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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:   COMMISSION FILE NUMBER:
September 30, 2020 000-54627
AFH-20200930_G1.JPG
ATLAS FINANCIAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Cayman Islands    27-5466079
(State or other jurisdiction of    (I.R.S. Employer
incorporation or organization)    Identification No.)
953 American Lane, 3rd Floor

   60173
Schaumburg, IL
   (Zip Code)
(Address of principal executive offices)   
Registrant’s telephone number, including area code: (847) 472-6700
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
None None None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ¨ No  þ
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
     Large Accelerated Filer ¨                            Accelerated Filer        ¨
    Non-Accelerated Filer ¨                            Smaller Reporting Company    
                                        Emerging Growth Company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  þ
There were 12,047,334 shares of the Registrant’s common stock outstanding as of February 23, 2021, all of which are ordinary voting common shares. There are no restricted voting common shares. Of the Registrant’s ordinary voting common shares outstanding, 10,769,335 shares as of February 23, 2021 were held by non-affiliates of the Registrant.
For purposes of the foregoing calculation only, the Registrant has included in the shares owned by affiliates, those shares owned by directors and officers of the Registrant, but such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.



Explanatory Note:

This Quarterly Report on Form 10-Q for Atlas Financial Holdings, Inc. (the “Company”) relates to the fiscal quarter ended September 30, 2020. As previously disclosed, the Company has been unable to previously file this quarterly report due to delays in the 2019 year end audit process, which delayed our filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 10-K”) and, as a result, our filing of this quarterly report. Unless otherwise noted, disclosures in this quarterly report, including disclosures regarding the Company’s financial and operating condition, are as of September 30, 2020. An overview of certain developments that occurred since September 30, 2020 is included in Part I, Item 1, Note 19, Subsequent Events’ and Part I, Item 2, 2020 Developments’ herein and “Risk Factors - Risks Related to 2020 Developments” in the 2019 10-K.





Atlas Financial Holdings, Inc.
Index to Quarterly Report on Form 10-Q
September 30, 2020
Financial Statements and Supplemental Schedules
1
2
3
4
6
I. Company Overview
II. Operating Results
III. Financial Condition





Part I. Financial Information
Item 1. Financial Statements and Supplemental Schedules
Atlas Financial Holdings, Inc.
Condensed Consolidated Statements of Financial Position
($ in ‘000s, except for share and per share data) September 30, 2020 December 31, 2019
Assets (unaudited)
Cash and cash equivalents $ 2,987  $ 9,025 
Restricted cash 4,694  7,122 
Premiums receivable (net of allowance of $794 and $800)
20,770  38,607 
Intangible assets, net 2,332  2,625 
Property and equipment, net 19,530  21,793 
Right-of-use asset 1,068  1,592 
Notes receivable 15,500  15,500 
Other assets 4,271  3,295 
Assets held for sale 46,612  51,302 
Total assets $ 117,764  $ 150,861 
Liabilities
Premiums payable $ 24,673  $ 43,988 
Lease liability 1,321  1,993 
Due to deconsolidated affiliates 14,974  11,172 
Notes payable, net 36,305  32,100 
Other liabilities and accrued expenses 7,260  7,302 
Liabilities held for sale 52,762  62,767 
Total liabilities $ 137,295  $ 159,322 
Commitments and contingencies (see Note 7)
Shareholders' Deficit
Ordinary voting common shares, $0.003 par value, 266,666,667 shares authorized, shares issued: September 30, 2020 - 12,240,198 and December 31, 2019 - 12,198,319; shares outstanding: September 30, 2020 - 11,984,693 and December 31, 2019 - 11,942,812
$ 36  $ 36 
Restricted voting common shares, $0.003 par value, 33,333,334 shares authorized, shares issued and outstanding: September 30, 2020 and December 31, 2019 - 0
—  — 
Additional paid-in capital 81,825  81,548 
Treasury stock, at cost: 255,505 shares of ordinary voting common shares at September 30, 2020 and December 31, 2019, respectively
(3,000) (3,000)
Retained deficit (99,019) (87,469)
Accumulated other comprehensive income, net of tax 627  424 
Total shareholders' deficit $ (19,531) $ (8,461)
Total liabilities and shareholders' deficit $ 117,764  $ 150,861 
See accompanying Notes to Condensed Consolidated Financial Statements.
1

Atlas Financial Holdings, Inc.
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Operations
($ in ‘000s, except for share and per share data) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(unaudited) (unaudited)
Net premiums earned $ —  $ 34,528  $ —  $ 110,241 
Commission income 1,674  860  4,677  4,666 
Net investment income —  329  —  1,884 
Loss from change in fair value of equity securities —  (3) —  (277)
Net realized gains —  384  —  1,138 
Other income 367  117  848  379 
Total revenue 2,041  36,215  5,525  118,031 
Net claims incurred —  25,099  —  80,767 
Acquisition costs 862  3,758  2,737  11,405 
Other underwriting expenses 4,222  9,757  12,803  30,568 
Amortization of intangible assets 98  98  293  293 
Interest expense, net 571  466  1,392  1,143 
Total expenses 5,753  39,178  17,225  124,176 
Loss from operations before income taxes (3,712) (2,963) (11,700) (6,145)
Income tax (benefit) expense (148) 26  (271) 26 
Loss from continuing operations (3,564) (2,989) (11,429) (6,171)
Income (loss) from discontinued operations, net of tax 39  747  (121) (23)
Net loss $ (3,525) $ (2,242) $ (11,550) $ (6,194)
Basic net (loss) income per share attributable to common shareholders
Continuing operations $ (0.30) $ (0.25) $ (0.96) $ (0.52)
Discontinued operations —  0.06  (0.01) — 
Net loss $ (0.30) $ (0.19) $ (0.97) $ (0.52)
Diluted net (loss) income per share attributable to common shareholders
Continuing operations $ (0.30) $ (0.25) $ (0.96) $ (0.52)
Discontinued operations —  0.06  (0.01) — 
Net loss $ (0.30) $ (0.19) $ (0.97) $ (0.52)
Basic weighted average common shares outstanding 11,971,490  11,954,494  11,946,051  11,954,494 
Diluted weighted average common shares outstanding 11,971,490  11,954,494  11,946,051  11,954,494 
Condensed Consolidated Statements of Comprehensive (Loss) Income
Net loss $ (3,525) $ (2,242) $ (11,550) $ (6,194)
Other comprehensive income:
Changes in net unrealized investment gains (losses) 54  (195) 299  2,243 
Reclassification to net loss (3) 541  (96) 1,917 
Other comprehensive income 51  346  203  4,160 
Total comprehensive loss $ (3,474) $ (1,896) $ (11,347) $ (2,034)
See accompanying Notes to Condensed Consolidated Financial Statements.
2

Atlas Financial Holdings, Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)
($ in ‘000s) Ordinary Voting Common Shares Restricted Voting Common Shares Additional Paid-In Capital Treasury Stock Retained Deficit Accumulated Other Comprehensive (Loss)/Income Total Share-holders’ Equity (Deficit)
Balance December 31, 2018 $ 36  $   $ 202,298  $ (3,000) $ (190,503) $ (3,132) $ 5,699 
Net loss —  —  —  —  (839) —  (839)
Other comprehensive income —  —  —  —  —  2,332  2,332 
Share-based compensation —  —  310  —  —  —  310 
Balance March 31, 2019 (unaudited) 36    202,608  (3,000) (191,342) (800) 7,502 
Net loss —  —  —  —  (3,113) —  (3,113)
Other comprehensive income —  —  —  —  —  1,482  1,482 
Share-based compensation —  —  187  —  —  —  187 
Balance June 30, 2019 (unaudited) 36    202,795  (3,000) (194,455) 682  6,058 
Net loss —  —  —  —  (2,242) —  (2,242)
Other comprehensive income —  —  —  —  —  346  346 
Share-based compensation —  —  188  —  —  —  188 
Balance September 30, 2019 (unaudited) 36    202,983  (3,000) (196,697) 1,028  4,350 
Balance December 31, 2019 $ 36  $   $ 81,548  $ (3,000) $ (87,469) $ 424  $ (8,461)
Net loss —  —  —  —  (3,291) —  (3,291)
Other comprehensive loss —  —  —  —  —  (149) (149)
Share-based compensation —  —  179  —  —  —  179 
Balance March 31, 2020 (unaudited) 36    81,727  (3,000) (90,760) 275  (11,722)
Net loss —  —  —  —  (4,734) —  (4,734)
Other comprehensive income —  —  —  —  —  301  301 
Share-based compensation —  —  16  —  —  —  16 
Balance June 30, 2020 (unaudited) 36    81,743  (3,000) (95,494) 576  (16,139)
Net loss —  —  —  —  (3,525) —  (3,525)
Other comprehensive income —  —  —  —  —  51  51 
Share-based compensation —  —  82  —  —  —  82 
Balance September 30, 2020 (unaudited) $ 36  $   $ 81,825  $ (3,000) $ (99,019) $ 627  $ (19,531)
See accompanying Notes to Condensed Consolidated Financial Statements.
3

