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, 2020.
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 policies
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 have 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.
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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 markets where our
value proposition delivers benefit to all stakeholders. AGMI distributes our
products through a network of independent retail agents and actively wrote
insurance in 41 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 insurance 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 submission
volume and hit ratios on new policies and the higher our retention ratios on our
renewal policies, the more revenue we expect to generate. Additionally, we may
earn certain volume and underwriting profit 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
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 26% to as much as 70% as compared to the same periods of 2019. This
directly impacts our revenue and the ability to generate new business.
The Company's current strategy focuses on AGMI's managing general agency
operation as the primary go-forward business. During 2019 and 2020, 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. As a result of management no longer
having financial control of the ASI Pool Companies, they have been
deconsolidated from our results since October 1, 2019 while Global Liberty has
been classified as discontinued operations since October 1, 2019. The metrics
discussed in the following MD&A have changed as a result of the deconsolidation
of the ASI Pool Companies and classification of Global Liberty as a discontinued
operation (see "Part I, Item 1, Note 17, Subsequent Events").
On September 1, 2021, the Company and certain of its subsidiaries entered into a
Convertible Senior Secured Delayed-Draw Credit Agreement and a Restructuring
Support Agreement (see "Part I, Item 1, Note 14, Notes Payable")
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II. Operating Results
Highlights
•Commission income was $2.0 million for the three months ended September 30,
2021, an increase of 22.2% from $1.7 million for the three months ended
September 30, 2020.
•Net realized losses were $1.5 million for the three months ended September 30,
2021 which related to the impairment charge on the Company's corporate
headquarters. There were no impairment charges for the three months ended
September 30, 2020.
•Total revenue, including the impact of net realized losses, was $1.8 million
for the three months ended September 30, 2021, a decrease of 12.6% from $2.0
million for the three months ended September 30, 2020.
•Loss from operating activities was $3.3 million in third quarter 2021 compared
to a loss from operating activities of $3.5 million in third quarter 2020.
•Net loss from continuing operations was $4.1 million, or $0.28 per common share
diluted, in third quarter 2021 compared to a net loss from continuing operations
of $3.6 million, or $0.30 loss per common share diluted, in third quarter 2020.
•Net income from discontinued operations was $14,000, or $0.00 earnings per
common share diluted, in third quarter 2021 compared to net income from
discontinued operations of $39,000, or $0.00 earnings per common share diluted,
in third quarter 2020.

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