What changed in this filing

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Item 1. Financial Statements

2021-05-11 compared with 2020-11-12 · 77 added, 175 removed, 509 unchanged (33% of the section changed)

4 unchanged sentences

(dollars in thousands)

September 30,

Investment securities:

5 unchanged sentences

Premiums and agents' balances receivable, net

Receivable from Affiliate

Reinsurance recoverables on unpaid losses

10 unchanged sentences

Common stock, no par value (100,000,000 shares authorized;

9,678,463 and 9,592,861 issued and outstanding, respectively)

9,681,728 issued and outstanding, respectively)

Accumulated deficit

8 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Gross earned premiums

11 unchanged sentences

Income (loss) before equity earnings in Affiliate and income taxes

Equity earnings (losses) in Affiliate, net of tax

Income tax expense (benefit)

Equity earnings in Affiliate, net of tax

Income tax expense

Net income (loss)

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended September 30,

Net income (loss)

20 unchanged sentences

Income (Loss)

Balances at June 30, 2020

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income

Balances at September 30, 2020

Balances at June 30, 2019

Net income (loss)

Repurchase of common stock

Issuance of common stock private placement

Restricted stock unit expense

Other comprehensive income

Balances at September 30, 2019

No Par, Common Stock

Comprehensive

Shareholders'

(Accumulated)

Income (Loss)

Balances at December 31, 2020

Net income (loss)

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income

Balances at September 30, 2020

Other comprehensive income (loss)

Balances at March 31, 2021

Balances at December 31, 2019

1 unchanged sentence

Repurchase of common stock

Issuance of common stock private placement

Restricted stock unit expense, net

Other comprehensive loss

Balances at September 30, 2019

Restricted stock unit expense

Other comprehensive income (loss)

Balances at March 31, 2020

The accompanying notes are an integral part of the Consolidated Financial Statements.

CONIFER HO LDINGS, INC.

CONIFER HOLDINGS, INC.

AND SUBSIDIARIES

1 unchanged sentence

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

3 unchanged sentences

Stock based compensation expenses

Equity earnings in Affiliate, net of tax

Changes in operating assets and liabilities:

7 unchanged sentences

Unearned premiums

Reinsurance premiums payable

Accounts payable and other liabilities

7 unchanged sentences

Cash Flows From Financing Activities

Proceeds received from issuance of shares of common stock

Repurchase of common stock

2 unchanged sentences

Repayment of borrowings under debt arrangements

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

17 unchanged sentences

These consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.

The results of operations for the nine months ended September 30, 2020, are not necessarily indicative of the results expected for the year ended December 31, 2020.

Results for interim periods are not necessarily indicative of the results that may be expected for a full year, especially when considering the risks and uncertainties associated with the novel coronavirus ("COVID-19") and the impact it may have on our business, results of operations and financial condition.

The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results expected for the year ended December 31, 2021.

In addition, there are risks and uncertainties associated with the novel coronavirus ("COVID-19") and the impact it may have on our business, results of operations and financial condition.

The COVID-19 pandemic has negatively impacted the U.S.

and global economies, lowered equity market valuations, created significant volatility and disruption in the capital markets, dramatically increased unemployment levels and has fueled concerns that it will lead to a global recession.

and global economies, created significant volatility and disruption in the capital markets, dramatically increased unemployment levels and has fueled concerns that it has led to a global recession.

Depending on the duration and severity of the pandemic, we foresee the potential for adverse impacts related to, among other things:

28 unchanged sentences

The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

Early Adoption of ASU No.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ("ASU No.

The update is intended to simplify the current rules regarding the accounting for income taxes and addresses several technical topics including accounting for franchise taxes, allocating income taxes between a loss in continuing operations and in other categories such as discontinued operations, reporting income taxes for legal entities that are not subject to income taxes, and interim accounting for enacted changes in tax laws.

The new standard is effective for fiscal years beginning after December 15, 2020;

however, early adoption is permitted.

The Company early adopted the provisions of ASU No.

2019-12 on April 1, 2020, which did not have a material impact on its consolidated financial statements and related disclosures.

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available for sale at September 30, 2020 and December 31, 2019, were as follows (dollars in thousands):

September 30, 2020

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This guidance provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR).

This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022.

Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available for sale at March 31, 2021 and December 31, 2020, were as follows (dollars in thousands):

March 31, 2021

Gross Unrealized

21 unchanged sentences

The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

September 30, 2020

March 31, 2021

Less than 12 months

31 unchanged sentences

Total debt securities available for sale

The Company analyzed its investment portfolio in accordance with its other-than-temporary impairment ("OTTI") review procedures and determined the Company did not need to record a credit-related OTTI loss in net income, nor recognize a non-credit related OTTI loss in other comprehensive income for the three and nine months ended September 30, 2020 and 2019.

The Company’s sources of net investment income and losses are as follows (dollars in thousands):

Three Months Ended

September 30,

Nine Months Ended September 30,

Debt securities

6 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended September 30,

Debt securities:

7 unchanged sentences

Total net realized investment gains (losses)

Proceeds from the sales of available-for-sale debt securities were $58.3 million and $24.0 million for the nine months ended September 30, 2020 and 2019, respectively.

The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended September 30, 2020, were $2.0 million and $0, respectively.

The gross realized gains and losses from the sales of available-for-sale debt securities for the nine months ended September 30, 2020 were $2.8 million and $0, respectively.

The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended September 30, 2019 were $7,000 and $2,000.

The gross realized gains and losses from the sales of available-for-sale debt securities for the nine months ended September 30, 2019, were $236,000 and $53,000, respectively.

As of September 30, 2020 and 2019, there were $10.8 million and $0 of payables from securities purchased, respectively.

There were $3.5 million and $0 of receivables from securities sold as of September 30, 2020 and 2019, respectively.

Proceeds from the sales of available-for-sale debt securities were $14.2 million and $23.2 million for the three months ended March 31, 2021 and 2020, respectively.

The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended March 31, 2021, were $27,000 and $6,000, respectively.

The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended March 31, 2020, were $719,000 and $0, respectively.

As of March 31, 2021 and 2020, there were $0 and $6.5 million of payables from securities purchased, respectively.

There were $3,000 and $7,000 of receivables from securities sold as of March 31, 2021, and 2020, respectively.

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.

1 unchanged sentence

There were no impairments or observable changes in price recorded during 2021 related to the Company's equity securities without readily determinable fair value.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $665,000 and $1.2 million as of September 30, 2020 and December 31, 2019, respectively.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at September 30, 2020.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $1.3 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at March 31, 2021.

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

9 unchanged sentences

Total debt securities

At September 30, 2020 and December 31, 2019, the Insurance Company Subsidiaries had $8.8 million and $8.0 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At September 30, 2020 and December 31, 2019, the Company had $63.2 million and $58.4 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

At March 31, 2021 and December 31, 2020, the Insurance Company Subsidiaries had $8.8 million on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At March 31, 2021 and December 31, 2020, the Company had $67.2 million and $67.6 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.

15 unchanged sentences

These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of September 30, 2020 and December 31, 2019 (dollars in thousands):

September 30, 2020

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of March 31, 2021 and December 31, 2020 (dollars in thousands):

March 31, 2021

Fair Value Measurements

38 unchanged sentences

Line of Credit *

Paycheck Protection Program loan *

Total Liabilities measured at fair value

3 unchanged sentences

Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments.

The fair value measurements that were based on Level 1 inputs comprise 22.1% of the fair value of the total investment portfolio as of September 30, 2020.

The fair value measurements that were based on Level 1 inputs comprise 17.5% of the fair value of the total investment portfolio as of March 31, 2021.

Level 2 investments include debt securities, which consist of U.S.

2 unchanged sentences

The third party pricing service monitors market indicators, as well as industry and economic events.

The fair value measurements that were based on Level 2 inputs comprise 77.5% of the fair value of the total investment portfolio as of September 30, 2020.

The fair value measurements that were based on Level 2 inputs comprise 82.2% of the fair value of the total investment portfolio as of March 31, 2021.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments.

4 unchanged sentences

The fair value of the borrowings under the senior revolving credit facility approximates its carrying amount because interest is based on a short-term, variable, market-based rate.

As of September 30, 2020 and December 31, 2019, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at September 30, 2020, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of issuance) were fed into a valuation model.

A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S.

As of March 31, 2021 and December 31, 2020, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at March 31, 2021 and December 31, 2020, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model.

A lognormal trinomial interest rate

lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S .

Treasury rates .

The OAS was then fed back into the model along with the September 30, 2020 and December 31, 2019 U.S .

The OAS was then fed back into the model along with the March 31, 2021 and December 31, 2020 U.S .

Treasury rates .

4 unchanged sentences

Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the nine months ended September 30, 2020 and 2019.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the three months ended March 31, 2021 and 2020.

The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

Three Months Ended

September 30,

Nine Months Ended September 30,

Balance at beginning of period

17 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Gross reserves - beginning of period

reinsurance recoverables on unpaid losses

deferred gain on ADC

Net reserves - beginning of period

7 unchanged sentences

reinsurance recoverables on unpaid losses

deferred gain on ADC

Gross reserves - end of period

In September 2017, the Company entered into an adverse development cover reinsurance agreement (the "ADC") to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017.

The agreement provided up to $17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016.

The Company had ceded to the limit of the ADC and the deferred gain from the ADC had been fully utilized during 2019, thus there was no impact from the ADC in 2020.

The Company’s incurred losses during the three and nine months ended September 30, 2020 include prior-year adverse reserve development of $4.7 million and $11.5 million, respectively.

The adverse development mostly came from commercial liability lines within the hospitality businesses.

The Company’s incurred losses during the three and nine months ended September 30, 2019 included prior-year adverse reserve development of $2.7 million and $7.1 million, respectively.

The reported reserve development was net of the amortization of the deferred gain on the ADC of $481,000 and $5.7 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2019, the deferred gain on the ADC was fully recognized.

The adverse development mainly stemmed from commercial liability and Florida homeowners lines of business.

The Company’s incurred losses during the three months ended March 31, 2021 include prior-year adverse reserve development of $5.8 million.

Of the $5.8 million of adverse development, $5.2 million was related to the Company’s commercial lines of business, while $612,000 was related to the Company’s personal lines of business.

Of the $5.2 million of adverse development in the Company’s commercial lines of business, $2.7 million was experienced in the Company’s hospitality lines of business, while $2.5 million was experienced in the Company’s small business lines of business.

The Company’s incurred losses during the three months ended March 31, 2020 included prior-year adverse reserve development of $3.7 million related to the Company’s commercial lines of business.

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.

The Company primarily ceded 40% of specific commercial property risks in excess of $400,000 and 60% in excess of $300,000 in both 2020 and 2019 and primarily ceded all specific commercial liability risks in excess of $400,000 in 2020 and 2019.

The Company primarily ceded all specific commercial liability risks in excess of $400,000 in 2021 and 2020.

The Company ceded specific commercial property risks in excess of $200,000 in 2021.

The Company ceded 40% of specific commercial property risks in excess of $400,000, and 60% in excess of $300,000 in 2020.

The Company ceded homeowners specific risks in excess of $300,000 in both 2021 and 2020.

8 unchanged sentences

The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M.

Best rating than the Company’s current rating, where the policies are wri tten in a state where the Company is not licensed or for other strategic reasons .

Best rating than the Company’s current rating, where the policies are written in a state where the Company is not licensed or for other strategic reasons.

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):

Three Months Ended

September 30,

Nine months ended

September 30,

Written premiums:

5 unchanged sentences

The Company's debt is comprised of four instruments:

$24.4 million of publicly traded senior unsecured notes which were issued in September and October of 2018, a $10.0 million line of credit which commenced in June 2018, $10.5 million of privately placed subordinated notes (the “Subordinated Notes”), and a $2.7 million Paycheck Protection Program (the “PPP loan”) issued as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

$24.4 million of publicly traded senior unsecured notes which were issued in September and October of 2018, a $10.0 million line of credit which commenced in June 2018, $10.5 million of privately placed subordinated notes (the “Subordinated Notes”), and a $2.7 million Paycheck Protection Program loan (the “PPP loan”) issued as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

A summary of the Company's outstanding debt is as follows (dollars in thousands):

September 30,

Senior unsecured notes

1 unchanged sentence

Line of credit

Paycheck Protection Program loan *

The PPP loan was embedded into the line of credit facility.

3 unchanged sentences

The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

The Company did not repurchase any of the Notes for the three months ended September 30, 2020.

For the nine months ended September 30, 2020, the Company repurchased 36,761 units in the public market with a face value of $919,000.

The Notes were repurchased at a discount to face value, which resulted in a $260,000 gain on extinguishment for the nine months ended September 30, 2020.

The Company did not repurchase any of the Notes for the three months ended March 31, 2021.

During the first quarter of 2020, the Company repurchased 9,761 units of the Notes in the public market with a face value of $244,000.

The Notes were repurchased at a discount to face value, which resulted in a $115,000 gain on extinguishment.

This gain is reflected in the Consolidated Statement of Operations as Other gains.

5 unchanged sentences

The call premium escalates each quarter to ultimately $1.75 million on September 30, 2023, then steps up to $3.05 million on December 31, 2023, and increases quarterly at a 12.5% per annum rate thereafter.

As of September 30, 2020, the carrying value of the Notes and Subordinated Notes are offset by $780,000 and $926,000 of debt issuance costs, respectively.

As of March 31, 2021, the carrying value of the Notes and Subordinated Notes are offset by $650,000 and $900,000 of debt issuance costs, respectively.

The debt issuance costs will be amortized through interest expense over the life of the loans.

The Subordinated Notes contain various restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, and risk-based capital ratios.

At September 30, 2020, the Company was in compliance with all of its financial debt financial covenants.

At March 31, 2021, the Company was in compliance with all of its financial covenants.

Line of credit

2 unchanged sentences

The agreement includes several financial debt covenants, including a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.

As of September 30, 2020, the Company had $7.75 million outstanding on the line of credit (including the PPP loan described below), and was in compliance with all of its financial debt covenants.

As of March 31, 2021, the Company had $5.7 million outstanding on the line of credit (including the PPP loan described below), and was in compliance with all of its financial debt covenants.

On June 19, 2020, the line of credit was renewed with a maturity of June 18, 2021.

5 unchanged sentences

The Company amended its $10.0 million line of credit facility with the Lender to incorporate this loan as a reduction of the available line of credit.

Beginning November 24, 2020, the Company is required to pay the Lender equal monthly payments of principal and interest as necessary to fully amortize by April 24, 2022.

The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

This loan may be subject to forgiveness under the CARES Act provisions.

The Company plans to apply for forgiveness of the loan before November 24, 2020.

At which point, principal and interest payments will be deferred until the SBA remits the loan forgiveness amount to the Lender.

No assumptions were made relative to potential forgiveness as of September 30, 2020.

The Company applied for forgiveness of the loan in 2020, at which point the principal and interest payments were deferred until the SBA remits the loan forgiveness amount to the Lender.

As of March 31, 2021, the loan remains on the Company’s balance sheet as a liability.

Shareholders’ Equity

In June 2019, the Company issued $5.0 million of common equity through a private placement for 1,176,471 shares priced at $4.25 per share.

The participants in the private placement consisted of members of the Company's Board of Directors.

The Company used the proceeds for growth capital in the Company's specialty core business segments.

On December 5, 2018, the Company's Board of Directors authorized a stock repurchase program, under which the Company may repurchase up to one million shares of the Company's common stock.

Shares may be purchased in the open market or through negotiated transactions.

The program may be terminated or suspended at any time, at the discretion of the Company.

The Company may in the future enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases, if criteria set forth in the plan are met.

Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows, when the Company typically would not be active in the market.

The timing of purchases, and the exact number of any shares to be purchased, will depend on market conditions.

The repurchase program does not include specific price targets or timetables.

The Company did not repurchase any shares of stock for the three months ended September 30, 2020.

The Company repurchased 11,393 shares of stock valued at approximately $41,000 for the three months ended September 30, 2019.

For the nine months ended September 30, 2020 and 2019, the Company repurchased 2,398 and 154,208 shares of stock valued at $8,000 and $638,000, respectively, related to the stock repurchase program.

For the three months ended September 30, 2020 and 2019, the Company repurchased 6,505 and 6,359 shares of stock valued at approximately $19,000 and $25,000, respectively, related to the vesting of the Company’s restricted stock units.