Atlas Financial Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
($ in ‘000s) Nine months ended September 30,
2020 2019
(unaudited)
Operating activities:
Net loss $ (11,550) $ (6,194)
Adjustments to reconcile net income to net cash flows used in operating activities:
Loss from discontinued operations, net of taxes 121  23 
Depreciation and amortization 2,463  2,988 
Share-based compensation expense 277  685 
Amortization of intangible assets 293  293 
Loss from change in fair value of equity securities —  277 
Net realized gains —  (1,138)
Gain in equity of investees —  (563)
Amortization of bond premiums and discounts —  218 
Amortization of financing costs 168  168 
Net changes in operating assets and liabilities:
Accrued investment income —  200 
Premiums receivable, net 14,659  16,428 
Due from reinsurers and prepaid reinsurance premiums —  (12,708)
Deferred policy acquisition costs —  1,908 
Other assets (3,179) 6,879 
Claims liabilities —  (21,484)
Unearned premium reserves —  (15,879)
Due to reinsurers —  (6,522)
Premiums payable (19,316) — 
Due to deconsolidated affiliates 3,802  — 
Other liabilities and accrued expenses (41) 80 
Net cash flows used in operating activities - continuing operations (12,303) (34,341)
Net cash flows used in operating activities - discontinued operations (13,721) (8,343)
Net cash flows used in operating activities (26,024) (42,684)
Investing activities:
Purchases of:
Fixed income securities —  (11,506)
Other investments —  (680)
Short-term investments —  (11,716)
Property and equipment (200) (2,316)
Proceeds from sale and maturity of:
Fixed income securities —  52,364 
Equity securities —  5,997 
Other investments —  7,390 
Short-term investments —  8,868 
Net cash flows (used in) provided by investing activities - continuing operations (200) 48,401 
Net cash flows provided by investing activities - discontinued operations 7,187  13,389 
Net cash flows provided by investing activities 6,987  61,790 
Financing activities:
Proceeds from notes payable 4,601  — 
Repayment of notes payable (564) — 
Net cash flows provided by financing activities - continuing operations 4,037   
Net cash flows provided by financing activities - discontinued operations    
Net cash flows provided by financing activities 4,037   
4

($ in ‘000s) Nine months ended September 30,
2020 2019
(unaudited)
Net change in cash and cash equivalents and restricted cash - continuing operations (8,466) 14,060 
Cash and cash equivalents and restricted cash, beginning of period 23,859  34,902 
Less: cash and cash equivalents of discontinued operations - beginning of period 7,712  747 
Cash and cash equivalents and restricted cash of continuing operations, beginning of period 16,147  34,155 
Cash and cash equivalents and restricted cash of continuing operations, end of period $ 7,681  $ 48,215 
Supplemental disclosure of cash information:
Cash (recovered) paid for:
Income taxes $ (2,790) $ (14,349)
Interest 1,521  1,242 
See accompanying Notes to Condensed Consolidated Financial Statements.
5

Atlas Financial Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Nature of Operations and Basis of Presentation
Atlas Financial Holdings, Inc. (“Atlas” or “We” or the “Company”) commenced operations on December 31, 2010. The primary business of Atlas focuses on a managing general agency strategy, primarily through our wholly owned subsidiary, Anchor Group Management, Inc. (“AGMI”). AGMI focuses on a niche market orientation for the “light” commercial automobile sector. This sector includes taxi cabs, non-emergency para-transit, limousine, livery, including certain transportation network companies (“TNC”) drivers/operators, and business autos. Automobile insurance products provide insurance coverage in three major areas: liability, accident benefits and physical damage.
Atlas’ business is carried out through its non-insurance company subsidiaries: AGMI, Plainview Premium Finance Company, Inc. (“Plainview Delaware”), UBI Holdings Inc. (“UBI Holdings”) and UBI Holdings’ wholly-owned subsidiaries, optOn Digital IP Inc. (“OOIP”) and optOn Insurance Agency Inc. (“optOn” and together with OOIP and UBI Holdings, “UBI”).
Prior to a strategic transition, our core business was the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector, through American Country Insurance Company (“American Country”), American Service Insurance Company, Inc. (“American Service”) and Gateway Insurance Company (“Gateway” and together with American Country and American Service, the “ASI Pool Companies”) and Global Liberty Insurance Company of New York (“Global Liberty” and together with the ASI Pool Companies, our “Insurance Subsidiaries”), along with our wholly owned managing general agency, AGMI. The ASI Pool Companies were placed into rehabilitation under the statutory control of the Illinois Department of Insurance during the second half of 2019 and have been deconsolidated from our consolidated financial statements as of October 1, 2019 as a result of these actions. Other regulatory actions were taken in certain states, including restriction, suspension, or revocation of certain state licenses and certificates of authority held by the ASI Pool Companies preceding and following the initiation of rehabilitation.
During the fourth quarter of 2019, the Company began actively pursuing the potential sale of Global Liberty, and as a result, Global Liberty has been classified as a discontinued operation.
The Insurance Subsidiaries distribute their insurance products through AGMI, which has contracted a network of retail independent agents. Together, the Insurance Subsidiaries are licensed to write property and casualty (“P&C”) insurance in 49 states and the District of Columbia in the U.S. Atlas’ core products are actively distributed in 42 of those states plus the District of Columbia. The Insurance Subsidiaries and the Company’s other non-insurance subsidiaries share common management and operating infrastructure. During the third quarter of 2019, new business writings were restricted or stopped in connection with certain of the Insurance Subsidiaries. See “Note 19, Subsequent Events” and “Part I, Item 2, 2020 Developments” for certain developments with respect to the Company and the Insurance Subsidiaries subsequent to September 30, 2020.
Atlas’ ordinary common shares trade on the OTC Markets system under the symbol “AFHIF” (see Note 19, Subsequent Events).
Basis of Presentation
These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Atlas and the entities it controls. Equity investments in entities that we do not consolidate, including corporate entities in which we have significant influence and partnership and partnership-like entities in which we have more than minor influence over operating and financial policies, are accounted for under the equity method unless we have elected the fair value option. All significant intercompany accounts and transactions have been eliminated.
The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for the full calendar year.
The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, do not include all of the information and notes required by U.S. GAAP for complete financial statements and should be read in conjunction with Atlas’ Annual Report on Form 10-K for the year ended December 31, 2019, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. Atlas has consistently applied the same accounting policies throughout all periods presented.
6

Estimates and Assumptions
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and changes in estimates are recorded in the accounting period in which they are determined Significant estimates in the accompanying financial statements include deferred tax asset valuation, and allowances on premiums and notes receivable.
Revenue Recognition
Revenues from contracts with customers include both commission and fee income. The recognition and measurement of revenue is based on the assessments of individual contract terms. As an MGA, the Company has contracts with various insurance carriers which determines the Company’s commission income revenue. Each contract specifies what our performance obligations are as an MGA and what determines our commission income revenue, generally gross written premiums, net of cancellations and refunds. Under these contracts there are a number of performance obligations; however, it is the bundle of these services and not a single obligation that results in the performance of the MGA under the contracts. The Company considers these performance obligations as a non-bifurcated bundle of services where the performance obligations are satisfied simultaneous to the point in time where the Company issues a policy, or cancels a policy to an insured. The commission rate stated in the individual contract is the standalone selling price of these non-bifurcated services which is allocated to the service bundle and not to any individual obligation under the various contracts.
The revenue included as commission income for the three months ended September 30, 2020 and 2019 was $1.7 million and $860,000, respectively and $4.7 million for each of the nine months ended September 30, 2020 and 2019.
The balance of receivables related to contracts with customers, which is recorded as part of premiums receivable on the Condensed Consolidated Statements of Financial Position as of September 30, 2020 and December 31, 2019 totaled $3.1 million and $1.4 million, respectively.
Premium income is recognized on a pro-rata basis over the terms of the respective insurance contracts.
Seasonality
The P&C insurance business is seasonal in nature. Our ability to generate commission income is also impacted by the timing of policy effective periods in the states in which we operate and products provided by our business partners. For example, January 1st and March 1st are common taxi cab renewal dates in Illinois and New York, respectively.
Operating Segments
The Company operates in one business segment, the Managing General Agency segment.
2. New Accounting Standards
There have been no recent pronouncements or changes in pronouncements during the nine months ended September 30, 2020, as compared to those described in our Annual Report on Form 10-K for the twelve months ended December 31, 2019, that are of significance or potential significance to Atlas. Pertinent Accounting Standard Updates (“ASUs”) are issued from time to time by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as they become effective. All recently issued accounting pronouncements with effective dates prior to October 1, 2020 have been adopted by the Company.

7

3. Intangible Assets
Intangible Assets by Major Asset Class
($ in ‘000s) Economic Useful Life Gross Carrying Amount Accumulated Amortization Net
As of September 30, 2020
Trade name and trademark 15 years $ 1,800  $ 673  $ 1,127 
Customer relationship 10 years 2,700  1,495  1,205 
$ 4,500  $ 2,168  $ 2,332 
As of December 31, 2019
Trade name and trademark 15 years $ 1,800  $ 581  $ 1,219 
Customer relationship 10 years 2,700  1,294  1,406 
$ 4,500  $ 1,875  $ 2,625 
4. Loss From Continuing Operations per Share
Computations of Basic and Diluted Loss per Common Share from Continuing Operations
($ in ‘000s, except share and per share amounts) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Basic
Loss from continuing operations before income taxes $ (3,712) $ (2,963) $ (11,700) $ (6,145)
Income tax (benefit) expense (148) 26  (271) 26 
Net loss attributable to common shareholders from continuing operations $ (3,564) $ (2,989) $ (11,429) $ (6,171)
Basic weighted average common shares outstanding 11,971,490  11,954,494  11,946,051  11,954,494 
Loss per common share basic from continuing operations $ (0.30) $ (0.25) $ (0.96) $ (0.52)
Diluted
Basic weighted average common shares outstanding 11,971,490  11,954,494  11,946,051  11,954,494 
Dilutive potential ordinary shares:
Dilutive stock options outstanding —  —  —  — 
Diluted weighted average common shares outstanding 11,971,490  11,954,494  11,946,051  11,954,494 
Loss per common share diluted from continuing operations $ (0.30) $ (0.25) $ (0.96) $ (0.52)
Common shares are defined as ordinary voting common shares, restricted voting common shares and participative restricted stock units (“RSUs”). Earnings per common share diluted is computed by dividing net income by the weighted average number of common shares outstanding for each period plus the incremental number of shares added as a result of converting dilutive potential ordinary voting common shares, calculated using the treasury stock method. Atlas’ potential dilutive ordinary voting common shares consists of outstanding stock options to purchase ordinary voting common shares and warrants to purchase 2,387,368 ordinary voting common shares of Atlas for $0.69 per share.
Atlas’ dilutive potential ordinary voting common shares consist of outstanding stock options to purchase ordinary voting common shares. The effects of these convertible instruments are excluded from the computation of earnings per common share diluted from continuing operations in periods in which the effect would be anti-dilutive. For the three and nine months ended September 30, 2020 and 2019, all exercisable stock options were deemed to be anti-dilutive.
8

5. Investments
Components of Net Investment Income
($ in ‘000s)
Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Total investment income:
   Interest income $ —  $ 525  $ —  $ 1,859 
   Income from other investments —  45  —  794 
Investment expenses —  (241) —  (769)
Net investment income $ —  $ 329  $ —  $ 1,884 
Aggregate Proceeds and Gross Realized Investment Gains and Losses
($ in ‘000s)
Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Fixed income securities:
Proceeds from sales and calls $ —  $ 10,177  $ —  $ 42,102 
Gross realized investment gains —  120  —  438 
Gross realized investment losses —  (32) —  (201)
Equities:
Proceeds from sales $ —  $ —  $ —  $ 5,997 
Gross realized investment gains —  —  —  443 
Gross realized investment losses —  —  —  (96)
Other investments:
Proceeds from sales $ —  $ 1,700  $ —  $ 3,997 
Gross realized investment gains —  297  —  576 
Total:
Proceeds from sales and calls $ —  $ 11,877  $ —  $ 52,096 
Gross realized investment gains —  417  —  1,457 
Gross realized investment losses —  (32) —  (297)
Components of Net Realized Gains
($ in ‘000s)
Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Fixed income securities $ —  $ 88  $ —  $ 237 
Equities —  —  —  347 
Other investments —  296  —  554 
Net realized gains $ —  $ 384  $ —  $ 1,138 
9

6. Income Taxes
Reconciliation of U.S. Statutory Marginal Income Tax Rate to the Effective Tax Rate - Continuing Operations
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Amount % Amount % Amount % Amount %
Provision for taxes at U.S. statutory marginal income tax rate $ (779) 20.5  % $ (623) 21.0  $ (2,456) 21.0  % $ (1,291) 21.0 
Provision for deferred tax assets deemed unrealizable (valuation allowance) (12) 0.3  626  (21.1) 1,571  (13.4) 1,242  (20.2)
Nondeductible expenses —  (0.1) —  26  (0.4)
Tax-exempt income —  —  (1) —  —  —  (3) — 
State tax (net of federal benefit) —  —  21  (0.7) —  —  21  (0.3)
Stock compensation 642  (16.9) —  —  654  (5.6) 31  (0.5)
Tax rate differential —  —  —  —  (42) 0.3  —  — 
Provision for income taxes for continuing operations $ (148) 3.9  % $ 26  (0.9) % $ (271) 2.3  % $ 26  (0.4) %
Reconciliation of U.S. Statutory Marginal Income Tax Rate to the Effective Tax Rate - Discontinued Operations
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Amount % Amount % Amount % Amount %
Provision for taxes at U.S. statutory marginal income tax rate $ 21.0  % $ 157  21.0  % $ (134) 21.0  % $ (5) 21.0  %
Provision for deferred tax assets deemed unrealizable (valuation allowance) (9) (21.8) (156) (21.0) (189) 29.3  (16.1)
Nondeductible expenses 0.8  —  —  (0.2) (9.4)
Tax-exempt income —  —  (1) —  —  —  (1) 4.5 
Tax rate differential —  —  —  —  (200) 31.0  —  — 
Provision for income taxes for discontinued operations $ —  —  % $ —  —  % $ (522) 81.1  % $ —  —  %
Components of Income Tax (Benefit) Expense - Continuing Operations
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Current tax (benefit) expense $ (148) $ 26  $ (271) $ 26 
Components of Income Tax Benefit - Discontinued Operations
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Current tax benefit $ —  $ —  $ (522) $ — 
10

During 2013 and 2019, due to shareholder activity, “triggering events” as determined under IRC Section 382 occurred. As a result, under IRC Section 382, the use of the Company’s net operating loss and other carryforwards generated prior to the “triggering events” will be subject to a yearly limitation as a result of this “ownership change” for tax purposes, which is defined as a cumulative change of more than 50% during any three-year period by shareholders owning 5% or greater portions of the Company’s shares. Due to the mechanics of the Section 382 calculation when there are multiple triggering events the Company’s losses will generally be limited based on the thresholds of the 2019 triggering event. The Company has established a valuation allowance against the NOLs that will expire unused as a result of the yearly limitation.
Components of Deferred Income Tax Assets and Liabilities
($ in ‘000s) September 30, 2020 December 31, 2019
Gross deferred tax assets:
Losses carried forward $ 13,042  $ 10,264 
Claims liabilities and unearned premium reserves 354  554 
Investment in affiliates 23,707  24,450 
Bad debts 167  168 
Stock compensation 276  873 
Other 160  81 
Valuation allowance (33,119) (32,522)
Total gross deferred tax assets 4,587  3,868 
Gross deferred tax liabilities:
Deferred policy acquisition costs 143  112 
Investments 162  116 
Fixed assets 1,477  2,099 
Intangible assets 490  551 
Other 2,315  990 
Total gross deferred tax liabilities 4,587  3,868 
Net deferred tax assets $ —  $ — 
Net Operating Loss Carryforward as of September 30, 2020 by Expiry
($ in ‘000s)
Year of Occurrence Year of Expiration Amount
2011 2031 $
2012 2032 70 
2015 2035
2017 2037 13,649 
2018 2038 8,903 
2018 Indefinite 8,245 
2019 2039 10,863 
2019 Indefinite 6,306 
2020 2040 8,460 
2020 Indefinite 5,605 
Total $ 62,103 
Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which they can be utilized. When considering the extent of the valuation allowance on Atlas’ deferred tax assets, weight is given by management to both positive and negative evidence. U.S. GAAP states that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets. Based on Atlas’ cumulative loss in recent years and certain deferred tax assets subject to a yearly limitation under Section 382 which will likely result in expiration before utilization, Atlas has recorded a valuation allowance of $33.1 million and $32.5 million for its gross future deferred tax assets as of September 30, 2020 and December 31, 2019, respectively.
11

Atlas accounts for uncertain tax positions in accordance with the income taxes accounting guidance. Atlas has analyzed filing positions in the federal and state jurisdictions where it is required to file tax returns, as well as the open tax years in these jurisdictions. Atlas believes that its federal and state income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal and state income tax positions have been recorded. Atlas would recognize interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. Atlas did not incur any federal income tax related interest income, interest expense or penalties for the three and nine months ended September 30, 2020 and 2019. Tax year 2015 and years thereafter are subject to examination by the Internal Revenue Service (“IRS”).
7. Commitments and Contingencies
In the ordinary course of its business, Atlas is involved in legal proceedings, including lawsuits, regulatory examinations and inquiries.
Atlas is exposed to credit risk on balances receivable from insureds and agents. Credit exposure to any one individual insured is not material due to the “in-equity” payment terms offered. The policies placed with risk taking partners are distributed by agents who may manage cash collection on its behalf pursuant to the terms of their agency agreement. Atlas has procedures to monitor and minimize its exposure to delinquent agent balances, including, but not limited to, reviewing account current statements, processing policy cancellations for non-payment and other collection efforts deemed appropriate.
8. Property and Equipment
Property and Equipment Held1
($ in ‘000s) September 30, 2020 December 31, 2019
Buildings $ 7,425  $ 7,425 
Land 1,840  1,840 
Building improvements 9,031  9,023 
Leasehold improvements 193  193 
Internal use software 12,795  12,610 
Computer equipment 1,921  1,925 
Furniture and other office equipment 1,121  1,150 
Total $ 34,326  $ 34,166 
Accumulated depreciation and amortization (14,796) (12,373)
Total property and equipment, net $ 19,530  $ 21,793 
1Excluding assets held for sale.
Depreciation expense and amortization from continuing operations was $741,000 and $1.1 million for the three months ended September 30, 2020 and 2019, respectively, and $2.5 million and $3.0 million for the nine months ended September 30, 2020 and 2019, respectively. As part of a cost sharing agreement with affiliates under common ownership, depreciation expense of $0 and $49,000 was allocated to Global Liberty during the three months ended September 30, 2020 and 2019, respectively, and $0 and $250,000 for the nine months ended September 30, 2020 and 2019, respectively. For the year ended December 31, 2019, depreciation expense and amortization from continuing operations was $3.9 million, and $250,000 was allocated to Global Liberty as part of the cost sharing agreement with affiliates under common ownership.
For the nine months ended September 30, 2020 and 2019, the Company capitalized $185,000 and $2.2 million, respectively, of costs incurred, consisting primarily of external consultants and internal labor costs incurred during the application development stage for internal-use software. Substantially all of the costs incurred during the period were part of the application development stage. Amortization expense recorded for projects in the post-implementation/operation stage was $308,000 and $578,000 for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.
12

During 2016, Atlas purchased a building and land to serve as its new corporate headquarters to replace its former leased office space. Atlas’ Chicago area staff moved into this space in late October 2017 and occupies approximately 70,000 square feet in the building. An unrelated tenant occupies the remaining office space in the building. Rental income related to this lease agreement was $116,000 and $111,000 for the three months ended September 30, 2020 and 2019, respectively, and $346,000 and $334,000 for the nine months ended September 30, 2020 and 2019, respectively. Depreciation expense related to the building and its improvements was $284,000 and $283,000 for the three months ended September 30, 2020 and 2019, respectively, and $833,000 and $850,000 for the nine months ended September 30, 2020 and 2019, respectively.
Loss on disposals of fixed assets totaled $0 and $21,000 for three and nine months ended September 30, 2019, respectively. There were no losses on disposals of fixed assets for the three and nine months ended September 30, 2020.
9. Reinsurance Ceded
As is customary in the insurance industry, Atlas reinsures portions of certain insurance policies it writes, thereby providing a greater diversification of risk and minimizing exposure on larger risks. Atlas remains contingently at risk with respect to any reinsurance ceded and would incur an additional loss if an assuming company were unable to meet its obligation under the reinsurance treaty.
Atlas monitors the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium reserves, ceded claims and claims adjustment expense reserve balances and ceded paid claims. These policies mitigate the risk of credit quality or dispute from becoming a danger to financial strength. To date, the Company has not experienced any material difficulties in collecting reinsurance recoverables.
The below table represents activity of the ASI Pool Companies for the three and nine months ended September 30, 2020 and 2019. The activity for Global Liberty has not been included as a result of being classified as a discontinued operation. The ASI Pool Companies were deconsolidated as of October 1, 2019.
Premiums Written, Premiums Earned and Amounts Related to Reinsurance
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Direct premiums written $ —  $ 26,488  $ —  $ 133,827 
Assumed premiums written —  4,301  —  26,857 
Ceded premiums written —  (10,672) —  (72,911)
Net premiums written $ —  $ 20,117  $ —  $ 87,773 
Direct premiums earned $ —  $ 46,831  $ —  $ 149,609 
Assumed premiums earned —  9,595  —  26,954 
Ceded premiums earned —  (21,898) —  (66,322)
Net premiums earned $ —  $ 34,528  $ —  $ 110,241 
Ceded claims and claims adjustment expenses $ —  $ 14,013  $ —  $ 31,551 
Ceding commissions $ —  $ 3,919  $ —  $ 16,381 
During 2019, the Company received notice from General Reinsurance Corporation (“Gen Re”) that effective July 31, 2019, the XOL reinsurance coverage for the ASI Pool Companies would terminate on a cut-off basis. Additionally, effective September 30, 2019, the ASI Pool Companies’ Quota Share contract with Swiss Reinsurance America Corporation (“Swiss Re”) was terminated on a run-off basis. During 2020, the Company received notice from Gen Re that effective January 1, 2020, the XOL reinsurance coverage for Global Liberty terminated on a run-off basis. See “Note 19, Subsequent Events” and “Part I, Item 2, 2020 Developments” for certain developments with respect to the ASI Pool Companies and Global Liberty.
13

10. Claims Liabilities
The below table represents activity of the ASI Pool Companies for the three and nine months ended September 30, 2020 and 2019. The activity for Global Liberty has not been included as a result of being classified as a discontinued operation. The ASI Pool Companies were deconsolidated as of October 1, 2019.
Changes in the Provision for Unpaid Claims and Claims Adjustment Expenses, Net of Reinsurance Recoverables
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Unpaid claims and claims adjustment expenses, beginning of period $ —  $ 206,996  $ —  $ 226,487 
Less: reinsurance recoverable —  55,533  —  55,265 
Net unpaid claims and claims adjustment expenses, beginning of period —  151,463  —  171,222 
Incurred related to:
Current year —  23,509  —  78,613 
Prior years —  1,590  —  2,154 
—  25,099  —  80,767 
Paid related to:
Current year —  9,756  —  22,182 
Prior years —  26,969  —  89,970 
—  36,725  —  112,152 
Net unpaid claims and claims adjustment expenses, end of period —  139,837  —  139,837 
Add: reinsurance recoverable —  65,166  —  65,166 
Unpaid claims and claims adjustment expenses, end of period $ —  $ 205,003  $ —  $ 205,003 
The process of establishing the estimated provision for unpaid claims and claims adjustment expenses is complex and imprecise, as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends, and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results may deviate, perhaps substantially, from the best estimates made.
The incurred related to prior years for the three and nine months ended September 30, 2020 and 2019 primarily resulted from changes in estimates on involuntary assigned risk pools and run-off commercial auto. Assigned risk pools are established by state governments to cover high-risk insureds who cannot purchase insurance through conventional means. See “Note 19, Subsequent Events” and “Part I, Item 2, 2020 Developments” for certain developments with respect to the Company and the Insurance Subsidiaries.
11. Share-Based Compensation
On January 6, 2011, Atlas adopted a stock option plan (“Stock Option Plan”) in order to advance the interests of Atlas by providing incentives to eligible persons defined in the plan. In the second quarter of 2013, a new equity incentive plan (“Equity Incentive Plan”) was approved by the Company’s common shareholders at the Annual General Meeting, and Atlas ceased to grant new stock options under the preceding Stock Option Plan. The Equity Incentive Plan is a securities based compensation plan, pursuant to which Atlas may issue restricted stock grants for ordinary voting common shares, restricted stock, stock grants for ordinary voting common shares, stock options and other forms of equity incentives to eligible persons as part of their compensation. The Equity Incentive Plan is considered an amendment and restatement of the Stock Option Plan, although outstanding stock options issued pursuant to the Stock Option Plan will continue to be governed by the terms of the Stock Option Plan.
14

Stock Options
Stock Option Activity
(prices in Canadian dollars designated with “C$” and U.S. dollars designated with “US$” Nine months ended September 30,
2020 2019
Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price
C$ Denominated:
Outstanding, beginning of period 27,195  C$6.00 27,195  C$6.00
Granted —  —  —  — 
Exercised —  —  —  — 
Canceled (27,195) C$6.00 —  — 
Outstanding, end of period —  —  27,195  C$6.00
US$ Denominated:
Outstanding, beginning of period 375,000  US$17.01 375,000  US$17.01
Granted —  —  —  — 
Exercised —  —  —  — 
Canceled (193,500) US$18.73 —  — 
Outstanding, end of period 181,500  US$13.51 375,000  US$17.01
There are no stock options that are exercisable as of September 30, 2020. The stock option grants outstanding have a weighted average remaining life of 3.47 years and have an intrinsic value of $0 as of September 30, 2020. In association with his retirement from the Company’s board of directors, 27,195 options held by Gordon Pratt were canceled effective August 1, 2020.
On March 12, 2015, the Board of Directors of Atlas granted equity awards of (i) 200,000 restricted stock grants for ordinary voting common shares of the Company and (ii) 200,000 options to acquire ordinary voting common shares to the executive officers of the Company as part of the Company’s annual compensation process. The awards were made under the Company’s Equity Incentive Plan. The awards vest in five equal annual installments of 20%, provided that an installment shall not vest unless an annual performance target based on specific book value growth rates linked to return on equity goals is met. In the event the performance target is not met in any year, the 20% installment for such year shall not vest, but such non-vested installment shall carry forward and can become vested in future years (up to the fifth year from the date of grant), subject to achievement in a future year of the applicable performance target for such year. For the three and nine months ended September 30, 2020 and 2019, no shares of either of the restricted stock grants for ordinary voting common shares or the options to acquire ordinary voting common shares vested due to not meeting annual performance targets. During the first quarter of 2020, 140,000 of the option awards were canceled as a result of not meeting the annual performance targets. Also during the first quarter of 2020, an additional 53,500 options were canceled due to the departure of a former officer. The Monte-Carlo simulation model was used, for both the options and restricted stock grants for ordinary voting common shares, to estimate the fair value of compensation expense as a result of the performance based component of these grants. Utilizing the Monte-Carlo simulation model, the fair values were $1.5 million and $1.9 million for the options and restricted stock grants for ordinary voting common shares, respectively. This expense will be amortized over the anticipated vesting period.
On December 31, 2018, the Company awarded restricted stock unit grants for ordinary voting common shares of the Company to its external directors pursuant to a director equity award agreement dated December 31, 2018. The awards, which were approved by the Company’s Board of Directors in March 2018, were valued at $40,000 per external director (“Aggregate Award”) and were made under the Company’s Equity Incentive Plan. The number of restricted stock units awarded was determined by dividing (A) the Aggregate Award by (B) the closing price of a Company ordinary voting common share at the close of market on April 4, 2018, which was $10.50 per share. For new directors, the Aggregate Award is proportionate to the director’s start date and priced as of that same day. During 2018, the Company awarded 17,524 RSU grants having an aggregate grant date fair value of $179,000. The RSUs will vest 33.3% on January 1 of each year with the last vesting period of January 1, 2021.

