss ratio was 68.5% for

the first half of 2024, compared to 65.5% for the first half of 2023, primarily due to an increase in the workers’ compensation loss ratio.

The personal lines statutory loss ratio of our insurance subsidiaries decreased slightly to 69.9% for the

first half of 2024, compared to 70.0% for the first half of 2023.

We attribute this decrease primarily to a decrease in the personal automobile loss ratio, offset partially by an increase in the homeowners loss ratio.

Our insurance subsidiaries

experienced favorable loss reserve development for the first half of 2024 of approximately $9.2 million that decreased the loss ratio by 2.0 percentage points, compared to $8.5 million that decreased the loss ratio for the first half of 2023 by 2.0

percentage points.

Our insurance subsidiaries experienced favorable development primarily in the commercial automobile, commercial multi-peril and personal automobile lines of business for the first half of 2024, offset partially by unfavorable

development in the workers’ compensation line of business that we attribute to higher-than-expected severity for a relatively small number of previously reported claims.

Underwriting Expenses.

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The expense ratio

of our insurance subsidiaries was 35.7% for the first quarter of 2024, compared to 36.4% for the first quarter of 2023.

The decrease in the expense ratio primarily reflected early impacts of expense reduction initiatives, offset partially by higher

technology costs related to our ongoing systems modernization initiatives for the first quarter of 2024 compared to the prior-year quarter.

We expect the impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the

ongoing systems modernization project will peak at approximately 1.3 percentage points of the expense ratio for the full year of 2024 before beginning to subside gradually in subsequent years.

of our insurance subsidiaries was 33.8% for the first half of 2024, compared to 35.3% for the first half of 2023.

The decrease in the expense ratio primarily reflected impacts of expense reduction initiatives, including agency incentive program

revisions, commission schedule adjustments, targeted staffing reductions, and deferred replacement of open employment positions, among others, offset partially by higher technology costs related to our ongoing systems modernization initiatives for

the first half of 2024 compared to the prior-year quarter.

We expect the impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project will peak at approximately 1.3 percentage

points of the expense ratio for the full year of 2024 before beginning to subside gradually in subsequent years.

Combined Ratio.

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premiums earned.

Our insurance subsidiaries’ combined ratios were 102.4% and 101.2% for the first quarter of 2024 and 2023, respectively.

We attribute the increase in the combined ratio primarily to an increase in the loss ratio for the first quarter

of 2024 compared to the first quarter of 2023.

Our insurance subsidiaries’ combined ratios were 102.7% and 103.0% for the first half of 2024 and 2023, respectively.

We attribute the decrease in the combined ratio primarily to a decrease in the expense ratio for the first half of

2024 compared to the first half of 2023.

Income Tax Expense.

We recorded income tax expense of $1.3 million for the first quarter of 2024, representing an effective tax rate of 17.8%.

We recorded income tax expense of $2.2 million for the first half of 2024, representing an effective tax rate of 17.6%.

We recorded income tax expense of

$1.1 million for the first quarter of 2023, representing an effective tax rate of 17.4%.

The income tax tax expense for the first quarter of 2024 and 2023 represented estimates based on our projected annual taxable income and effective tax rates.

$1.3 million for the first half of 2023, representing an effective tax rate of 15.8%.

The income tax expense for the first half of 2024 and 2023 represented estimates based on our projected annual taxable income and effective tax rates.

Net Income and Net Income Per Share.

Our net income for the first quarter of 2024 was $6.0 million, or $.18 per share of Class A common stock on a diluted basis and $.16 per

share of Class B common stock, compared to $5.2 million, or $.16 per share of Class A common stock on a diluted basis and $.15 per share of Class B common stock, for the first quarter of 2023.

Our net income for the first half of 2024 was $10.1 million, or $.31 per share of Class A common stock on a diluted basis and $.28 per

share of Class B common stock, compared to $7.2 million, or $.22 per share of Class A common stock on a diluted basis and $.20 per share of Class B common stock, for the first half of 2023.

We had 27.9 million and 27.5 million Class A shares

outstanding at March 31, 2024 and 2023, respectively.

outstanding at June 30, 2024 and 2023, respectively.

We had 5.6 million Class B shares outstanding at the end of both periods.

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of liquidity to meet our obligations should an unexpected variation occur in the future.

Our operating activities provided (used) net cash flows in the first three months of 2024 and 2023 of $4.8 million and ($680,734), respectively.

At March 31, 2024, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11%.

March 31, 2024, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 1.74%.

Our operating activities provided net cash flows in the first six months of 2024 and 2023 of $26.5 million and $13.1 million, respectively.

At June 30, 2024, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11%.

June 30, 2024, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 1.74%.

We estimate the timing of claim payments associated with the liabilities for losses and loss expenses of our insurance subsidiaries based on historical experience and expectations of future payment patterns.

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in the open market subject to the provisions of applicable rules of the SEC and in privately negotiated transactions.

We did not purchase any shares of our Class A common stock under this program during the three months ended March 31, 2024 or 2023.

We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through March 31, 2024.

On April 18, 2024, our board of directors declared quarterly cash dividends of $.1725 per share of our Class A common stock and $.155 per share of our Class B common stock,

payable on May 22, 2024 to our stockholders of record as of the close of business on May 8, 2024.

We are not subject to any restrictions on our payment of dividends to our stockholders, although there are state law restrictions on the payment of

dividends by our insurance subsidiaries to us.

We did not purchase any shares of our Class A common stock under this program during the six months ended June 30, 2024 or 2023.

have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through June 30, 2024.

On July 18, 2024, our board of directors declared quarterly cash dividends of $.1725 per share of our Class A common stock and $.155 per share of our Class B common stock,

payable on August 15, 2024 to our stockholders of record as of the close of business on August 1, 2024.

We are not subject to any restrictions on our payment of dividends to our stockholders, although there are state law restrictions on the payment

of dividends by our insurance subsidiaries to us.

Dividends from our insurance subsidiaries are our principal source of cash for payment of dividends to our stockholders.

Our insurance subsidiaries are subject to regulations that restrict the payment

of dividends from statutory surplus and may require prior approval of their domiciliary insurance regulatory authorities.

Our insurance subsidiaries are also subject to risk based capital (“RBC”) requirements that limit their ability to pay dividends

Our insurance subsidiaries’ statutory capital and surplus at December 31, 2023 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin.

insurance subsidiaries did not pay any dividends to us during the first three months of 2024.

Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance

regulatory authorities in 2024 are $27.4 million from Atlantic States, $7.2 million from MICO and $5.0 million from Peninsula, or a total of approximately $39.6 million.

At March 31, 2024, we had no material commitments for capital expenditures.

Our insurance subsidiaries are subject to regulations that restrict the

payment of dividends from statutory surplus and may require prior approval of their domiciliary insurance regulatory authorities.

Our insurance subsidiaries are also subject to risk based capital (“RBC”) requirements that limit their ability to pay

dividends to us.

Our insurance subsidiaries paid $5.0 million in dividends to us during the first six months of 2024.

Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary

insurance regulatory authorities in 2024 are $22.4 million from Atlantic States, $7.2 million from MICO and $5.0 million from Peninsula, or a total of approximately $34.6 million.

At June 30, 2024, we had no material commitments for capital expenditures.

Equity Price Risk

14 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis