QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||||||||||||||||||||||
(Registrant’s telephone number, including area code) | (Former name, former address and former fiscal year, if changed since last report) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
☒ | Accelerated filer | ☐ | |||||||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||
Emerging growth company |
Term | Meaning | ||||
AAD | Annual aggregate deductible | ||||
AOCI | Accumulated other comprehensive income (loss) | ||||
Board | Board of Directors of ProAssurance Corporation | ||||
BOLI | Business owned life insurance | ||||
CARES Act | Coronavirus Aid, Relief and Economic Security Act | ||||
Council of Lloyd's | The governing body for Lloyd's of London | ||||
CODM | Chief Operating Decision Maker | ||||
DDR | Death, disability and retirement | ||||
DPAC | Deferred policy acquisition costs | ||||
Eastern Re | Eastern Re, LTD, S.P.C. | ||||
EBUB | Earned but unbilled premium | ||||
ECO/XPL | Extra-contractual obligations/excess of policy limit claims | ||||
ERC | Employee Retention Credit | ||||
FAL | Funds at Lloyd's | ||||
FASB | Financial Accounting Standards Board | ||||
FHLB | Federal Home Loan Bank | ||||
FHLMC | Federal Home Loan Mortgage Corporation | ||||
FNMA | Federal National Mortgage Association | ||||
FSMA | Financial Services and Markets Act | ||||
GAAP | Generally accepted accounting principles in the United States of America | ||||
GNMA | Government National Mortgage Association | ||||
IBNR | Incurred but not reported | ||||
Inova Re | Inova Re, LTD, S.P.C. | ||||
Interest Rate Swaps | ProAssurance's two forward-starting interest rate swap agreements associated with its Revolving Credit Agreement and Term Loan | ||||
IRS | Internal Revenue Service | ||||
LLC | Limited liability company | ||||
Lloyd's | Lloyd's of London market | ||||
LP | Limited partnership | ||||
MPL | Medical professional liability | ||||
Medical Technology Liability | Medical technology and life sciences products liability | ||||
NAV | Net asset value | ||||
NOL | Net operating loss | ||||
NORCAL | NORCAL Insurance Company, formerly known as NORCAL Mutual Insurance Company | ||||
NRSRO | Nationally recognized statistical rating organization | ||||
NYSE | New York Stock Exchange | ||||
OCI | Other comprehensive income (loss) | ||||
PCAOB | Public Company Accounting Oversight Board | ||||
PPM RRG | Preferred Physicians Medical Risk Retention Group, a Mutual Insurance Company | ||||
Revolving Credit Agreement | ProAssurance's $250 million revolving credit agreement | ||||
ROE | Return on equity | ||||
ROU | Right-of-use | ||||
SEC | Securities and Exchange Commission | ||||
SOFR | Secured Overnight Financing Rate | ||||
SPC | Segregated portfolio cell | ||||
Specialty P&C | Specialty Property and Casualty |
Term | Meaning | ||||
Syndicate 1729 | Lloyd's of London Syndicate 1729 | ||||
Syndicate 6131 | Lloyd's of London Syndicate 6131 was a Special Purpose Arrangement with Lloyd's of London Syndicate 1729. | ||||
TCJA | Tax Cuts and Jobs Act H.R.1 of 2017 | ||||
Term Loan | ProAssurance's $125 million delayed draw term loan | ||||
U.K. | United Kingdom of Great Britain and Northern Ireland | ||||
ULAE | Unallocated loss adjustment expenses | ||||
VIE | Variable interest entity | ||||
VOBA | Value of business acquired |
l | changes in general economic conditions, including the impact of inflation, including medical and social inflation, and unemployment; | ||||
l | regulatory, legislative and judicial actions or decisions that could affect our business plans or operations; | ||||
l | the enactment or repeal of tort reforms; | ||||
l | 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; | ||||
l | changes in the interest and tax rate environment; | ||||
l | resolution of uncertain tax matters and changes in tax laws; | ||||
l | changes in laws or government regulations regarding financial markets or market activity that may affect our business; | ||||
l | changes in the ability, or perception thereof, of the U.S. government to meet its obligations that may affect the U.S. economy and our business; | ||||
l | performance of financial markets affecting the fair value of our investments or making it difficult to determine the value of our investments; | ||||
l | changes in requirements or accounting policies and practices that may be adopted by our regulatory agencies, the governments of states in which we are domiciled, the FASB, the SEC, the PCAOB or the NYSE that may affect our business; | ||||
l | changes in laws or government regulations affecting the financial services industry, the property and casualty insurance industry, the workers' compensation insurance industry or particular insurance lines underwritten by our subsidiaries; | ||||
l | 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; | ||||
l | 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; | ||||
l | the effect of cyclical insurance industry trends on our underwriting, including demand and pricing in the insurance and reinsurance markets in which we operate; | ||||
l | uncertainties inherent in the estimate of our loss and loss adjustment expense reserve and reinsurance recoverable; | ||||
l | changes in the availability, cost, quality or collectability of insurance/reinsurance; | ||||
l | the results of litigation, including pre- or post-trial motions, trials and/or appeals we undertake; | ||||
