Consolidated Statements of Cash Flows Protective Insurance Corporation and Subsidiaries (in thousands) Year Ended December 31 2018 2017 2016 Operating activities Net income (loss) $ (34,075 ) $ 18,323 $ 28,945 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Change in accounts receivable and unearned premium (3,904 ) 2,678 (2,721 ) Change in accrued investment income (199 ) (278 ) 108 Change in reinsurance recoverable on paid losses 956 (446 ) 692 Change in losses and loss expenses reserves, net of reinsurance 117,027 47,229 23,568 Change in other assets, other liabilities and current income taxes 8,204 49,221 (8,063 ) Amortization of net policy acquisition costs 54,981 47,387 18,085 Net policy acquisition costs deferred (55,940 ) (51,824 ) (17,813 ) Provision for deferred income tax expense (benefit) (18,794 ) (3,866 ) 2,838 Bond amortization 184 1,865 3,030 Loss on sale of property and equipment – 235 63 Depreciation 6,102 5,752 5,521 Net realized (gains) losses on investments 25,691 (19,686 ) (23,228 ) Compensation expense related to restricted stock 475 1,154 1,343 Net cash provided by operating activities 100,708 97,744 32,368 Investing activities Purchases of fixed maturities and equity securities (415,326 ) (436,932 ) (400,670 ) Purchases of limited partnership interests (450 ) (1,097 ) – Distributions from limited partnerships 6,869 19,230 1,462 Proceeds from maturities 64,035 131,623 78,691 Proceeds from sales of fixed maturities 241,429 148,652 199,790 Proceeds from sales of equity securities 149,195 69,756 88,773 Net sales of short-term investments – 500 11,258 Purchase of insurance company-owned life insurance (10,000 ) – – Purchase of commercial mortgage loans (6,672 ) – – Purchases of property and equipment (5,439 ) (6,661 ) (7,725 ) Proceeds from disposals of property and equipment 10 582 1,059 Net cash provided by (used in) investing activities 23,651 (74,347 ) (27,362 ) Financing activities Dividends paid to shareholders (16,835 ) (16,302 ) (15,803 ) Repurchase of common shares (4,596 ) (1,880 ) – Net cash used in financing activities (21,431 ) (18,182 ) (15,803 ) Effect of foreign exchange rates on cash and cash equivalents (830 ) 522 235 Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents 102,098 5,737 (10,562 ) Cash, cash equivalents and restricted cash and cash equivalents at beginning of year 68,713 62,976 73,538 Cash, cash equivalents and restricted cash and cash equivalents at end of year $ 170,811 $ 68,713 $ 62,976 Supplemental Disclosures of Cash Flow Information Cash paid for income taxes, net of refunds $ 9,500 $ – $ 10,173 Cash paid for interest $ 504 $ 456 $ 309 See notes to consolidated financial statements. - 43 -