Shareholders' Equity

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

At September 30, 2012 and December 31, 2011, ProAssurance had 100 million shares of authorized common stock and 50 million shares of authorized preferred stock. The Board of Directors of ProAssurance Corporation (the Board) has the authority to determine provisions for the issuance of preferred shares, including the number of shares to be issued, the designations, powers, preferences and rights, and the qualifications, limitations or restrictions of such shares. To date, the Board has not approved the issuance of preferred stock.

During 2011 the Board instituted a cash dividend policy. ProAssurance declared cash dividends of $0.25 per common share for each of the first three quarters of 2012, totaling $23.0 million, which included the third quarter dividend of $7.7 million that was paid in October 2012. ProAssurance declared its initial quarterly dividend of $0.25 per common share, $7.6 million in total, during the third quarter of 2011 that was paid in October 2011. The liability for unpaid dividends is included in Other liabilities. Any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of financial performance, future expectations and other factors deemed relevant by the Board.

At September 30, 2012, approximately $135.1 million of Board authorizations for the repayment of debt or repurchase of common shares remained available for use. During the nine months endedSeptember 30, 2012, authorizations totaling approximately $52.5 million were used to repay debt.

ProAssurance did not repurchase any common shares during the three and nine months ended September 30, 2012. ProAssurance repurchased approximately 341,000 common shares, having a total cost of $21.0 million, during the nine months ended September 30, 2011, including approximately 6,900 forfeited employer match shares (cost basis of $0.4 million) reacquired due to the termination of the ProAssurance Corporation Stock Ownership Plan.

9. Shareholders’ Equity (continued)

Share-based compensation expense was $1.3 million and $6.4 million for the three and nine months ended September 30, 2012, respectively, and $1.7 million and $5.4 million for the three and nine months ended September 30, 2011, respectively. Related tax benefits were $0.5 million and $2.2 million for the three and nine months ended September 30, 2012, respectively, and $0.6 million and $1.9 million for the three and nine months ended September 30, 2011, respectively.

ProAssurance awarded approximately 25,000 restricted share units and 100,000 (target) performance share units to employees in February 2012. The fair value of each unit awarded was estimated at $89.28, equal to the market value of a ProAssurance common share on the date of grant. All awards are charged to expense as an increase to equity over the service period (generally the vesting period) associated with the award. Restricted share units and performance share units vest in their entirety at the end of a three-year period following the grant date based on a continuous service requirement and, for performance share units, achievement of a performance objective. Partial vesting is permitted for retirees. A ProAssurance common share is issued for each unit once vesting requirements are met, except that units sufficient to satisfy required tax withholdings are paid in cash. The number of common shares issued for performance share units varies from 75% to 125% of base awards depending upon the degree to which stated performance objectives are achieved. ProAssurance issued approximately 17,000 and 50,000 common shares, respectively, to employees in February 2012 related to restricted share units and performance share units granted in 2009. Shares issued for performance share units were awarded at the maximum level (125%).

ProAssurance issued approximately 19,000 and 20,000 common shares to employees in February 2012 and February 2011, respectively, as bonus compensation, as approved by the Compensation Committee of the Board. The shares issued were valued at fair value (the market price of a ProAssurance common share on the date of award).

Other Comprehensive Income

For all periods presented, other comprehensive income was comprised of unrealized gains and losses, including non-credit impairment losses, arising during the period related to available-for-sale securities less reclassification adjustments for gains (losses) from available-for-sale securities recognized in current period net income (net of tax). Accumulated other comprehensive income was comprised entirely of unrealized gains and losses from available for sale securities, net of tax, at both September 30, 2012 and December 31, 2011.

Reclassification adjustments related to available-for-sale securities for the three and nine months ended September 30, 2012 and 2011 were as follows:

	Three Months Ended September 30						Nine Months Ended September 30
(In thousands)	2012			2011			2012			2011
Net realized investment gains (losses) included in the calculation of net income	$	3,675		$	990		$	8,147		$	8,475
Tax effect (at 35%)	(1,286		)	(347		)	(2,851		)	(2,966		)
Net realized investment gains (losses) reclassified from other comprehensive income	$	2,389		$	643		$	5,296		$	5,509