l | effects on our claims costs from mass tort litigation that are different from that anticipated by us; | ||||
l | allegations of bad faith which may arise from our handling of any particular claim, including failure to settle; | ||||
l | loss or consolidation of independent agents, agencies, brokers or brokerage firms; | ||||
l | changes in our organization, compensation and benefit plans; |
l | changes in the business or competitive environment may alter or limit the effectiveness of our business strategy and impact our revenues; | ||||
l | our ability to retain and recruit senior management and other qualified personnel; | ||||
l | the availability, integrity and security of our technology infrastructure and that of our third-party providers, including any susceptibility to cyber-attacks which might result in a loss of information, operating capability or actual monetary loss; | ||||
l | the impact of new systems or systems consolidation on our information technology infrastructure; | ||||
l | the impact of machine learning and artificial intelligence on the insurance industry as well as on our insureds and certain risks we insure; | ||||
l | the impact of a catastrophe, natural or man-made, including a pandemic event, as it relates to our business and insurance operations, investment results and our insured risks; | ||||
l | the impact of a catastrophic man-made event, such as acts of terrorism, acts of war and civil and political unrest; | ||||
l | the effects of terrorism-related insurance legislation and laws; | ||||
l | guaranty funds and other state assessments; | ||||
l | changes to the ratings assigned by rating agencies to our holding company or insurance subsidiaries, individually or as a group; | ||||
l | provisions in our charter documents, Delaware law and state insurance laws may impede attempts to replace or remove management or may impede a takeover; | ||||
l | state insurance restrictions may prohibit assets held by our insurance subsidiaries, including cash and investment securities, from being used for general corporate purposes; and | ||||
l | 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. | ||||
TABLE OF CONTENTS | ||||||||
March 31, 2024 | December 31, 2023 | ||||||||||
Assets | |||||||||||
Investments | |||||||||||
Fixed maturities, available-for-sale, at fair value (amortized cost, $ | $ | $ | |||||||||
Fixed maturities, trading, at fair value (cost, $ | |||||||||||
Equity investments, at fair value (cost, $ | |||||||||||
Short-term investments | |||||||||||
Business owned life insurance | |||||||||||
Investment in unconsolidated subsidiaries | |||||||||||
Other investments (at fair value, $ | |||||||||||
Total Investments | |||||||||||
Cash and cash equivalents | |||||||||||
Premiums receivable, net (allowance for expected credit losses, $ | |||||||||||
Receivable from reinsurers on paid losses and loss adjustment expenses | |||||||||||
Receivable from reinsurers on unpaid losses and loss adjustment expenses | |||||||||||
Prepaid reinsurance premiums | |||||||||||
Deferred policy acquisition costs | |||||||||||
Deferred tax asset, net | |||||||||||
Real estate, net | |||||||||||
Operating lease ROU assets | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Other assets | |||||||||||
Total Assets | $ | $ | |||||||||
Liabilities and Shareholders' Equity | |||||||||||
Liabilities | |||||||||||
Policy liabilities and accruals | |||||||||||
Reserve for losses and loss adjustment expenses | $ | $ | |||||||||
Unearned premiums | |||||||||||
Reinsurance premiums payable | |||||||||||
Total Policy Liabilities and Accruals | |||||||||||
Operating lease liabilities | |||||||||||
Other liabilities | |||||||||||
Debt less unamortized debt issuance costs | |||||||||||
Total Liabilities | |||||||||||
Shareholders' Equity | |||||||||||
Common shares (par value $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive income (loss) (net of deferred tax expense (benefit) of ($ | ( | ( | |||||||||
Retained earnings | |||||||||||
Treasury shares, at cost ( | ( | ( | |||||||||
Total Shareholders' Equity | |||||||||||
Total Liabilities and Shareholders' Equity | $ | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Common shares issued for compensation | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Net effect of restricted and performance shares issued | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Common shares issued for compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Net effect of restricted and performance shares issued | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||
Dividends to shareholders | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Revenues | |||||||||||
Net premiums earned | $ | $ | |||||||||
Net investment income | |||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | ( | ||||||||||
Net investment gains (losses): | |||||||||||
Impairment losses | ( | ( | |||||||||
Portion of impairment losses recognized in other comprehensive income (loss) before taxes | |||||||||||
Net impairment losses recognized in earnings | ( | ( | |||||||||
Other net investment gains (losses) | |||||||||||
Total net investment gains (losses) | ( | ||||||||||
Other income | |||||||||||
Total revenues | |||||||||||
Expenses | |||||||||||
Net losses and loss adjustment expenses | |||||||||||
Underwriting, policy acquisition and operating expenses: | |||||||||||
Operating expense | |||||||||||
DPAC amortization | |||||||||||
SPC U.S. federal income tax expense (benefit) | |||||||||||
SPC dividend expense (income) | |||||||||||
Interest expense | |||||||||||
Total expenses | |||||||||||
Income (loss) before income taxes | ( | ||||||||||
Provision for income taxes: | |||||||||||
Current expense (benefit) | ( | ||||||||||
Deferred expense (benefit) | ( | ||||||||||
Total income tax expense (benefit) | ( | ||||||||||
Net income (loss) | ( | ||||||||||
Other comprehensive income (loss), after tax, net of reclassification adjustments | ( | ||||||||||
Comprehensive income (loss) | $ | $ | |||||||||
Earnings (loss) per share: | |||||||||||
Basic | $ | $ | ( | ||||||||
Diluted | $ | $ | ( | ||||||||
Weighted average number of common shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
Cash dividends declared per common share | $ | $ |
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Operating Activities | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | |||||||||||
Depreciation and amortization, net of accretion | |||||||||||
(Increase) decrease in cash surrender value of BOLI | ( | ( | |||||||||
Net investment (gains) losses | ( | ||||||||||
Share-based compensation | |||||||||||
Deferred income tax expense (benefit) | ( | ||||||||||
Policy acquisition costs, net of amortization (net deferral) | ( | ( | |||||||||
Equity in (earnings) loss of unconsolidated subsidiaries | ( | ||||||||||
Distributed earnings from unconsolidated subsidiaries | |||||||||||
Other, net | ( | ( | |||||||||
Change in: | |||||||||||
Premiums receivable | ( | ( | |||||||||
Reinsurance related assets and liabilities | ( | ||||||||||
Other assets | ( | ||||||||||
Reserve for losses and loss adjustment expenses | ( | ( | |||||||||
Unearned premiums | |||||||||||
Other liabilities | ( | ( | |||||||||
Net cash provided (used) by operating activities | ( | ( | |||||||||
Investing Activities | |||||||||||
Purchases of: | |||||||||||
Fixed maturities, available-for-sale | ( | ( | |||||||||
Equity investments | ( | ( | |||||||||
Other investments | ( | ( | |||||||||
Investment in unconsolidated subsidiaries | ( | ( | |||||||||
Proceeds from sales or maturities of: | |||||||||||
Fixed maturities, available-for-sale | |||||||||||
Equity investments | |||||||||||
Other investments | |||||||||||
Net sales or (purchases) of fixed maturities, trading | ( | ( | |||||||||
Return of invested capital from unconsolidated subsidiaries | |||||||||||
Net sales or maturities (purchases) of short-term investments | ( | ||||||||||
Unsettled security transactions, net change | |||||||||||
Purchases of capital assets | ( | ( | |||||||||
Other | |||||||||||
Net cash provided (used) by investing activities | |||||||||||
Continued on the following page. |
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Continued from the previous page. | |||||||||||
Financing Activities | |||||||||||
Dividends to shareholders | ( | ||||||||||
Capital contribution received from (return of capital to) external segregated portfolio cell participants | ( | ||||||||||
Other | ( | ( | |||||||||
Net cash provided (used) by financing activities | ( | ( | |||||||||
Increase (decrease) in cash and cash equivalents | ( | ||||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||
Significant Non-Cash Transactions | |||||||||||
Dividends declared and not yet paid | $ | $ | |||||||||
Operating lease liabilities arising from obtaining ROU assets | $ | $ | |||||||||
Increase (decrease) in fair value of contingent consideration issued in NORCAL acquisition | $ | $ | ( |
Level 1: | quoted (unadjusted) market prices in active markets for identical assets and liabilities. For ProAssurance, Level 1 inputs are generally quotes for securities actively traded in exchange or over-the-counter markets. |
Level 2: | market data obtained from sources independent of the reporting entity (observable inputs). For ProAssurance, Level 2 inputs generally include quoted prices in markets that are not active, quoted prices for similar assets or liabilities, and results from pricing models that use observable inputs such as interest rates and yield curves that are generally available at commonly quoted intervals. |
Level 3: | the reporting entity’s own assumptions about market participant assumptions based on the best information available in the circumstances (non-observable inputs). For ProAssurance, Level 3 inputs are used in situations where little or no Level 1 or 2 inputs are available or are inappropriate given the particular circumstances. Level 3 inputs include results from pricing models for which some or all of the inputs are not observable, discounted cash flow methodologies, single non-binding broker quotes and adjustments to externally quoted prices that are based on management judgment or estimation. |
March 31, 2024 | |||||||||||||||||||||||
Fair Value Measurements Using | Total | ||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | |||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||
Corporate debt, multiple observable inputs | |||||||||||||||||||||||
Corporate debt, limited observable inputs | |||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||
Fixed maturities, trading | |||||||||||||||||||||||
Equity investments | |||||||||||||||||||||||
Financial | |||||||||||||||||||||||
Utilities/Energy | |||||||||||||||||||||||
Industrial | |||||||||||||||||||||||
Bond funds | |||||||||||||||||||||||
All other | |||||||||||||||||||||||
Short-term investments | |||||||||||||||||||||||
Other investments | |||||||||||||||||||||||