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Restricted Shares
Restricted Stock Grants for Ordinary Voting Common Shares and Restricted Share Unit Activity
Nine months ended September 30,
2020 2019
Number of Shares Weighted Average Fair Value at Grant Date Number of Shares Weighted Average Fair Value at Grant Date
Non-vested, beginning of period $ 171,682  $ 17.46  $ 207,156  $ 16.50 
Granted —  —  —  — 
Vested (8,381) 10.22  (28,066) 11.79 
Canceled (160,000) 9.62  (7,408) 12.20 
Non-vested, end of period $ 3,301  $ 10.22  $ 171,682  $ 17.46 
During the first quarter of 2019, 7,408 restricted share units related to a February 2014 grant to an independent director were canceled at such director’s request. During the first quarter of 2020, 140,000 ordinary voting restricted common shares were canceled as a result of not meeting annual performance targets. Also during the first quarter of 2020, an additional 20,000 restricted common shares were canceled due to the departure of a former officer. During the third quarter of 2020, 2,540 restricted share units vested related to the retirement of two former directors.
In accordance with ASC 718 (Stock-Based Compensation), Atlas has recognized share-based compensation expense on a straight-line basis over the requisite service period of the last separately vesting portion of the award. Share-based compensation expense is a component of other underwriting expenses on the condensed consolidated statements of operations. Atlas recognized $82,000 and $188,000 in share-based compensation expense, including income tax expense, for the three months ended September 30, 2020 and 2019, respectively, and $277,000 and $685,000 for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, there was $15,000 of unrecognized total compensation expense related to restricted stock and restricted stock units for ordinary voting common shares. The expense will be amortized over a weighted average period of 3 months.
12. Other Employee Benefit Plans
Defined Contribution Plan
Atlas has a defined contribution 401(k) plan covering all qualified employees of Atlas and its subsidiaries. Contributions to this plan are limited based on IRS guidelines. Atlas matches 100% of the employee contribution up to 2.5% of annual earnings, plus 50% of additional contributions up to 2.5% of annual earnings, for a total maximum expense of 3.75% of annual earnings per participant. Atlas’ matching contributions are discretionary. Employees are 100% vested in their own contributions and vest in Atlas contributions based on years of service equally over 5 years with 100% vested after 5 years. Company contributions were $19,000 and $119,000 for the three months ended September 30, 2020 and 2019, respectively, and $77,000 and $381,000 for the nine months ended September 30, 2020 and 2019, respectively. The matching portion of this plan was suspended during the third quarter of 2020.
Employee Stock Purchase Plan
The Atlas Employee Stock Purchase Plan (“ESPP”) encourages employee interest in the operation, growth and development of Atlas and provides an additional investment opportunity to employees. Full time and permanent part time employees working more than 30 hours per week are allowed to invest up to 7.5% of adjusted salary in Atlas ordinary voting common shares. Atlas matches 100% of the employee contribution up to 2.5% of annual earnings, plus 50% of additional contributions up to 5% of annual earnings, for a total maximum expense of 5% of annual earnings per participant. Atlas’ matching contributions are discretionary. Atlas’ costs incurred related to the matching portion of the ESPP were $5,000 and $21,000 for the three months ended September 30, 2020 and 2019, respectively, and $21,000 and $107,000 for the nine months ended September 30, 2020 and 2019, respectively. The matching portion of this plan was suspended during the third quarter of 2020.
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13. Share Capital and Mezzanine Equity
Share Capital
Share Capital Activity
September 30, 2020 December 31, 2019
Shares Authorized Shares Issued Shares Outstanding Amount
($ in ‘000s)
Shares Issued Shares Outstanding Amount
($ in ‘000s)
Ordinary voting common shares 266,666,667  12,240,198  11,984,693  $ 36  12,198,319  11,942,812  $ 36 
Restricted voting common shares 33,333,334  —  —  —  —  —  — 
Total common shares 300,000,001  12,240,198  11,984,693  $ 36  12,198,319  11,942,812  $ 36 
There were 3,301 and 11,682 non-vested RSUs as of September 30, 2020 and December 31, 2019, respectively. These RSUs are participative and are included in the computations of earnings per common share and book value per common share for these periods.
During the nine months ended September 30, 2020, the Company issued 201,881 ordinary voting common shares of which 193,500 ordinary voting common shares were issued under the near term incentive program while 8,381 ordinary voting common shares were issued as a result of the vesting of RSUs. Also, during the first quarter of 2020 140,000 ordinary voting restricted common shares were cancelled due to not meeting performance targets, and 20,000 ordinary voting restricted common shares were canceled due to the departure of a former officer. During the year ended December 31, 2019, the Company issued 5,842 ordinary voting common shares as a result of the vesting of RSUs.
Warrants
The Schedule 13G/A filed by American Financial Group, Inc. a parent holding company, on January 31, 2020 states that as of December 31, 2019, and as updated on February 2, 2021 for December 31, 2020, it has sole power to vote and sole power to dispose of 2,387,368 ordinary voting common shares. These shares are represented by warrants to purchase 2,387,368 ordinary voting common shares until June 10, 2024, under a Warrant Agreement dated June 10, 2019 (the “Warrant Agreement”), at an initial exercise price of $0.69 per share, with both the number of ordinary voting common shares subject to the Warrant Agreement and the exercise price subject to adjustment as set forth in the Warrant Agreement.
Mezzanine Equity
There were no preferred shares outstanding as of September 30, 2020 and December 31, 2019.
14. Deferred Policy Acquisition Costs
The below table represents activity of the ASI Pool Companies for the nine months ended September 30, 2020 and 2019. The activity for Global Liberty has not been included as a result of being classified as a discontinued operation. The ASI Pool Companies were deconsolidated as of October 1, 2019.
Components of Deferred Policy Acquisition Costs
($ in ‘000s) Nine months ended September 30,
2020 2019
Balance, beginning of period $ —  $ 5,918 
Acquisition costs deferred —  9,497 
Amortization charged to income —  (11,405)
Balance, end of period $ —  $ 4,010 
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15. Leases
The Company adopted ASC 842 (Leases) as of January 1, 2019, using the transition method wherein entities were allowed to initially apply the new lease standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Adoption of ASC 842 resulted in an increase of operating lease right-of-use asset totaling approximately $2.5 million, an operating lease liability of approximately $3.1 million and a decrease of net deferred rent liabilities of approximately $600,000 on the condensed consolidated statements of financial position as of January 1, 2019.
We currently lease real estate space, automobiles, and certain equipment under non-cancelable operating lease agreements. Leases with an initial term of 12 months or less, which are immaterial to the Company, are not recorded in the condensed consolidated statement of financial position. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases to lease payments based on changes in index rates or usage, are not recorded in the condensed consolidated statement of financial position.
Certain agreements include an option to extend or renew the lease term at our option. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercising those options. Lease payments are discounted using the implicit discount rate in the lease. If the implicit discount rate for the lease cannot be readily determined, the Company uses an estimate of its incremental borrowing rate. The Company did not have any contracts accounted for as finance leases as of September 30, 2020 or 2019.
Lease Expense
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Operating leases $ 190  $ 242  $ 570  $ 718 
Variable lease cost 88  90  268  256 
Total $ 278  $ 332  $ 838  $ 974 
Other Operating Lease Information
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Cash paid for amounts included in the measurement of lease liabilities reported in operating cash flows $ 278  $ 333  $ 838  $ 976 
Right-of-use assets obtained in exchange for new lease liabilities —  —  —  — 
Total $ 278  $ 333  $ 838  $ 976 
Weighted-average remaining lease term 1.4 years
Weighted-average discount rate 3.5  %
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The following table presents the undiscounted contractual maturities of the Company’s operating lease liability:
Contractual Operating Lease Liabilities
($ in ‘000s) As of September 30, 2020
Remainder of 2020 $ 235 
2021 898 
2022 179 
2023 23 
Total lease payments $ 1,335 
Impact of discounting (14)
Operating lease liability $ 1,321 

16. Related Party Transactions
During the periods presented, a portion of Global Liberty’s investment portfolio, which is included in “Assets held for sale” on the Condensed Consolidated Statements of Financial Position, included investment vehicles that are considered related-party transactions. As of September 30, 2020 and December 31, 2019, these related-party transactions make up less than 14.5% and 1.0%, respectively, of the Company’s investment portfolio. In these transactions, one or more of the Company’s former directors or entities affiliated with such directors invest in and/or manage these vehicles. These related-party transactions are consistent with the Company’s investment guidelines and have been reviewed and approved by the Investment Committee of the Company’s Board of Directors. The Company believes that these transactions leverage investment resources that would otherwise not be available to the Company.
17. Notes Payable
On April 26, 2017, Atlas issued $25 million of five-year 6.625% senior unsecured notes and received net proceeds of approximately $23.9 million after deducting underwriting discounts and commissions and other estimated offering expenses. Interest on the senior unsecured notes is payable quarterly on each January 26, April 26, July 26 and October 26. Atlas may, at its option, beginning with the interest payment date of April 26, 2020, and on any scheduled interest payment date thereafter, redeem the senior unsecured notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the date of redemption. The senior unsecured notes will rank senior in right of payment to any of Atlas’ existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the senior unsecured notes. The senior unsecured notes will rank equally in right of payment to all of Atlas’ existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the senior unsecured notes will be structurally subordinated to the indebtedness and other obligations of Atlas’ subsidiaries.
The senior unsecured notes were issued under an indenture and supplemental indenture that contain covenants that, among other things, limit: (i) the ability of Atlas to merge or consolidate, or lease, sell, assign or transfer all or substantially all of its assets; (ii) the ability of Atlas to sell or otherwise dispose of the equity securities of certain of its subsidiaries; (iii) the ability of certain of Atlas’ subsidiaries to issue equity securities; (iv) the ability of Atlas to permit certain of its subsidiaries to merge or consolidate, or lease, sell, assign or transfer all or substantially all of their respective assets; and (v) the ability of Atlas and its subsidiaries to incur debt secured by equity securities of certain of its subsidiaries.
On November 10, 2016, American Insurance Acquisition, Inc. (“AIAI”) entered into a ten-year 5.0% fixed rate mortgage agreement with the Insurance Subsidiaries totaling $10.7 million with principal and interest payments due monthly. The mortgage rate is secured by the Company’s headquarters and was previously eliminated in consolidation. The amount payable as of September 30, 2020 is due to the ASI Pool Companies.
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On May 1, 2020, AIAI entered into a Paycheck Protection Program Promissory Note (the "PPP Note") with respect to a loan of $4,600,500 (the "PPP Loan") from Fifth Third Bank, National Association. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the "PPP") of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") administered by the U.S. Small Business Administration ("SBA"). The PPP Loan matures on May 1, 2022 and bears interest at a rate of 1.0% per annum. The PPP Loan is payable in 18 equal monthly payments of $257,611.48 which was to commence December 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. AIAI has applied for loan forgiveness pursuant to the terms of the PPP as certain of the criteria have been met and is awaiting the results of the forgiveness decision, and as a result, monthly payments will be deferred until final resolution of the forgiveness application process.
Interest expense on notes payable was $571,000 and $470,000 for the three months ended September 30, 2020 and 2019, respectively, and $1.7 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively.
Notes Payable Outstanding
($ in ‘000s) September 30, 2020 December 31, 2019
6.625% Senior Unsecured Notes due April 26, 2022
$ 25,000  $ 25,000 
1.0% PPP Loan due May 1, 2022
4,601  — 
5.0% Mortgage due November 10, 2026
7,056  7,621 
Total outstanding borrowings 36,657  32,621 
Unamortized issuance costs (352) (521)
Total notes payable $ 36,305  $ 32,100 

18. Deconsolidation and Discontinued Operations
Deconsolidation
Effective October 1, 2019, Atlas no longer had statutory responsibility or authority over the financial activities of the ASI Pool Companies while still maintaining their indirect ownership of the ASI Pool Companies. This resulted in the ASI Pool Companies being classified as variable interest entities for which the Company is no longer the primary beneficiary, and they were deconsolidated during the fourth quarter of 2019. The financial results of the ASI Pool Companies are included in the condensed consolidated statements of operations through the October 1, 2019 disposal date. There was not re-measurement of any retained interest since no future value was assigned to the deconsolidated entities as a result of the rehabilitation. Management will continue supporting the administrative activities of the ASI Pool Companies as required by the Office of the Special Deputy Receiver of the Illinois Department of Insurance (“OSD”); however, the Company will have no control over the financial activities of these entities.
As part of the deconsolidation, notes receivable from the ASI Pool Companies with an outstanding principal balance of $15.5 million are now presented on the condensed consolidated statements of financial position. On May 1, 2015, AIAI entered into subordinated surplus debentures (“Surplus Notes”) with the ASI Pool Companies that had a maturity date of April 30, 2020 carrying a variable interest equal to the corporate base rate as reported by the largest bank (measured in assets) with its head office located in Chicago, Illinois, in effect on the first business day of each month for the term of the Surplus Notes plus two percent per annum on the unpaid principal balance with a maximum variable interest rate for any month not to exceed the initial rate for the Surplus Notes by more than ten percent per annum. These Surplus Notes are subject to various terms and conditions as set forth by the Illinois Department of Insurance and the Missouri Department of Insurance and require prior written approvals for the payment of interest and/or a reduction in principal (See Note 19, Subsequent Events and Part I, Item 2, 2020 Developments). These Surplus Notes could be used at some point to offset future amounts payable to the ASI Pool Companies.
Discontinued Operations
During the fourth quarter of 2019, the Company began actively pursuing the potential sale of Global Liberty, and as a result, Global Liberty has been classified as a discontinued operation and the results of Global Liberty’s operations are reported separately for all periods presented.
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Summary financial information for Global Liberty included in income (loss) from discontinued operations, net of tax in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 is presented below:
Income (Loss) from Discontinued Operations
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net premiums earned $ 3,208  $ 6,054  $ 11,048  $ 21,633 
Net investment (loss) income (27) 99  (44) 396 
Net realized losses —  28  (1,565) (46)
Total revenue 3,181  6,181  9,439  21,983 
Net claims incurred 1,071  3,742  3,424  15,700 
Acquisition costs 389  350  2,818  3,222 
Other underwriting expenses 1,682  1,342  3,840  3,152 
Interest (income) —  —  —  (68)
Total expenses 3,142  5,434  10,082  22,006 
Income (loss) from operations before income taxes 39  747  (643) (23)
Income tax benefit —  —  (522) — 
Net income (loss) $ 39  $ 747  $ (121) $ (23)
Statements of Comprehensive Income
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net income (loss) $ 39  $ 747  $ (121) $ (23)
Other comprehensive income:
Changes in net unrealized investments gains 54  (60) 299  540 
Reclassification to net income (loss) (3) 167  (96) 450 
Other comprehensive income 51  107  203  990 
Total comprehensive income $ 90  $ 854  $ 82  $ 967 
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The assets and liabilities of Global Liberty are presented as discontinued operations in the condensed consolidated statements of financial position at September 30, 2020 and December 31, 2019 and are detailed as follows:
($ in ‘000s) September 30, 2020 December 31, 2019
Assets
Investments
Fixed income securities, available for sale, at fair value (amortized cost $7,516 and $14,016)
$ 7,942  $ 14,239 
Short-term investments, at cost —  491 
Other investments 1,306  1,315 
Total investments 9,248  16,045 
Cash and cash equivalents 1,178  7,712 
Accrued investment income 52  78 
Reinsurance recoverables on amounts paid 1,115  2,227 
Reinsurance recoverables on amounts unpaid 14,358  18,339 
Prepaid reinsurance premiums 15,574  3,765 
Deferred policy acquisition costs 682  534 
Property and equipment, net —  1,741 
Other assets 4,405  861 
Total assets $ 46,612  $ 51,302 
Liabilities
Claims liabilities $ 27,338  $ 46,771 
Unearned premium reserves 21,652  12,423 
Due to reinsurers 32  1,019 
Other liabilities and accrued expenses 3,740  2,554 
Total liabilities $ 52,762  $ 62,767 
19. Subsequent Events
As previously disclosed, the Company was unable to timely file this Quarterly Report on Form 10-Q due to delays in the 2019 year end audit process, which delayed our filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2020 and June 30, 2020 and, as a result, our filing of this quarterly report. As a result of this delay, the Company received delinquency notices from Nasdaq related to these filings as well as other matters. On August 31, 2020, the Company filed a Current Report on Form 8-K advising that Nasdaq would suspend trading in the Company’s securities effective at the open of business on September 2, 2020. Nasdaq filed a Form 25 Notification of Delisting with the SEC on October 27, 2020 notifying the SEC of Nasdaq’s determination to remove the Company’s common shares from listing on Nasdaq under Section 12(b) of the Exchange Act. The formal delisting of the Company’s common shares from Nasdaq became effective on November 6, 2020, ten days after the Form 25 was filed. In connection with the suspension of trading on The Nasdaq Capital Market, the Company’s common shares began to trade on the OTC Markets system effective with the open of the markets on September 2, 2020.
Subsequent to the Gateway transaction (see Part I, Item 2, 2020 Developments), Buckle proposed terms to acquire the stock, charter and state licenses of American Country and American Service. In connection therewith, a required court order was entered on August 11, 2020 to place American Country and American Service in liquidation, with the Director acting as the statutory liquidator. AIAI and the Director as statutory liquidator of American County and American Service signed a stock purchase agreement on November 2, 2020. The closing of this pending transaction is subject to regulatory approval and other conditions.
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On February 7, 2021, AIAI entered into a Paycheck Protection Program promissory note with respect to a loan of $2,000,000 (the “Second PPP Loan”) from Fifth Third Bank, National Association (“Fifth Third”). The Second PPP Loan was obtained pursuant to the Small Business Administration’s Paycheck Protection Program Second Draw Loans under the Small Business Act (“SB Act”), and is subject to the terms and conditions of the SB Act, the Coronavirus Aid, Relief, and Economic Security Act and related legislation and regulations (the “PPP Rules”). The Company was eligible for this Second PPP loan because our equity securities are not a National Markets System stock traded on a national securities exchange as defined by Section 6 of the Securities Exchange Act of 1934. The Second PPP Loan matures on February 7, 2026 and bears interest at a rate of 1.00% per annum. The Company will not be obligated to make any payments of principal or interest if the Company submits a loan forgiveness application to Fifth Third within 10 months after the end of the Company’s covered loan forgiveness period (as defined and interpreted by the PPP Rules) and such loan forgiveness is allowed. If the Company does not submit a loan forgiveness application within 10 months after the end of the Company’s loan forgiveness covered period (and such forgiveness is not allowed), the Company must begin paying principal and interest after that period (or after notice that such forgiveness is not allowed).
The Company’s Current Reports on Form 8-K and press releases since September 30, 2020 provide more detailed disclosures regarding the above events.


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Item 2. Management’s Discussion and Analysis (“MD&A”) of Results of Operations and Financial Condition
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this report. In this discussion and analysis, the term “common share” refers to the summation of ordinary voting common shares, restricted voting common shares and participative restricted stock units when used to describe earnings (loss) or book value per common share. All amounts are in U.S. dollars, except for amounts preceded by “C” as Canadian dollars, share and per share amounts.
Forward-Looking Statements
In addition to the historical consolidated financial information, this report contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, which may include, but are not limited to, statements with respect to estimates of future expenses, revenue and profitability; trends affecting financial condition, cash flows and results of operations; the availability and terms of additional capital; dependence on key suppliers and other strategic partners; industry trends; the competitive and regulatory environment; the successful integration of acquisitions; the impact of losing one or more senior executives or failing to attract additional key personnel; and other factors referenced in this report. Factors that could cause or contribute to these differences include those discussed below and elsewhere, particularly in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.
Often, but not always, forward-looking statements can be identified by the use of words such as “plans,” “expects,” “is expected,” “budget,” “scheduled,” “estimates,” “forecasts,” “intends,” “anticipates,” “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Atlas to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political, regulatory and social uncertainties.
Although Atlas has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this report, and Atlas disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty in them.
I. Company Overview
We are a technology and analytics driven financial services holding company incorporated under the laws of the Cayman Islands. Our primary business is generating, underwriting and servicing commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the “light” commercial automobile sector.
Our business currently focuses on a managing general agency strategy. Primarily through our wholly owned subsidiary, Anchor Group Management, Inc. (“AGMI”), we are focused on maintaining and recapturing business we have historically written in the taxi, livery/limo, paratransit and transportation network company sectors as well as generating new business that fits our current underwriting parameters. We are also actively pursuing additional programs in the “light” commercial auto space where we believe our expertise, infrastructure and insurance technology will enable us to increase scale and profitability, but there can be no assurance that these programs will materialize. We believe that the specialized infrastructure and technology platforms we’ve developed over the years to support our traditional business will enable us to provide comparative advantages as a managing general agency in other commercial auto segments. In particular, we believe our ability to efficiently manage large numbers of small or highly transactional accounts through our technology platform and workflows is a differentiator. We are also evaluating opportunities to leverage our optOnTM insuretech platform, which was developed to provide micro-duration commercial automobile insurance for gig-economy drivers via a proprietary mobile app based ecosystem.
The sector on which we traditionally focused included taxi cabs, non-emergency para-transit, limousine, livery, including certain full-time transportation network company (“TNC”) drivers/operators, and business auto. Our goal is to always be the preferred specialty insurance business in any geographic areas where our value proposition delivers benefit to all stakeholders. During 2019, our Insurance Subsidiaries were licensed to write property and casualty (“P&C”) insurance in 49 states and the
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District of Columbia in the United States (“U.S.”) (see Item 2, 2020 Developments). As noted elsewhere in this report, certain state licenses held by the ASI Pool Companies were restricted, suspended or revoked. As of the end of 2019, the ASI Pool Companies were no longer writing new insurance policies and began non-renewing existing policies. AGMI distributes our products through a network of independent retail agents, and actively wrote insurance in 42 states and the District of Columbia during 2020. We embrace continuous improvement, analytics and technology as a means of building on the strong heritage our subsidiary companies cultivated in the niche markets we serve.
Factors Affecting Our Results of Operations
We generate commission revenue from selling policies in the commercial auto markets on behalf of our insurance carrier partners, which compensate us through first year and renewal commissions. We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents whom we believe are best suited for those consumers. As a result, one of the primary factors affecting our growth is our total number of agents, comprised of both existing core agents and the number of new agents that we contract to sell new policies. We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force. We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to maintain agent productivity.
The amount of revenue we expect to recognize is based on multiple factors, including our commission rates with our insurance carrier partners and the market demand for the types of products we offer. The higher our hit ratios on new policies and the higher our retention ratios, the more revenue we expect to generate. Additionally, we may earn certain volume-based compensation from some unrelated risk taking partners, which can include a renewal rights component. Our goal is to maximize policyholder lifetime value by optimizing efficiency and scale, which starts by providing consumers with a transparent, valuable and best-in-class consumer experience by endeavoring to support our distribution channel effectively and providing insurance solutions that meet the specific needs of our customers.
Recent Events
Prior to the strategic transition referenced above, our core business was the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector, through the ASI Pool Companies and Global Liberty, along with our wholly owned managing general agency, AGMI. As previously announced, the ASI Pool Companies were placed in rehabilitation under the statutory control of the Illinois Department of Insurance during the second half of 2019. Regulatory actions were taken in certain states, including restriction, suspension, or revocation of certain state licenses and certificates of authority held by the ASI Pool Companies preceding and following the initiation of rehabilitation.
The Company’s current strategy focuses on AGMI’s managing general agency operation as the primary go-forward business. During 2019, we worked with insurance regulators and advisors to evaluate and take steps intended to achieve the best outcome for stakeholders in connection with our Insurance Subsidiaries pursuant to regulatory actions. See “Item 1, Note 19, Subsequent Events” and “2020 Developments” for certain developments with respect to the Company and the Insurance Subsidiaries subsequent to September 30, 2020. As a result of management no longer having financial control of the ASI Pool Companies, they have been deconsolidated from our results as of October 1, 2019. During the fourth quarter of 2019, the Company began actively pursuing the potential sale of Global Liberty, and as a result, Global Liberty has been classified as discontinued operations. These determinations impact the financial presentation in this report and are more fully described throughout. We feel that that the current presentation best represents the aspects of Atlas’ business on which the Company intends to focus going forward.
In March 2020, the World Health Organization formally declared the novel coronavirus (“COVID-19”) outbreak a pandemic. With social distancing measures that have been implemented to curtail the spread of the virus, we enacted a robust business continuity plan, including a work-from-home policy for all our employees. We believe our technology platform and pre-existing remote agent capabilities have allowed for a seamless transition to a remote working environment and that our technology platforms continue to provide agents with tools and company contacts necessary to quote our products to our markets.
COVID-19 has dramatically reduced the addressable market. At the time of filing, it is difficult to estimate the near and longer-term impact on market size and potential revenue, and the impact of COVID-19 on our customers appears to have resulted in an approximate reduction of trips and vehicles in operation in the range of 52% to as much as 88% as compared to the end of 2019. This directly impacts our revenue and the ability to generate new business.

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2020 Developments
As previously disclosed, the Company was unable to timely file this Quarterly Report on Form 10-Q due to delays in the year end 2019 audit process, which delayed our filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Reports on Forms 10-Q for the periods ended March 31, 2020 and June 30, 2020 and, as a result, our filing of this quarterly report. As a result of this delay, the Company received delinquency notices from Nasdaq related to these filings as well as other matters. On August 31, 2020, the Company filed a Current Report on Form 8-K advising that Nasdaq would suspend trading in the Company’s securities effective at the open of business on September 2, 2020. Nasdaq filed a Form 25 Notification of Delisting with the SEC on October 27, 2020 notifying the SEC of Nasdaq’s determination to remove the Company’s common shares from listing on Nasdaq under Section 12(b) of the Exchange Act. The formal delisting of the Company’s common shares from Nasdaq became effective on November 6, 2020, ten days after the Form 25 was filed. In connection with the suspension of trading on The Nasdaq Capital Market, the Company’s common shares began to trade on the OTC Markets system effective with the open of the markets on September 2, 2020.
On May 1, 2020, AIAI entered into a Paycheck Protection Program Promissory Note (the "PPP Note") with respect to a loan of $4,600,500 (the "PPP Loan") from Fifth Third Bank, National Association. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the "PPP") of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") administered by the U.S. Small Business Administration ("SBA"). The PPP Loan matures on May 1, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments of $257,611.48 which was to commence December 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. AIAI has applied for loan forgiveness pursuant to the terms of the PPP as certain of the criteria have been met and is awaiting the results of the forgiveness decision, and as a result, monthly payments will be deferred until final resolution of the forgiveness application process.
On May 8, 2020, AIAI and the Director (as defined below) as statutory rehabilitator of Gateway signed a stock purchase agreement with Buckle Corp. (“Buckle”), a technology-driven financial services company, to purchase the stock of Gateway and Gateway’s corporate charter and state licenses from its statutory rehabilitator in a collaborative transaction as an important next step in Atlas’ strategic plan. Buckle’s core business focuses on part-time transportation network company (“TNC”) drivers and is complementary to Atlas’ focus on full-time drivers in the Livery, Paratransit, Taxi and TNC segments.
On June 10, 2020, the required court orders were entered to place Gateway in liquidation, with the Director of Insurance of the State of Illinois (the “Director”) acting as the statutory liquidator. This was necessary to facilitate the above described transaction with Buckle. The sale of stock, charter and state licenses of Gateway to Buckle closed effective June 16, 2020. The Company and Buckle entered into an underwriting agreement whereby Gateway under Buckle’s ownership became a risk-taking partner for AGMI. The Company and Buckle also entered into a professional services agreement in furtherance of related strategic activities.
Subsequent to the Gateway transaction, Buckle proposed terms to acquire the stock, charter and state licenses of American Country and American Service. In connection therewith, a required court order was entered on August 11, 2020 to place American Country and American Service in liquidation, with the Director acting as the statutory liquidator. AIAI and the Director as statutory liquidator of American County and American Service signed a stock purchase agreement on November 2, 2020. The closing of this pending transaction is subject to regulatory approval and other conditions.
In July 2020, the Company announced that AGMI’s underwriting agreement with National Interstate Insurance Company (“National Interstate”), for paratransit business was extended and expanded. Further to the extension and expansion, the Company and National Interstate executed a renewal rights agreement with respect to paratransit accounts with eight or more vehicles (“Large Paratransit Accounts”). Pursuant to this agreement, the Company and National Interstate will work together to transition the handling of Large Paratransit Accounts to National Interstate. The Company received $2.9 million as consideration from National Interstate as consideration for this transaction. Under the previously announced expanded agreement AGMI, will manage owner operators and fleets with seven or less vehicles (“Small Paratransit Accounts”) until at least August 2021. If the Small Paratransit Account program is not extended further, National Interstate continues to retain the option to purchase renewal rights on this segment at the expiration of the agreement period. Under the terms of the agreements, the Company will not compete with National Interstate for Large Paratransit Accounts for a period of three years following the Large Paratransit Account renewal rights transaction. Other previously disclosed material terms of the agreements between the parties remain unchanged.
The Company’s numerous Current Reports on Form 8-K and press releases during 2020 provide more detailed disclosures regarding the above events.


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II. Operating Results
Highlights
Due to the deconsolidation of the ASI Pool Companies and the discontinued operation classification of Global Liberty, the first quarter 2020 and go forward operating results do not and will not include insurance company financial impacts other than those related to discontinued operations and will solely consist of the results of Atlas, including AGMI. By way of example, revenues in the third quarter of 2019 include net earned premiums related to our Insurance Subsidiaries while the third quarter of 2020 does not. All references and comparisons to 2019 throughout this document reflect this impact.
Commission income was $1.7 million for the three months ended September 30, 2020 compared to $860,000 for the three months ended September 30, 2019.
Total revenue was $2.0 million for the three months ended September 30, 2020, a decrease of 94.4% from $36.2 million for the three months ended September 30, 2019.
Underwriting loss was $3.5 million in third quarter 2020 compared to an underwriting loss of $3.3 million in third quarter 2019.
Net loss from continuing operations was $3.6 million, or $0.30 loss per common share diluted, in third quarter 2020 compared to a net loss from continuing operations of $3.0 million, or $0.25 loss per common share diluted, in third quarter 2019.
Net income from discontinued operations was $39,000, or $0.00 earnings per common share diluted, in third quarter 2020 compared to net income from discontinued operations of $747,000, or $0.06 earnings per common share diluted, in third quarter 2019.
Book value per common share was $(1.63) as of September 30, 2020, compared to $(0.71) and $0.36 as of December 31, 2019 and September 30, 2019, respectively.