For the nine months ended September 30, 2020 and 2019, the Company repurchased 8,813 and 8,667 shares of stock valued at approximately $27,000 and $36,000, respectively.

Upon the repurchase of the Company’s shares, the shares remain authorized, but not issued or outstanding.

As of September 30, 2020 and December 31, 201 9 , the Company h ad 9, 678,463 and 9,592,861 issued and outstanding shares of common stock, respectively .

The Company did not repurchase any shares of stock for the three months ended March 31, 2021 related to the stock repurchase program.

The Company repurchased 700 shares valued at approximately $2,000 related to the stock repurchase program for the three months ended March 31, 2020.

For the three months ended March 31, 2021 and 2020, the Company did not repurchased any shares of stock related to the vesting of the Company’s restricted stock units.

As of March 31, 2021 and December 31, 2020, the Company had 9,681,728 issued and outstanding shares of common stock, respectively.

Holders of common stock are entitled to one vote per share and to receive dividends only when and if declared by the board of directors.

3 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Balance at beginning of period

7 unchanged sentences

Three Months Ended

September 30,

Nine months ended

September 30,

Net income (loss)

1 unchanged sentence

Earnings (loss) per common share, basic and diluted

The nonvested shares of the restricted stock units and stock options were anti-dilutive as of September 30, 2020 and 2019.

Therefore, the basic and diluted weighted average common shares are equal for the three and nine months ended September 30, 2020 and 2019.

The nonvested shares of the restricted stock units and stock options were anti-dilutive as of March 31, 2021 and 2020.

Therefore, the basic and diluted weighted average common shares are equal for the three months ended March 31, 2021 and 2020.

Stock-based Compensation

4 unchanged sentences

In 2015, 2016, and 2018, the Company issued 390,352, 111,281, and 70,000, respectively, of restricted stock units (“RSUs”) to various employees to be settled in shares of common stock, which were valued at $4.1 million, $909,000, and $404,000, respectively, on the dates of grant.

The Company recorded $622,000 and $719,000 of compensation expense related to the RSUs for the nine months ended September 30, 2020 and 2019, respectively.

There were 47,330 unvested RSUs as of September 30, 2020, which will generate an estimated future expense of $313,000.

The Company recorded $14,000 of compensation expense for the nine months ended September 30, 2020 related to the stock options granted on June 30, 2020.

There were 280,000 unvested options as of September 30, 2020, which will generate an estimated future expense of $276,000.

The Company recorded $54,000 and $239,000 of compensation expense related to the RSUs for the three months ended March 31, 2021 and 2020, respectively.

There were 51,941 unvested RSUs as of March 31, 2021, which will generate an estimated future expense of $204,000.

The Company recorded $12,000 of compensation expense for the three months ended March 31, 2021 related to the stock options granted on June 30, 2020.

There were 265,000 unvested options as of March 31, 2021, which will generate an estimated future expense of $233,000.

Commitments and Contingencies

23 unchanged sentences

All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Michigan, Florida, Texas and California.

For the nine months ended September 30, 2020 and 2019 gross written premiums attributable to these four states were 49.9% and 51.1%, respectively, of the Company’s total gross written premiums.

For the three months ended March 31, 2021 and 2020 gross written premiums attributable to these four states were 53.5% and 52.6%, respectively, of the Company’s total gross written premiums.

The Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers.

8 unchanged sentences

Three months ended

September 30, 2020

March 31, 2021

Commercial Lines

14 unchanged sentences

Three months ended

September 30, 2019

Gross written premiums

Net written premiums

Net earned premiums

Segment revenue

Losses and LAE, net

Policy acquisition costs

Operating expenses

Segment expenses

Segment gain (loss)

Investment income

Net realized investment gains

Change in fair value of equity securities

Interest expense

Income (loss) before equity earnings in Affiliate and income taxes

Nine months ended

September 30, 2020

Gross written premiums

Net written premiums

Net earned premiums

Segment revenue

Losses and LAE, net

Policy acquisition costs

Operating expenses

Segment expenses

Segment gain (loss)

Investment income

Net realized investment gains

Change in fair value of equity securities

Interest expense

Income (loss) before equity earnings in Affiliate and income taxes

Nine months ended

September 30, 2019

March 31, 2020

Gross written premiums

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements