Non-GAAP Measures We believe investors’ understanding of our performance is enhanced by our disclosure of underwriting income (loss), which is a measure that is not calculated in accordance with GAAP. Underwriting income (loss) represents the pre-tax profitability of our insurance operations and is derived by subtracting net realized and unrealized gains (losses) on investments and net investment income from income (loss) before federal income tax expense (benefit). For 2018, we also had a goodwill impairment charge, which was excluded from the calculation of 2018 underwriting income (loss).  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 2018, the goodwill impairment charge was excluded 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. 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. - 23 - (dollars in thousands) 2019 2018 2017 Income (loss) before federal income tax expense (benefit) $ 8,673 $ (43,872 ) $ 10,122 Less: Net realized and unrealized gains (losses) on investments 12,889 (25,691 ) 19,686 Less: Net investment income 26,249 22,048 18,095 Less: Goodwill impairment charge included in other operating expenses (see below) – (3,152 ) – Underwriting income (loss) $ (30,465 ) $ (37,077 ) $ (27,659 ) Other operating expenses $ 138,456 $ 137,177 $ 113,594 Less: Goodwill impairment charge – 3,152 – Other operating expenses, excluding goodwill impairment charge $ 138,456 $ 134,025 $ 113,594 Ratios Losses and loss expenses incurred $ 348,468 $ 345,864 $ 247,518 Net premiums earned 447,288 432,880 328,145 Loss ratio 77.9 % 79.9 % 75.4 % Other operating expenses $ 138,456 $ 137,177 $ 113,594 Less: Commissions and other income 9,171 9,932 5,308 Other operating expenses, less commissions and other income 129,285 127,245 108,286 Net premiums earned 447,288 432,880 328,145 Expense ratio 28.9 % 29.4 % 33.0 % Impact of goodwill impairment charge – (0.7 )% – Expense ratio, excluding goodwill impairment charge 28.9 % 28.7 % 33.0 % Combined ratio 106.8 % 109.3 % 108.4 % Combined ratio, excluding goodwill impairment charge 106.8 % 108.6 % 108.4 %