Other assets | |||||||||||||||||||||||
Total assets categorized within the fair value hierarchy | $ | $ | $ | ||||||||||||||||||||
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: | |||||||||||||||||||||||
Investment in unconsolidated subsidiaries | |||||||||||||||||||||||
Total assets at fair value | $ | ||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Other liabilities | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities categorized within the fair value hierarchy | $ | $ | $ | $ |
December 31, 2023 | |||||||||||||||||||||||
Fair Value Measurements Using | Total | ||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | |||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||
Corporate debt, multiple observable inputs | |||||||||||||||||||||||
Corporate debt, limited observable inputs | |||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||
Fixed maturities, trading | |||||||||||||||||||||||
Equity investments | |||||||||||||||||||||||
Financial | |||||||||||||||||||||||
Utilities/Energy | |||||||||||||||||||||||
Industrial | |||||||||||||||||||||||
Bond funds | |||||||||||||||||||||||
All other | |||||||||||||||||||||||
Short-term investments | |||||||||||||||||||||||
Other investments | |||||||||||||||||||||||
Other assets | |||||||||||||||||||||||
Total assets categorized within the fair value hierarchy | $ | $ | $ | ||||||||||||||||||||
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: | |||||||||||||||||||||||
Investment in unconsolidated subsidiaries | |||||||||||||||||||||||
Total assets at fair value | $ | ||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Other liabilities | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities categorized within the fair value hierarchy | $ | $ | $ | $ |
Fair Value at | ||||||||||||||||||||||||||||||||
($ in thousands) | March 31, 2024 | December 31, 2023 | Valuation Technique | Unobservable Input | Range (Weighted Average) | |||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Corporate debt, limited observable inputs | $ | $ | Market Comparable Securities | Comparability Adjustment | ||||||||||||||||||||||||||||
Discounted Cash Flows | Comparability Adjustment | |||||||||||||||||||||||||||||||
Residential mortgage-backed, other commercial mortgage-backed and other asset-backed securities | $ | $ | Market Comparable Securities | Comparability Adjustment | ||||||||||||||||||||||||||||
Discounted Cash Flows | Comparability Adjustment | |||||||||||||||||||||||||||||||
Equity investments | $ | $ | Discounted Cash Flows | Comparability Adjustment | ||||||||||||||||||||||||||||
Other investments | $ | $ | Discounted Cash Flows | Comparability Adjustment | ||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Other liabilities | $ | $ | Stochastic Model/Discounted Cash Flows | Weighted Average Cost of Capital | ||||||||||||||||||||||||||||
March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
Level 3 Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||
Assets | Liabilities | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Corporate Debt | Asset-backed Securities | Equity Investments | Other Investments | Total Assets | Other Liabilities | Total Liabilities | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
Total gains (losses) realized and unrealized: | |||||||||||||||||||||||||||||||||||||||||
Included in earnings, as a part of: | |||||||||||||||||||||||||||||||||||||||||
( | |||||||||||||||||||||||||||||||||||||||||
( | ( | ( | |||||||||||||||||||||||||||||||||||||||
Purchases | |||||||||||||||||||||||||||||||||||||||||
Sales | ( | ( | |||||||||||||||||||||||||||||||||||||||
Transfers in | |||||||||||||||||||||||||||||||||||||||||
Transfers out | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
$ | $ | $ | ( | $ | $ | $ | $ |
March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Level 3 Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||
Assets | Liabilities | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Corporate Debt | Asset-backed Securities | Equity Investments | Other Investments | Total Assets | Other Liabilities | Total Liabilities | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
Total gains (losses) realized and unrealized: | |||||||||||||||||||||||||||||||||||||||||
Included in earnings, as a part of: | |||||||||||||||||||||||||||||||||||||||||
( | |||||||||||||||||||||||||||||||||||||||||
Operating expense | |||||||||||||||||||||||||||||||||||||||||
Purchases | |||||||||||||||||||||||||||||||||||||||||
Sales | ( | ( | |||||||||||||||||||||||||||||||||||||||
Transfers in | |||||||||||||||||||||||||||||||||||||||||
Transfers out | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
$ | $ | $ | ( | $ | $ | ( | $ | $ |
Unfunded Contractual Commitments | Fair Value | ||||||||||||||||
(In thousands) | March 31, 2024 | March 31, 2024 | December 31, 2023 | ||||||||||||||
Investment in unconsolidated subsidiaries: | |||||||||||||||||
Private debt funds (1) | $ | $ | $ | ||||||||||||||
Long/short equity funds (2) | |||||||||||||||||
Non-public equity funds (3) | $ | ||||||||||||||||
Credit funds (4) | $ | ||||||||||||||||
Strategy focused funds (5) | $ | ||||||||||||||||
Total investments carried at NAV | $ | $ | |||||||||||||||
March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
(In thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
BOLI | $ | $ | $ | $ | |||||||||||||||||||
Other investments | $ | $ | $ | $ | |||||||||||||||||||
Other assets | $ | $ | $ | $ | |||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||
Revolving Credit Agreement* | $ | $ | $ | $ | |||||||||||||||||||
Term Loan* | $ | $ | $ | $ | |||||||||||||||||||
Contribution Certificates | $ | $ | $ | $ | |||||||||||||||||||
Other liabilities | $ | $ | $ | $ | |||||||||||||||||||
* Carrying value excludes unamortized debt issuance costs. |
March 31, 2024 | |||||||||||||||||||||||||||||
(In thousands) | Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||||||||
Corporate debt | |||||||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||||||||
$ | $ | $ | $ | $ |
December 31, 2023 | |||||||||||||||||||||||||||||
(In thousands) | Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||||||||
Corporate debt | |||||||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||||||||
$ | $ | $ | $ | $ |
(In thousands) | Amortized Cost | Due in one year or less | Due after one year through five years | Due after five years through ten years | Due after ten years | Total Fair Value | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||||||||||||||
Corporate debt | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||||||||||||||
$ | $ |
March 31, 2024 | |||||||||||||||||||||||||||||||||||
Total | Less than 12 months | 12 months or longer | |||||||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||||||||||||
(In thousands) | Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||||||||||||||
Corporate debt | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
December 31, 2023 | |||||||||||||||||||||||||||||||||||
Total | Less than 12 months | 12 months or longer | |||||||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||||||||||||
(In thousands) | Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | |||||||||||||||||||||||||||||||||||
State and municipal bonds | |||||||||||||||||||||||||||||||||||
Corporate debt | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Agency commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Three Months Ended March 31, 2024 | |||||||||||||||||
(In thousands) | Corporate Debt | Residential mortgage-backed securities | Other commercial mortgage-backed securities | Other asset-backed securities | Total | ||||||||||||
Balance, at December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||
Additional credit losses related to securities for which: | |||||||||||||||||
No allowance for credit losses has been previously recognized | |||||||||||||||||
Reductions related to: | |||||||||||||||||
Securities sold during the period | ( | ( | ( | ( | |||||||||||||
Balance, at March 31, 2024 | $ | $ | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||
(In thousands) | Residential mortgage-backed securities | Other asset-backed securities | Total | ||||||||
Balance, at December 31, 2022 | $ | $ | $ | ||||||||
Reductions related to: | |||||||||||
Securities sold during the period | ( | ( | ( | ||||||||
Balance, at March 31, 2023 | $ | $ | $ |
Three Months Ended March 31 | |||||||||||
(In millions) | 2024 | 2023 | |||||||||
Proceeds from sales (exclusive of maturities and paydowns) | $ | $ | |||||||||
Purchases | $ | $ |
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Fixed maturities | $ | $ | |||||||||
Equities | |||||||||||
Short-term investments, including Other | |||||||||||
BOLI | |||||||||||
Investment fees and expenses | ( | ( | |||||||||
Net investment income | $ | $ |
March 31, 2024 | Carrying Value | |||||||||||||||||||
(In thousands) | Percentage Ownership | March 31, 2024 | December 31, 2023 | |||||||||||||||||
Qualified affordable housing project tax credit partnerships | See below | $ | $ | |||||||||||||||||
All other investments, primarily investment fund LPs/LLCs | See below | |||||||||||||||||||
$ | $ |
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Qualified affordable housing project tax credit partnerships | |||||||||||
Losses recorded | $ | $ | |||||||||
Tax credits recognized | $ | $ | |||||||||
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Total impairment losses: | |||||||||||
Corporate debt | $ | ( | $ | ( | |||||||
Asset-backed securities | ( | ||||||||||
Portion of impairment losses recognized in other comprehensive income before taxes: | |||||||||||
Corporate debt | |||||||||||
Net impairment losses recognized in earnings | ( | ( | |||||||||
Gross realized gains, available-for-sale fixed maturities | |||||||||||
Gross realized (losses), available-for-sale fixed maturities | ( | ( | |||||||||
Net realized gains (losses), trading fixed maturities | ( | ||||||||||
Net realized gains (losses), equity investments | ( | ||||||||||
Net realized gains (losses), other investments | |||||||||||
Change in unrealized holding gains (losses), trading fixed maturities | |||||||||||
Change in unrealized holding gains (losses), equity investments | |||||||||||
Change in unrealized holding gains (losses), convertible securities, carried at fair value | ( | ||||||||||
Other(1) | ( | ||||||||||
Net investment gains (losses) | $ | ( | $ | ||||||||
(1) Includes a gain of $ |
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Balance beginning of period | $ | $ | |||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||
No impairment has been previously recognized | |||||||||||
Balance March 31 | $ | $ |
(In thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Year Ended December 31, 2023 | ||||||||||||||
Balance, beginning of year | $ | $ | $ | ||||||||||||||
Less reinsurance recoverables on unpaid losses and loss adjustment expenses | |||||||||||||||||
Net balance, beginning of year | |||||||||||||||||
Net losses: | |||||||||||||||||
Current year | |||||||||||||||||
(Favorable) unfavorable development of reserves established in prior years, net(1) | ( | ||||||||||||||||
Total | |||||||||||||||||
Paid related to: | |||||||||||||||||
Current year | ( | ( | ( | ||||||||||||||
Prior years | ( | ( | ( | ||||||||||||||
Total paid | ( | ( | ( | ||||||||||||||
Net balance, end of period | |||||||||||||||||
Plus reinsurance recoverables on unpaid losses and loss adjustment expenses | |||||||||||||||||
Balance, end of period | $ | $ | $ |
($ in thousands) | March 31, 2024 | December 31, 2023 | |||||||||
Contribution Certificates due 2031, interest at | $ | $ | |||||||||
Revolving Credit Agreement, outstanding borrowings are not permitted to exceed $ | |||||||||||
Term Loan, principal repayments in quarterly installments beginning June 30, 2024; Term Loan expires in 2028. The effective interest rate was | |||||||||||
Total principal | |||||||||||
Less unamortized debt issuance costs | |||||||||||
Debt less unamortized debt issuance costs | $ | $ |
($ in thousands) | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||
Derivatives Designated and Qualifying as Cash Flow Hedging Instruments | Location in the Condensed Consolidated Balance Sheets | Number of Instruments | Aggregate Notional Amount(1) | Estimated Fair Value(2) | Number of Instruments | Aggregate Notional Amount(1) | Estimated Fair Value(2) | |||||||||||||||||||
Interest Rate Swaps | Other Assets | $ | $ | $ | $ | |||||||||||||||||||||
Qualifying Cash Flow Hedges - Gains (Losses) Reclassified from AOCI, net of tax, to Earnings | |||||||||||
(In thousands) | Three Months Ended March 31 | ||||||||||
Derivatives Designated as Hedging Instruments | Location in the Condensed Consolidated Statements of Income and Comprehensive Income | 2024 | 2023 | ||||||||
Interest Rate Swaps | Interest Expense | $ | $ |
(In thousands) | Unrealized Investment Gains (Losses) | Cash Flow Hedging Gains (Losses) (1) | Non-credit Impairments | Unrecognized Change in Defined Benefit Plan Liabilities | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||
Balance, December 31, 2023 | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
OCI, before reclassifications, net of tax | ( | ( | ( | ||||||||||||||||||||||||||
Amounts reclassified from AOCI, net of tax | ( | ||||||||||||||||||||||||||||
Net OCI, current period | ( | ( | ( | ||||||||||||||||||||||||||
Balance, March 31, 2024 | $ | ( | $ | $ | ( | $ | ( | $ | ( |
(In thousands) | Unrealized Investment Gains (Losses) | Non-credit Impairments | Unrecognized Change in Defined Benefit Plan Liabilities | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||
Balance, December 31, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
OCI, before reclassifications, net of tax | |||||||||||||||||||||||
Amounts reclassified from AOCI, net of tax | |||||||||||||||||||||||
Net OCI, current period | |||||||||||||||||||||||
Balance, March 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(In thousands, except per share data) | Three Months Ended March 31 | ||||||||||
2024 | 2023 | ||||||||||
Weighted average number of common shares outstanding, basic | |||||||||||
Dilutive effect of securities: | |||||||||||
Restricted Share Units | |||||||||||
Performance Share Units | |||||||||||
Weighted average number of common shares outstanding, diluted | |||||||||||
Effect of dilutive shares on earnings (loss) per share | $ | $ | |||||||||
Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||
(In thousands) | Specialty P&C | Workers' Compensation Insurance | Segregated Portfolio Cell Reinsurance | Corporate | Inter-segment Eliminations | Consolidated | |||||||||||||||||||||||||||||
Net premiums earned | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | |||||||||||||||||||||||||||||||||||
Net investment gains (losses) | ( | ( | |||||||||||||||||||||||||||||||||
Other income (expense)(1) | ( | ( | |||||||||||||||||||||||||||||||||
Net losses and loss adjustment expenses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Underwriting, policy acquisition and operating expenses(1) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
SPC U.S. federal income tax benefit (expense)(2) | ( | ( | |||||||||||||||||||||||||||||||||
SPC dividend (expense) income | ( | ( | |||||||||||||||||||||||||||||||||
Interest expense | ( | ( | |||||||||||||||||||||||||||||||||
Income tax benefit (expense) | ( | ( | |||||||||||||||||||||||||||||||||
Segment results | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Net income (loss) | $ | ||||||||||||||||||||||||||||||||||
Significant non-cash items: | |||||||||||||||||||||||||||||||||||
Depreciation and amortization, net of accretion | $ | $ | $ | ( | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
(In thousands) | Specialty P&C | Workers' Compensation Insurance | Segregated Portfolio Cell Reinsurance | Corporate | Inter-segment Eliminations | Consolidated | |||||||||||||||||||||||||||||
Net premiums earned | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | ( | ( | |||||||||||||||||||||||||||||||||
Net investment gains (losses) | |||||||||||||||||||||||||||||||||||
Other income (expense)(1) | ( | ||||||||||||||||||||||||||||||||||
Net losses and loss adjustment expenses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Underwriting, policy acquisition and operating expenses(1) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
SPC U.S. federal income tax benefit (expense)(2) | ( | ( | |||||||||||||||||||||||||||||||||
SPC dividend (expense) income | ( | ( | |||||||||||||||||||||||||||||||||
Interest expense | ( | ( | |||||||||||||||||||||||||||||||||
Income tax benefit (expense) | |||||||||||||||||||||||||||||||||||
Segment results | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
Reconciliation of segments to consolidated results: | |||||||||||||||||||||||||||||||||||
Contingent Consideration(3) | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | ( | |||||||||||||||||||||||||||||||||
Significant non-cash items: | |||||||||||||||||||||||||||||||||||
Depreciation and amortization, net of accretion | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Includes certain fees for services provided by the Workers' Compensation Insurance segment to the SPCs at Inova Re and Eastern Re which are recorded as expenses within the Segregated Portfolio Cell Reinsurance segment and as other income within the Workers' Compensation Insurance segment. These fees are primarily SPC rental fees and are eliminated between segments in consolidation. | |||||||||||||||||||||||||||||||||||
(2) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs. | |||||||||||||||||||||||||||||||||||
(3) Represents the change in the fair value of contingent consideration issued in connection with the NORCAL acquisition included as a component of consolidated net investment gains (losses) on the Condensed Consolidated Statements of Income and Comprehensive Income. See further discussion on the contingent consideration in Note 2. | |||||||||||||||||||||||||||||||||||
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Specialty P&C Segment | |||||||||||
Gross premiums earned: | |||||||||||
MPL | $ | $ | |||||||||
Medical Technology Liability | |||||||||||
Lloyd's Syndicates | |||||||||||
Other | |||||||||||
Ceded premiums earned | ( | ( | |||||||||
Segment net premiums earned | |||||||||||
Workers' Compensation Insurance Segment | |||||||||||
Gross premiums earned: | |||||||||||
Traditional business | |||||||||||
Alternative market business | |||||||||||
Ceded premiums earned | ( | ( | |||||||||
Segment net premiums earned | |||||||||||
Segregated Portfolio Cell Reinsurance Segment | |||||||||||
Gross premiums earned: | |||||||||||
Workers' compensation(1) | |||||||||||
MPL(2) | |||||||||||
Ceded premiums earned | ( | ( | |||||||||
Segment net premiums earned | |||||||||||
Consolidated net premiums earned | $ | $ |
Three Months Ended March 31 | |||||||||||||||||
(In thousands) | 2024 | 2023 | Change | ||||||||||||||
Net cash provided (used) by: | |||||||||||||||||
Operating activities | $ | (11,649) | $ | (29,843) | $ | 18,194 | |||||||||||
Investing activities | 12,120 | 59,663 | (47,543) | ||||||||||||||
Financing activities | (969) | (3,345) | 2,376 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | $ | (498) | $ | 26,475 | $ | (26,973) |
Healthcare Professional Liability | Medical Technology & Life Sciences Products | Workers' Compensation - Traditional |
Per Occurrence Coverage | Aggregate Coverage |
March 31, 2024 | December 31, 2023 | ||||||||||||||||
($ in thousands) | Carrying Value | % of Total Investment | Carrying Value | % of Total Investment | |||||||||||||
Fixed maturities, available-for-sale | |||||||||||||||||
U.S. Treasury obligations | $ | 240,889 | 6 | % | $ | 243,525 | 5 | % | |||||||||
U.S. Government-sponsored enterprise obligations | 18,927 | 1 | % | 18,724 | 1 | % | |||||||||||
State and municipal bonds | 474,265 | 11 | % | 454,381 | 10 | % | |||||||||||
Corporate debt | 1,714,052 | 40 | % | 1,750,574 | 40 | % | |||||||||||
Residential mortgage-backed securities | 450,052 | 10 | % | 430,137 | 10 | % | |||||||||||
Commercial mortgage-backed securities | 236,979 | 5 | % | 197,861 | 5 | % | |||||||||||
Other asset-backed securities | 408,973 | 9 | % | 398,395 | 9 | % | |||||||||||
Total fixed maturities, available-for-sale | 3,544,137 | 82 | % | 3,493,597 | 80 | % | |||||||||||
Fixed maturities, trading | 50,106 | 1 | % | 48,324 | 1 | % | |||||||||||
Total fixed maturities | 3,594,243 | 83 | % | 3,541,921 | 81 | % | |||||||||||
Equity investments(1) | 137,914 | 3 | % | 151,295 | 4 | % | |||||||||||
Short-term investments | 184,001 | 4 | % | 235,785 | 5 | % | |||||||||||
BOLI | 78,657 | 2 | % | 78,205 | 2 | % | |||||||||||
Investment in unconsolidated subsidiaries | 278,931 | 7 | % | 276,756 | 6 | % | |||||||||||
Other investments | 59,796 | 1 | % | 65,819 | 2 | % | |||||||||||
Total investments | $ | 4,333,542 | 100 | % | $ | 4,349,781 | 100 | % | |||||||||
(1) Includes $101.6 million and $114.9 million of investment grade bond funds as of March 31, 2024 and December 31, 2023, respectively, which are not subject to significant equity price risk. |
March 31, 2024 | December 31, 2023 | ||||||||||||||||
($ in thousands) | Carrying Value | % of Total Investment | Carrying Value | % of Total Investment | |||||||||||||
Rating* | |||||||||||||||||
AAA | $ | 535,654 | 15 | % | $ | 489,121 | 14 | % | |||||||||
AA+ | 710,520 | 20 | % | 689,491 | 20 | % | |||||||||||
AA | 209,973 | 6 | % | 206,471 | 6 | % | |||||||||||
AA- | 173,522 | 5 | % | 180,827 | 5 | % | |||||||||||
A+ | 290,382 | 8 | % | 286,723 | 8 | % | |||||||||||
A | 410,841 | 12 | % | 410,935 | 12 | % | |||||||||||
A- | 363,808 | 10 | % | 374,612 | 11 | % | |||||||||||
BBB+ | 189,765 | 5 | % | 194,140 | 5 | % | |||||||||||