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Consolidated Performance
($ in ‘000s, except per share data) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Gross premiums written $ —  $ 30,789  $ —  $ 160,684 
Net premiums earned —  34,528  —  110,241 
Commission income 1,674  860  4,677  4,666 
Net claims incurred —  25,099  —  80,767 
Underwriting expense:
Acquisition costs 862  3,758  2,737  11,405 
Share-based compensation 82  188  277  685 
Deferred policy acquisition costs amortization —  332  —  343 
Other underwriting expenses 4,238  9,335  12,819  29,833 
Total underwriting expenses 5,182  13,613  15,833  42,266 
Underwriting loss (3,508) (3,324) (11,156) (8,126)
Net investment income —  329  —  1,884 
Loss from operating activities, before income taxes (3,508) (2,995) (11,156) (6,242)
Interest expense, net (571) (466) (1,392) (1,143)
Loss from change in fair value of equity securities —  (3) —  (277)
Realized gains and other income 367  501  848  1,517 
Net loss before income taxes (3,712) (2,963) (11,700) (6,145)
Income tax (benefit) expense (148) 26  (271) 26 
Income (loss) from discontinued operations, net of tax 39  747  (121) (23)
Net loss $ (3,525) $ (2,242) $ (11,550) $ (6,194)
Key Financial Ratios
Continuing operations loss per common share diluted $ (0.30) $ (0.25) $ (0.96) $ (0.52)
Book value per common share $ (1.63) $ 0.36  $ (1.63) $ 0.36 

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Revenues
Historically, our revenues were derived primarily from premiums from our insurance policies and income from our investment portfolio. As a larger percentage of our premium is written by AGMI with unrelated strategic risk-taking partners, commission and fee income is expected to represent the majority of the Company’s revenue going forward. Our underwriting approach is to price our products with the objective of generating underwriting profit for the insurance companies we own and with whom we partner. The Company’s philosophy is to prioritize the improvement in profit margin over top line growth. As with all P&C insurance businesses, the impact of price changes, other underwriting activities and market conditions is reflected in our financial results over time. Underwriting changes on our in-force policies occur as they are renewed. This cycle generally takes twelve months for our entire book of business and up to an additional twelve months to earn a full year of premium and recognize commissions at the renewal rate.
We approach investment and capital management with the intention of supporting insurance operations by providing a stable source of income to supplement underwriting income. The goals of our investment policy are to protect capital while optimizing investment income and capital appreciation and to maintain appropriate liquidity. We follow a formal investment policy, and the Board of Directors reviews the portfolio performance at least quarterly for compliance with the established guidelines. The Investment Committee of the Board of Directors provides interim guidance and analysis with respect to asset allocation, as deemed appropriate.
Expenses
Net claims incurred expenses are a function of the amount and type of insurance contracts we wrote and of the claims experience of the underlying risks. We recorded net claims incurred based on an actuarial analysis of the estimated claims we expected to be reported on contracts that were written. Our objective has been to establish case reserves at our Insurance Subsidiaries at the maximum probable exposure, based on our historical claims experience and, beginning in 2016, the use of claim related analytics. The amount reported under net claims incurred in any period includes payments in the period net of the change in the value of the reserves for net claims incurred between the beginning and the end of the period, as well as estimation of potential future trends or changes. While the Company has always relied on independent actuarial professionals and internal controls in this regard, the estimation of reserves is inherently uncertain. As a result of the ASI Pool Companies being placed into rehabilitation by the Illinois Department of Insurance, management of the Company no longer has the authority to establish reserves for these entities. The strategic shift undertaken by the Company coupled with regulatory actions related to the ASI Pool Companies had a major effect on our business. Expenses related to the deconsolidated entities no longer have an impact on our operating results beginning on October 1, 2019. Also, beginning on October 1, 2019, Global Liberty is classified as a discontinued operation and its expenses will be considered as such.
Acquisition costs at our Insurance Subsidiaries consist principally of brokerage and agent commissions and, to a lesser extent, premium taxes. The commissions paid to our external producers are reduced by ceding commissions received from assuming reinsurers that represent a percentage of the premiums on insurance policies and reinsurance contracts written and vary depending upon the amount and types of contracts written.
Other underwriting expenses consist primarily of personnel related expenses (including salaries, benefits and certain costs associated with awards under our equity compensation plans, such as share-based compensation expense) and other general operating expenses incurred primarily in connection with our MGA and holding company operations. We believe that because a portion of our personnel expenses are relatively fixed in nature, changes in premium writings may impact our operating scale and operating expense ratios. Commissions and other fee related revenue were earned and recognized in connection with policies managed by AGMI.
Gross Premiums Written
Gross Premiums Written by Line of Business
($ in ‘000s) Three months ended September 30, Nine months ended September 30,
2020 2019 % Change 2020 2019 % Change
Commercial automobile $ —  $ 29,972  (100.0) % $ —  $ 138,035  (100.0) %
Other —  817  (100.0) —  22,649  (100.0)
Total $ —  $ 30,789  (100.0) % $ —  $ 160,684  (100.0) %
Gross premiums written decreased 100.0% in both the three and nine months ended September 30, 2020 compared to the corresponding periods in 2019. The decrease is related to the deconsolidation of the ASI Pool Companies. See “Note 19, Subsequent Events” and “Part 1, Item 2, 2020 Developments” for certain developments with respect to the Company and the Insurance Subsidiaries.
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Geographic Concentration
Gross Premiums Written by State
($ in ‘000s) Three months ended September 30,
2020 2019
New York $ —  —  % $ 10,348  33.6  %
California —  —  6,638  21.6 
Minnesota —  —  3,115  10.1 
Virginia —  —  1,825  5.9 
Nevada —  —  1,020  3.3 
Illinois —  —  802  2.6 
Georgia —  —  759  2.5 
Maryland —  —  664  2.2 
Ohio —  —  517  1.7 
Pennsylvania —  —  504  1.6 
Other —  —  4,597  14.9 
Total $ —  —  % $ 30,789  100.0  %
Gross Premiums Written by State
Nine months ended September 30,
2020 2019
New York $ —  —  % $ 61,902  38.5  %
California —  —  33,062  20.6 
Virginia —  —  7,840  4.9 
Illinois —  —  6,439  4.0 
Minnesota —  —  4,203  2.6 
Louisiana —  —  4,190  2.6 
Texas —  —  3,753  2.3 
Georgia —  —  3,670  2.3 
Ohio —  —  3,282  2.0 
Nevada —  —  2,678  1.7 
Other —  —  29,665  18.5 
Total $ —  —  % $ 160,684  100.0  %
Ceded Premiums Written
Ceded premiums written is equal to premiums ceded under the terms of Atlas’ in-force reinsurance treaties. Atlas generally purchases reinsurance in an effort to limit net exposure on any one claim to a maximum amount of $500,000 with respect to commercial automobile liability claims. This Excess of Loss reinsurance is primarily secured through Gen Re. Atlas also purchases reinsurance from Gen Re in an effort to protect against awards in excess of its policy limits.
Ceded premiums written decreased by 100.0% to $0 for both the three and nine months ended September 30, 2020, compared to $10.7 million and $72.9 million for the three and nine months ended September 30, 2019, respectively, due to the deconsolidation of ASI Pool Companies.
During 2019, the Company received notice from Gen Re that effective July 31, 2019, the XOL reinsurance coverage for the ASI Pool Companies would terminate on a cut-off basis. Additionally, effective September 30, 2019, the ASI Pool Companies’ Quota Share contract with Swiss Re was terminated on a run-off basis. During 2020, the Company received notice from Gen Re that effective January 1, 2020, the XOL reinsurance coverage for Global Liberty terminated on a run-off basis. See “Part I, Item 1, Note 19, Subsequent Events” and “Part I, Item 2, 2020 Developments” for certain developments with respect to the Company and the Insurance Subsidiaries.
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Net Premiums Written
Net premiums written is equal to gross premiums written less the ceded premiums written under the terms of Atlas’ in-force reinsurance treaties. Net premiums written decreased 100.0% to $0 for both the three and nine months ended September 30, 2020, compared to $20.1 million and $87.8 million for the three and nine months ended September 30, 2019, respectively. The change is attributed to the deconsolidation of the ASI Pool Companies.
Net Premiums Earned
Premiums are earned ratably over the term of the underlying policy. Net premiums earned decreased 100.0% to $0 in both the three and nine months ended September 30, 2020 compared to $34.5 million and $110.2 million for the three and nine months ended September 30, 2019, respectively. The change is attributable to the deconsolidation of the ASI Pool Companies.
Commission Income
AGMI earns commission for the sale of first year and renewal policies from our insurance carrier partners, which are presented in our condensed consolidated statements of operations as commission revenue. Our contracts with our insurance carrier partners contain a commission percentage that is used to compute the total commission due per policy written. We also generate fee income in connection with individual policies as well as professional services provided to our business partners under contractual arrangements. Our commission revenue is recognized upon the sale or renewal of a policy. After a policy is sold, we have policy management obligations to the policyholder and the insurance carrier partner, including, but not limited to, policy endorsements, policy cancellations and policy restatements. Therefore, we do incur additional expense related to our policy management requirements. Most costs associated with the sale of an individual policy are incurred prior to or at the time of the initial sale of an individual policy and are characterized in our financial statements as Other Underwriting Expenses.