SECURITIES AND EXCHANGE COMMISSION | |||||
Washington, D.C. 20549 | |||||
FORM 8-K | |||||
CURRENT REPORT | |||||
Pursuant to Section 13 or 15(d) of the Securities | |||||
Exchange Act of 1934 | |||||
Date of Report (Date of earliest event reported): February 21, 2019 | |||||
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ProAssurance Corporation | |||||
(Exact name of registrant as specified in its charter) | |||||
Delaware | 001-16533 | 63-1261433 | |||
(State of Incorporation) | (Commission File No.) | (IRS Employer I.D. No.) | |||
100 Brookwood Place, Birmingham, Alabama | 35209 | ||||
(Address of Principal Executive Office ) | (Zip code) | ||||
Registrant’s telephone number, including area code: (205) 877-4400 | |||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
¨ | Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12) | ||||
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b)) | ||||
¨ | Pre-commencement communications pursuant to Rule 13e-(c) under the Exchange Act (17CFR 240.13e-(c)) | ||||
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |||||
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. ¨ |
ITEM 2.02 RESULTS OF OPERATION AND FINANCIAL CONDITION | |
On February 21, 2019 we issued a news release reporting the results of our operations for the quarter ended December 31, 2018. The text of the release is furnished as Exhibit 99.1 to this Current Report on Form 8K. | |
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS | |
On February 21, 2019 we issued a news release reporting several changes in our executive leadership team. Howard H. Friedman will retire from his role as President of Healthcare Professional Liability but will maintain his employment with the Company, overseeing the continued development of the actuarial function. Michael L. Boguski, the current President of Eastern Alliance Insurance Group (Eastern), ProAssurance’s workers’ compensation subsidiary, is being promoted to President of ProAssurance’s Specialty P&C operations, which comprises all of ProAssurance’s professional and product liability operations. Kevin M. Shook, the current Executive Vice President of Eastern and formerly its Chief Financial Officer, is being promoted to become Eastern’s new President. These changes will be effective on May 13, 2019, and each executive will report directly to Ned Rand, ProAssurance’s President and Chief Operating Officer. The text of the release is furnished as Exhibit 99.2 to this Current Report on Form 8K. | |
ITEM 7.01 REGULATION FD DISCLOSURES | |
We have updated the online disclosure of our entire investment portfolio to provide details of our holdings through December 31, 2018. The disclosure is available under Quarterly Investment Supplements under the Financial Information section of the Investor Relations section of our website (http://investor.proassurance.com/). | |
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS | |
99.1 | |
99.2 | |
The information we are furnishing under Items 7.01 and 9.01 of this Current Report on Form 8K, including Exhibit 99.1, are not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) as amended, or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing. | |
SIGNATURE | |
Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | |
Date: February 21, 2019 |
PROASSURANCE CORPORATION |
by: /s/ Frank B. O’Neil |
----------------------------------------------------- |
Frank B. O’Neil Senior Vice-President |
NEWS RELEASE For More Information: Frank B. O’Neil, IRC Sr. Vice President, Corporate Communications & Investor Relations 800-282-6242 • 205-877-4461 • FrankONeil@ProAssurance.com | ![]() |
CONSOLIDATED INCOME STATEMENT HIGHLIGHTS | |||||||||||||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands, except per share data) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Revenues | |||||||||||||||||||||
