Results of Operations 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. 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 - 5% Increase in Ultimate Loss Ratio 10% Increase in Ultimate Loss Ratio 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 2019 Compared to 2018