Gross premiums written* | $ | 211,697 | $ | 191,744 | 10.4 | % | $ | 957,311 | $ | 874,876 | 9.4 | % | |||||||||
Net premiums written | $ | 182,684 | $ | 167,434 | 9.1 | % | $ | 834,914 | $ | 764,018 | 9.3 | % | |||||||||
Net premiums earned | $ | 202,033 | $ | 182,972 | 10.4 | % | $ | 818,853 | $ | 738,531 | 10.9 | % | |||||||||
Net investment income | $ | 24,207 | $ | 26,070 | (7.1 | %) | $ | 91,884 | $ | 95,662 | (3.9 | %) | |||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | $ | (3,300 | ) | $ | (455 | ) | (625.3 | %) | $ | 8,948 | $ | 8,033 | 11.4 | % | |||||||
Net realized investment gains (losses) | $ | (46,139 | ) | $ | (2,401 | ) | (1,821.7 | %) | $ | (43,488 | ) | $ | 16,409 | (365.0 | %) | ||||||
Other income (expense)* | $ | 2,677 | $ | 2,933 | (8.7 | %) | $ | 9,833 | $ | 7,514 | 30.9 | % | |||||||||
Total revenues* | $ | 179,478 | $ | 209,119 | (14.2 | %) | $ | 886,030 | $ | 866,149 | 2.3 | % | |||||||||
Expenses | |||||||||||||||||||||
Net losses and loss adjustment expenses | $ | 154,089 | $ | 105,102 | 46.6 | % | $ | 593,210 | $ | 469,158 | 26.4 | % | |||||||||
Underwriting, policy acquisition and operating expenses* | $ | 59,742 | $ | 63,647 | (6.1 | %) | $ | 238,556 | $ | 235,753 | 1.2 | % | |||||||||
Total expenses* | $ | 218,021 | $ | 174,885 | 24.7 | % | $ | 857,005 | $ | 737,526 | 16.2 | % | |||||||||
Income tax expense (benefit) | $ | (14,093 | ) | $ | 16,892 | (183.4 | %) | $ | (18,032 | ) | $ | 21,359 | (184.4 | %) | |||||||
Net income (loss) | $ | (24,450 | ) | $ | 17,342 | (241.0 | %) | $ | 47,057 | $ | 107,264 | (56.1 | %) | ||||||||
Non-GAAP operating income | $ | 9,669 | $ | 29,517 | (67.2 | %) | $ | 79,527 | $ | 108,538 | (26.7 | %) | |||||||||
Weighted average number of common shares outstanding | |||||||||||||||||||||
Diluted | 53,791 | 53,686 | 0.2 | % | 53,749 | 53,611 | 0.3 | % | |||||||||||||
Earnings per share | |||||||||||||||||||||
Net income (loss) per diluted share | $ | (0.46 | ) | $ | 0.32 | (243.8 | %) | $ | 0.88 | $ | 2.00 | (56.0 | %) | ||||||||
Non-GAAP operating income per diluted share | $ | 0.18 | $ | 0.55 | (67.3 | %) | $ | 1.48 | $ | 2.02 | (26.7 | %) | |||||||||
* Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). See Note 16 of the Notes to Consolidated Financial Statements in the December 31, 2018 Form 10-K for amounts by line item. |
CONSOLIDATED KEY RATIOS | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Current accident year net loss ratio | 88.6 | % | 81.7 | % | 83.7 | % | 81.7 | % | |||
Effect of prior accident years’ reserve development | (12.3 | %) | (24.3 | %) | (11.3 | %) | (18.2 | %) | |||
Net loss ratio | 76.3 | % | 57.4 | % | 72.4 | % | 63.5 | % | |||
Expense ratio | 29.6 | % | 34.8 | % | 29.1 | % | 31.9 | % | |||
Combined ratio | 105.9 | % | 92.2 | % | 101.5 | % | 95.4 | % | |||
Operating ratio | 93.9 | % | 78.0 | % | 90.3 | % | 82.4 | % | |||
Return on equity* | (6.3 | %) | 4.0 | % | 3.0 | % | 6.3 | % | |||
* Quarterly computations of ROE are annualized |
NEWS RELEASE CONTINUES | ![]() |
• | Consolidated gross premiums written increased by $20.0 million, a 10.4% increase over the fourth quarter of 2017. In our Lloyd’s Syndicates segment, gross premiums written increased to $25.8 million. Gross premiums written grew 7.7% in our Workers’ Compensation Insurance segment and 3.9% in our Segregated Portfolio Cell Reinsurance segment, quarter-over-quarter, to $65.0 million and $16.8 million, respectively. Gross premiums written in our Specialty P&C segment were essentially unchanged, quarter-over-quarter. |
• | Net premiums earned increased $19.1 million, or 10.4% quarter-over-quarter. Net premiums earned in our Lloyd’s Syndicates segment were $18.1 million. Net premiums earned were up 23.8% compared to the year-ago quarter in our Workers’ Compensation Insurance segment to $50.8 million, and up 12.2% in our Segregated Portfolio Cell Reinsurance segment, to $19.7 million. The quarter-over-quarter increase in net premiums earned in our Specialty P&C segment was 0.8%, or approximately $900,000. |
• | Our coordinated sales & marketing programs produced $3.4 million of business in the quarter. |
• | Our consolidated current accident year net loss ratio was 88.6%, an increase of approximately seven points over the prior year’s quarter primarily due to higher natural catastrophe-related losses in the fourth quarter of 2018 as compared to 2017 in our Lloyd's Syndicates segment and the continued caution we are exercising in our view of potential loss severity trends in the healthcare professional liability line within our Specialty P&C segment. |
• | Net favorable development in the fourth quarter of 2018 was $25.0 million, compared to $44.3 million in the prior year quarter. |
• | The consolidated underwriting expense ratio was 29.6%, a quarter-over-quarter decline of approximately five points, due to the increase in net premiums earned in the fourth quarter, as well as a $3.9 million decrease in underwriting, policy acquisition and operating expenses. |
• | Net realized investment losses were $46.1 million in the quarter, primarily reflecting mark-to-market adjustments in our equity trading portfolio. This compares to net realized investment losses of $2.4 million in the final quarter of 2017. |
• | Our consolidated net investment result was $20.9 million, a decline of $4.7 million as compared to the fourth quarter 2017; net investment income was $24.2 million, a $1.9 million decrease, quarter-over-quarter, primarily due to lower earnings from our fixed income portfolio as we have reduced our municipal bond holdings as a result of tax reform. |
• | We had a tax benefit of $14.1 million in the quarter, compared to a tax expense of $16.9 million in the fourth quarter of 2017 primarily driven by the pre-tax loss. |
NEWS RELEASE CONTINUES | ![]() |
• | Consolidated gross premiums written were $957.3 million in 2018, a 9.4% increase over 2017, with year-over-year increases in all operating segments. |
• | Net premiums earned were $818.9 million in 2018, an increase of 10.9%. Again, all operating segments saw a year-over-year increase in net premiums earned. |
• | Our coordinated sales & marketing programs produced $19.5 million of business in 2018, compared to $16.3 million in 2017. |
• | Our consolidated current accident year net loss ratio increased two points year-over-year, to 83.7%. The current accident year net loss ratio in our Specialty P&C segment increased approximately four points due to the continued caution we are exercising in our view of potential loss severity trends in the healthcare professional liability line. The current accident year net loss ratio in our Workers’ Compensation Insurance segment increased approximately two points due to increased claim severity. These increases were somewhat offset by a decline of approximately five points in our Lloyd’s Syndicates segment, and approximately three points in our Segregated Portfolio Cell Reinsurance segment. |
• | Net favorable development in 2018 was $92.1 million, compared to $134.4 million in 2017. In our Specialty P&C segment, favorable development was $77.0 million, in our Workers’ Compensation Insurance segment favorable development was $8.1 million, and there was $9.0 million of favorable development in our Segregated Portfolio Cell Reinsurance segment. Our Lloyd’s Syndicates segment had unfavorable development of $2.0 million. |
• | The consolidated underwriting expense ratio was 29.1%, a year-over-year decline of almost three points primarily due to an increase in net premiums earned across all of our operating segments and, to a lesser extent, a decrease in operating expenses in our Corporate segment. |
• | Net realized investment losses were $43.5 million in 2018, primarily reflecting market volatility in 2018, which caused our equity securities to decline in value. This compares to net realized investment gains of $16.4 million in 2017. |
• | Our consolidated net investment result was $100.8 million, a decline of $2.9 million or 2.8% year-over year, primarily attributable to a decrease in net investment income due to reduced earnings from our fixed income portfolio which reflected lower average investment balances. |
• | We had a tax benefit of $18.0 million in 2018, compared to a tax expense of $21.4 million in 2017 primarily due to lower pre-tax income, a lower corporate tax rate, a portion of our investment income being tax-exempt and our ability to utilize tax credits in the current tax year as well as the previous tax year through carryback provisions of the tax law. |
NEWS RELEASE CONTINUES | ![]() |
RECONCILIATION OF NET INCOME TO NON-GAAP OPERATING INCOME | |||||||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||
(In thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income (loss) | $ | (24,450 | ) | $ | 17,342 | $ | 47,057 | $ | 107,264 | ||||||
Items excluded in the calculation of Non-GAAP operating income: | |||||||||||||||
Net realized investment (gains) losses | 46,139 | 2,401 | 43,488 | (16,409 | ) | ||||||||||
Net realized gains (losses) attributable to SPCs which no profit/loss is retained (1) | (2,922 | ) | 891 | (2,535 | ) | 3,083 | |||||||||
Guaranty fund assessments (recoupments) | (29 | ) | (4 | ) | 148 | (157 | ) | ||||||||
Pre-tax effect of exclusions | 43,188 | 3,288 | 41,101 | (13,483 | ) | ||||||||||
Tax effect (2) | (9,069 | ) | (1,151 | ) | (8,631 | ) | 4,719 | ||||||||
After-tax effect of exclusions | 34,119 | 2,137 | 32,470 | (8,764 | ) | ||||||||||
Non-GAAP operating income, before tax reform adjustments | 9,669 | 19,479 | 79,527 | 98,500 | |||||||||||
Tax reform adjustments excluded in the calculation of Non-GAAP operating income: | |||||||||||||||
Adjustment of deferred taxes upon the change in corporate tax rate (3) | — | 6,541 | — | 6,541 | |||||||||||
Adjustment of deferred taxes upon the change in limitation of future deductibility of certain executive compensation (3) | — | 3,497 | — | 3,497 | |||||||||||
Non-GAAP operating income | $ | 9,669 | $ | 29,517 | $ | 79,527 | $ | 108,538 | |||||||
Per diluted common share: | |||||||||||||||
Net income (loss) | $ | (0.46 | ) | $ | 0.32 | $ | 0.88 | $ | 2.00 | ||||||
Effect of exclusions | 0.63 | 0.23 | 0.60 | 0.02 | |||||||||||
Non-GAAP operating income per diluted common share | $ | 0.18 | $ | 0.55 | $ | 1.48 | $ | 2.02 | |||||||
(1) Net realized investment gains (losses) on investments related to SPCs are recognized in our Segregated Portfolio Cell Reinsurance segment and the portion of operating earnings, including the gain or loss, net of our participation, is due to the external cell participants through the SPC dividend expense (income). To be consistent with our exclusion of net realized investment gains (losses) recognized in earnings, we are excluding the portion of net realized investment gains (losses) that is included in the SPC dividend expense (income) which is due to the external cell participants. | |||||||||||||||
(2) The annual expected incremental tax rate for 2018 is 21% as compared to 35% for 2017, associated with the taxable or tax deductible items listed above. Excluding certain discrete items, which are tax effected at the annual expected incremental tax rate in the period they are included in net income, the effective tax rate for each period was applied to these items in calculating net income. See further discussion under the heading "Taxes" in the Executive Summary of Operations section of our 2018 Form 10-K filed on February 21, 2019. | |||||||||||||||
(3) Due to tax reform enacted by the TCJA, we remeasured our deferred tax assets and liabilities based on the newly enacted tax rate of 21% and recognized a charge of $6.5 million, which is included as a component of income tax expense from continuing operations for the three months and year ended December 31, 2017. In addition, we made a reasonable estimate of the effects on our deferred tax asset balances at December 31, 2017 as it related to the limitation on the future deductibility on certain executive compensation and recorded a provisional charge to income tax expense of $3.5 million for the three months and year ended December 31, 2017. During 2018, we were able to complete our accounting for the impact of the TCJA on our December 31, 2017 deferred tax asset balances related to executive compensation; no measurement period adjustment was recorded in 2018 as a result. |
NEWS RELEASE CONTINUES | ![]() |
BALANCE SHEET HIGHLIGHTS | |||||||
(In thousands, except per share data) | December 31, 2018 | December 31, 2017 | |||||
Total investments | $ | 3,349,382 | $ | 3,686,528 | |||
Total assets | $ | 4,600,726 | $ | 4,929,197 | |||
Total liabilities | $ | 3,077,724 | $ | 3,334,402 | |||
Common shares (par value $0.01) | $ | 630 | $ | 628 | |||
Retained earnings | $ | 1,571,847 | $ | 1,614,186 | |||
Treasury shares | $ | (417,277 | ) | $ | (418,007 | ) | |
Shareholders’ equity | $ | 1,523,002 | $ | 1,594,795 | |||
Book value per share | $ | 28.39 | $ | 29.83 |
NEWS RELEASE CONTINUES | ![]() |
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Gross premiums written | $ | 121,060 | $ | 121,292 | (0.2 | %) | $ | 577,196 | $ | 549,323 | 5.1 | % | |||||||||
Net premiums written | $ | 99,546 | $ | 103,327 | (3.7 | %) | $ | 494,148 | $ | 466,621 | 5.9 | % | |||||||||
Net premiums earned | $ | 113,434 | $ | 112,535 | 0.8 | % | $ | 491,787 | $ | 449,823 | 9.3 | % | |||||||||
Total revenues | $ | 115,333 | $ | 114,280 | 0.9 | % | $ | 497,631 | $ | 455,511 | 9.2 | % | |||||||||
Net losses and loss adjustment expenses | $ | 91,687 | $ | 67,738 | 35.4 | % | $ | 384,431 | $ | 285,250 | 34.8 | % | |||||||||
Underwriting, policy acquisition and operating expenses | $ | 28,589 | $ | 29,369 | (2.7 | %) | $ | 112,419 | $ | 107,972 | 4.1 | % | |||||||||
Segregated portfolio cell dividend expense (income) | $ | — | $ | — | — | % | $ | — | $ | 5,181 | (100.0 | %) | |||||||||
Total expenses | $ | 120,276 | $ | 97,107 | 23.9 | % | $ | 496,850 | $ | 398,403 | 24.7 | % | |||||||||
Segment operating results | $ | (4,943 | ) | $ | 17,173 | (128.8 | %) | $ | 781 | $ | 57,108 | (98.6 | %) |
SPECIALTY P&C SEGMENT KEY RATIOS | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Current accident year net loss ratio | 100.3 | % | 93.4 | % | 93.8 | % | 89.9 | % | |||
Effect of prior accident years’ reserve development | (19.5 | %) | (33.2 | %) | (15.6 | %) | (26.5 | %) | |||
Net loss ratio | 80.8 | % | 60.2 | % | 78.2 | % | 63.4 | % | |||
Underwriting expense ratio | 25.2 | % | 26.1 | % | 22.9 | % | 24.0 | % | |||
Combined ratio | 106.0 | % | 86.3 | % | 101.1 | % | 87.4 | % |
NEWS RELEASE CONTINUES | ![]() |
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Gross premiums written | $ | 64,959 | $ | 60,314 | 7.7 | % | $ | 293,230 | $ | 264,048 | 11.1 | % | |||||||||
Net premiums written | $ | 44,769 | $ | 39,413 | 13.6 | % | $ | 195,350 | $ | 173,566 | 12.6 | % | |||||||||
Net premiums earned | $ | 50,848 | $ | 41,063 | 23.8 | % | $ | 186,079 | $ | 163,309 | 13.9 | % | |||||||||
Total revenues | $ | 51,432 | $ | 41,443 | 24.1 | % | $ | 188,491 | $ | 165,405 | 14.0 | % | |||||||||
Net losses and loss adjustment expenses | $ | 30,689 | $ | 22,714 | 35.1 | % | $ | 118,483 | $ | 102,233 | 15.9 | % | |||||||||
Underwriting, policy acquisition and operating expenses | $ | 14,147 | $ | 13,664 | 3.5 | % | $ | 55,693 | $ | 52,576 | 5.9 | % | |||||||||
Total expenses | $ | 44,836 | $ | 36,378 | 23.3 | % | $ | 174,176 | $ | 154,809 | 12.5 | % | |||||||||
Segment operating results | $ | 6,596 | $ | 5,065 | 30.2 | % | $ | 14,315 | $ | 10,596 | 35.1 | % |
WORKERS’ COMPENSATION INSURANCE SEGMENT KEY RATIOS | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Current accident year net loss ratio | 68.0 | % | 66.5 | % | 68.0 | % | 66.1 | % | |||
Effect of prior accident years’ reserve development | (7.6 | %) | (11.2 | %) | (4.3 | %) | (3.5 | %) | |||
Net loss ratio | 60.4 | % | 55.3 | % | 63.7 | % | 62.6 | % | |||
Underwriting expense ratio | 27.8 | % | 33.3 | % | 29.9 | % | 32.2 | % | |||
Combined ratio | 88.2 | % | 88.6 | % | 93.6 | % | 94.8 | % |
NEWS RELEASE CONTINUES | ![]() |
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Gross premiums written | $ | 16,830 | $ | 16,195 | 3.9 | % | $ | 85,086 | $ | 77,675 | 9.5 | % | |||||||||
Net premiums written | $ | 14,838 | $ | 14,280 | 3.9 | % | $ | 75,547 | $ | 68,862 | 9.7 | % | |||||||||
Net premiums earned | $ | 19,692 | $ | 17,546 | 12.2 | % | $ | 73,940 | $ | 68,197 | 8.4 | % | |||||||||
Net investment income | 466 | 290 | 60.7 | % | 1,566 | 1,059 | 47.9 | % | |||||||||||||
Net realized gains (losses) | (3,615 | ) | 1,199 | (401.5 | %) | (3,149 | ) | 3,914 | (180.5 | %) | |||||||||||
Other income | 35 | 32 | 9.4 | % | 211 | 115 | 83.5 | % | |||||||||||||
Net losses and loss adjustment expenses | (11,165 | ) | (11,148 | ) | 0.2 | % | (38,726 | ) | (37,455 | ) | 3.4 | % | |||||||||
Underwriting, policy acquisition and operating expenses | (6,357 | ) | (5,526 | ) | 15.0 | % | (22,426 | ) | (20,764 | ) | 8.0 | % | |||||||||
SPC net operating results | (944 | ) | 2,393 | (139.4 | %) | 11,416 | 15,066 | (24.2 | %) | ||||||||||||
Segregated portfolio cell dividend (expense) income (1) | 665 | (1,694 | ) | (139.3 | %) | (9,122 | ) | (10,590 | ) | (13.9 | %) | ||||||||||
Segment operating results (2) | $ | (279 | ) | $ | 699 | (139.9 | %) | $ | 2,294 | $ | 4,476 | (48.7 | %) | ||||||||
(1) Represents the operating (profit) loss due to external cell participants. | |||||||||||||||||||||
(2) Represents our share of the operating profit (loss) of the SPCs in which we participate. |
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT KEY RATIOS | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Current accident year net loss ratio | 60.3 | % | 75.4 | % | 64.5 | % | 67.4 | % | |||
Effect of prior accident years’ reserve development | (3.6 | %) | (11.9 | %) | (12.1 | %) | (12.5 | %) | |||
Net loss ratio | 56.7 | % | 63.5 | % | 52.4 | % | 54.9 | % | |||
Underwriting expense ratio | 32.3 | % | 31.5 | % | 30.3 | % | 30.4 | % | |||
Combined ratio | 89.0 | % | 95.0 | % | 82.7 | % | 85.3 | % |
NEWS RELEASE CONTINUES | ![]() |
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Gross premiums written | $ | 25,797 | $ | 13,229 | 95.0 | % | $ | 88,746 | $ | 70,224 | 26.4 | % | |||||||||
Net premiums written | $ | 23,531 | $ | 10,414 | 126.0 | % | $ | 69,869 | $ | 54,969 | 27.1 | % | |||||||||
Net premiums earned | $ | 18,059 | $ | 11,828 | 52.7 | % | $ | 67,047 | $ | 57,202 | 17.2 | % | |||||||||
Net investment income | $ | 987 | $ | 542 | 82.1 | % | $ | 3,358 | $ | 1,736 | 93.4 | % | |||||||||
Other gains (losses) | $ | 19 | $ | 166 | (88.6 | %) | $ | (138 | ) | $ | (1,369 | ) | 89.9 | % | |||||||
Total revenues | $ | 19,065 | $ | 12,536 | 52.1 | % | $ | 70,267 | $ | 57,569 | 22.1 | % | |||||||||
Net losses and loss adjustment expenses | $ | 20,548 | $ | 3,502 | 486.8 | % | $ | 51,570 | $ | 44,220 | 16.6 | % | |||||||||
Underwriting, policy acquisition and operating expenses | $ | 7,938 | $ | 7,176 | 10.6 | % | $ | 31,686 | $ | 26,963 | 17.5 | % | |||||||||
Total expenses | $ | 28,486 | $ | 10,678 | 166.8 | % | $ | 83,256 | $ | 71,183 | 17.0 | % | |||||||||
Total income tax expense (benefit) | $ | 38 | $ | (73 | ) | 152.1 | % | $ | (317 | ) | $ | (568 | ) | 44.2 | % | ||||||
Segment operating results | $ | (9,459 | ) | $ | 1,931 | (589.8 | %) | $ | (12,672 | ) | $ | (13,046 | ) | 2.9 | % |
LLOYD’S SYNDICATES SEGMENT KEY RATIOS | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Current accident year net loss ratio | 104.5 | % | 31.6 | % | 74.0 | % | 78.7 | % | |||
Effect of prior accident years’ reserve development | 9.3 | % | (2.0 | %) | 2.9 | % | (1.4 | %) | |||
Net loss ratio | 113.8 | % | 29.6 | % | 76.9 | % | 77.3 | % | |||
Underwriting expense ratio | 44.0 | % | 60.7 | % | 47.3 | % | 47.1 | % |
NEWS RELEASE CONTINUES | ![]() |
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||
($ in thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Net investment income | $ | 22,754 | $ | 25,211 | (9.7 | %) | $ | 86,960 | $ | 92,867 | (6.4 | %) | |||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | $ | (3,300 | ) | $ | (455 | ) | (625.3 | %) | $ | 8,948 | $ | 8,033 | 11.4 | % | |||||||
Net realized investment gains (losses) | $ | (42,468 | ) | $ | (3,602 | ) | (1,079.0 | %) | $ | (39,879 | ) | $ | 12,388 | (421.9 | %) | ||||||
Total revenues | $ | (22,226 | ) | $ | 22,068 | (200.7 | %) | $ | 59,554 | $ | 116,176 | (48.7 | %) | ||||||||
Operating expenses | $ | 3,415 | $ | 8,214 | (58.4 | %) | $ | 18,767 | $ | 29,275 | (35.9 | %) | |||||||||
Interest expense | $ | 4,855 | $ | 4,442 | 9.3 | % | $ | 16,163 | $ | 16,844 | (4.0 | %) | |||||||||
Income tax expense (benefit) | $ | (14,131 | ) | $ | 16,965 | (183.3 | %) | $ | (17,715 | ) | $ | 21,927 | (180.8 | %) | |||||||
Segment operating results | $ | (16,365 | ) | $ | (7,553 | ) | (116.7 | %) | $ | 42,339 | $ | 48,130 | (12.0 | %) |
NEWS RELEASE CONTINUES | ![]() |
| changes in general economic conditions, including the impact of inflation or deflation and unemployment; |
| our ability to maintain our dividend payments; |
| regulatory, legislative and judicial actions or decisions that could affect our business plans or operations, including the impact of Brexit; |
| the enactment or repeal of tort reforms; |
| formation or dissolution of state-sponsored insurance entities providing coverages now offered by ProAssurance which could remove or add sizable numbers of insureds from or to the private insurance market; |
NEWS RELEASE CONTINUES | ![]() |
| changes in the interest and tax rate environment; |
| resolution of uncertain tax matters and changes in tax laws, including the impact of the TCJA; |
| changes in laws or government regulations regarding financial markets or market activity that may affect our business; |
| changes in the ability of the U.S. government to meet its obligations that may affect the U.S. economy and our business; |
| performance of financial markets affecting the fair value of our investments or making it difficult to determine the value of our investments; |
| changes in requirements or accounting policies and practices that may be adopted by our regulatory agencies, the FASB, the SEC, the PCAOB or the NYSE that may affect our business; |
| changes in laws or government regulations affecting the financial services industry, the property and casualty insurance industry or particular insurance lines underwritten by our subsidiaries; |
| the effect on our insureds, particularly the insurance needs of our insureds, and our loss costs, of changes in the healthcare delivery system and/or changes in the U.S. political climate that may affect healthcare policy or our business; |
| consolidation of our insureds into or under larger entities which may be insured by competitors, or may not have a risk profile that meets our underwriting criteria or which may not use external providers for insuring or otherwise managing substantial portions of their liability risk; |
| uncertainties inherent in the estimate of our loss and loss adjustment expense reserve and reinsurance recoverable; |
| changes in the availability, cost, quality or collectability of insurance/reinsurance; |
| the results of litigation, including pre- or post-trial motions, trials and/or appeals we undertake; |
| effects on our claims costs from mass tort litigation that are different from that anticipated by us; |
| allegations of bad faith which may arise from our handling of any particular claim, including failure to settle; |
| loss or consolidation of independent agents, agencies, brokers or brokerage firms; |
| changes in our organization, compensation and benefit plans; |
| changes in the business or competitive environment may limit the effectiveness of our business strategy and impact our revenues; |
| our ability to retain and recruit senior management; |
| the availability, integrity and security of our technology infrastructure or that of our third-party providers of technology infrastructure, including any susceptibility to cyber-attacks which might result in a loss of information or operating capability; |
| the impact of a catastrophic event, as it relates to both our operations and our insured risks; |
| the impact of acts of terrorism and acts of war; |
| the effects of terrorism-related insurance legislation and laws; |
| guaranty funds and other state assessments; |
| our ability to achieve continued growth through expansion into new markets or through acquisitions or business combinations; |
| changes to the ratings assigned by rating agencies to our insurance subsidiaries, individually or as a group; |
| provisions in our charter documents, Delaware law and state insurance laws may impede attempts to replace or remove management or may impede a takeover; |
| state insurance restrictions may prohibit assets held by our insurance subsidiaries, including cash and investment securities, from being used for general corporate purposes; |
| taxing authorities can take exception to our tax positions and cause us to incur significant amounts of legal and accounting costs and, if our defense is not successful, additional tax costs, including interest and penalties; and |
NEWS RELEASE CONTINUES | ![]() |
| expected benefits from completed and proposed acquisitions may not be achieved or may be delayed longer than expected due to business disruption; loss of customers, employees or key agents; increased operating costs or inability to achieve cost savings; and assumption of greater than expected liabilities, among other reasons. |
Additional risks, assumptions and uncertainties that could arise from our membership in the Lloyd's market and our participation in Lloyd's Syndicates include, but are not limited to, the following: | |
| members of Lloyd's are subject to levies by the Council of Lloyd's based on a percentage of the member's underwriting capacity, currently a maximum of 3%, but can be increased by Lloyd's; |
| Syndicate operating results can be affected by decisions made by the Council of Lloyd's which the management of Syndicate 1729 and Syndicate 6131 have little ability to control, such as a decision to not approve the business plan of Syndicate 1729 or Syndicate 6131, or a decision to increase the capital required to continue operations, and by our obligation to pay levies to Lloyd's; |
| Lloyd's insurance and reinsurance relationships and distribution channels could be disrupted or Lloyd's trading licenses could be revoked, making it more difficult for a Lloyd's Syndicate to distribute and market its products; |
| rating agencies could downgrade their ratings of Lloyd's as a whole; and |
| Syndicate 1729 and Syndicate 6131 operations are dependent on a small, specialized management team and the loss of their services could adversely affect the Syndicate’s business. The inability to identify, hire and retain other highly qualified personnel in the future could adversely affect the quality and profitability of Syndicate 1729’s or Syndicate 6131's business. |
NEWS RELEASE | ![]() |
NEWS RELEASE | ![]() |
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