BBB | 279,059 | 7 | % | 286,378 | 8 | % | |||||||||||
BBB- | 137,350 | 4 | % | 138,399 | 4 | % | |||||||||||
Below investment grade | 242,206 | 7 | % | 233,405 | 6 | % | |||||||||||
Not rated | 1,057 | 1 | % | 3,095 | 1 | % | |||||||||||
Total | $ | 3,544,137 | 100 | % | $ | 3,493,597 | 100 | % | |||||||||
*Average of three NRSRO sources, presented as an S&P equivalent. Source: S&P, Copyright ©2024, S&P Global Market Intelligence |
Carrying Value | March 31, 2024 | ||||||||||||||||
($ in thousands, except expected funding period) | March 31, 2024 | December 31, 2023 | Unfunded Commitment | Expected funding period in years | |||||||||||||
Qualified affordable housing project tax credit partnerships (1) | $ | 562 | $ | 666 | $ | 118 | 3 | ||||||||||
All other investments, primarily investment fund LPs/LLCs | 278,369 | 276,090 | 138,385 | 4 | |||||||||||||
Total | $ | 278,931 | $ | 276,756 | $ | 138,503 | |||||||||||
(1) The carrying value reflects our total commitments (both funded and unfunded) to the partnerships, less any amortization, since our initial investment. We fund these investments based on funding schedules maintained by the partnerships. | |||||||||||||||||
($ in thousands) | March 31, 2024 | December 31, 2023 | |||||||||
Contribution Certificates | $ | 179,865 | $ | 179,387 | |||||||
Revolving Credit Agreement | 125,000 | 125,000 | |||||||||
Term Loan | 125,000 | 125,000 | |||||||||
Total principal | 429,865 | 429,387 | |||||||||
Less unamortized debt issuance costs | 2,091 | 2,254 | |||||||||
Debt less unamortized debt issuance costs | $ | 427,774 | $ | 427,133 | |||||||
Three Months Ended March 31 | |||||||||||
($ in thousands, except per share data) | 2024 | 2023 | Change | ||||||||
Revenues: | |||||||||||
Net premiums written | $ | 282,673 | $ | 284,909 | $ | (2,236) | |||||
Net premiums earned | $ | 244,150 | $ | 239,787 | $ | 4,363 | |||||
Net investment result | 36,860 | 29,189 | 7,671 | ||||||||
Net investment gains (losses) | (268) | 2,912 | (3,180) | ||||||||
Other income | 3,955 | 787 | 3,168 | ||||||||
Total revenues | 284,697 | 272,675 | 12,022 | ||||||||
Expenses: | |||||||||||
Net losses and loss adjustment expenses | 194,694 | 205,296 | (10,602) | ||||||||
Underwriting, policy acquisition and operating expenses | 78,005 | 67,788 | 10,217 | ||||||||
SPC U.S. federal income tax expense (benefit) | 416 | 532 | (116) | ||||||||
SPC dividend expense (income) | 607 | 1,942 | (1,335) | ||||||||
Interest expense | 5,657 | 5,463 | 194 | ||||||||
Total expenses | 279,379 | 281,021 | (1,642) | ||||||||
Income (loss) before income taxes | 5,318 | (8,346) | 13,664 | ||||||||
Income tax expense (benefit) | 692 | (2,172) | 2,864 | ||||||||
Net income (loss) | $ | 4,626 | $ | (6,174) | $ | 10,800 | |||||
Non-GAAP operating income (loss) | $ | 4,177 | $ | (7,418) | $ | 11,595 | |||||
Earnings (loss) per share: | |||||||||||
Basic | $ | 0.09 | $ | (0.11) | $ | 0.20 | |||||
Diluted | $ | 0.09 | $ | (0.11) | $ | 0.20 | |||||
Non-GAAP operating income (loss) per share: | |||||||||||
Basic | $ | 0.08 | $ | (0.14) | $ | 0.22 | |||||
Diluted | $ | 0.08 | $ | (0.14) | $ | 0.22 | |||||
Net loss ratio | 79.7 | % | 85.6 | % | (5.9 | pts) | |||||
Underwriting expense ratio | 31.9 | % | 28.3 | % | 3.6 | pts | |||||
Combined ratio | 111.6 | % | 113.9 | % | (2.3 | pts) | |||||
Operating ratio | 97.7 | % | 101.3 | % | (3.6 | pts) | |||||
Effective tax rate | 13.0 | % | 26.0 | % | (13.0 | pts) | |||||
Return on equity* | 1.7 | % | (2.5 | %) | 4.2 | pts | |||||
Non-GAAP operating return on equity* | 1.5 | % | (2.6 | %) | 4.1 | pts | |||||
*Annualized. See further discussion on this calculation in the Executive Summary of Operations section under the heading "Non-GAAP Operating ROE." | |||||||||||
In all tables that follow, the abbreviation "nm" indicates that the information or the percentage change is not meaningful. |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net premiums earned | |||||||||||||||||||||||
Specialty P&C | $ | 188,888 | $ | 183,684 | $ | 5,204 | 2.8 | % | |||||||||||||||
Workers' Compensation Insurance | 41,094 | 40,803 | 291 | 0.7 | % | ||||||||||||||||||
Segregated Portfolio Cell Reinsurance | 14,168 | 15,300 | (1,132) | (7.4 | %) | ||||||||||||||||||
Consolidated total | $ | 244,150 | $ | 239,787 | $ | 4,363 | 1.8 | % |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net investment income | $ | 33,897 | $ | 30,310 | $ | 3,587 | 11.8 | % | |||||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries* | 2,963 | (1,121) | 4,084 | 364.3 | % | ||||||||||||||||||
Net investment result | $ | 36,860 | $ | 29,189 | $ | 7,671 | 26.3 | % | |||||||||||||||
*Equity in earnings (loss) of unconsolidated subsidiaries includes our share of the operating results of interests we hold in certain LPs/LLCs as well as a nominal amount of operating losses associated with our tax credit partnership investments, which are designed to generate returns in the form of tax credits and tax-deductible project operating losses. We record our allocable portion of the partnership operating income or loss as the results of the LPs/LLCs become available, typically following the end of a reporting period. | |||||||||||||||||||||||
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net impairment losses recognized in earnings | $ | (934) | $ | (2,933) | $ | 1,999 | (68.2 | %) | |||||||||||||||
Other net investment gains (losses)(1) | 666 | 5,845 | (5,179) | (88.6 | %) | ||||||||||||||||||
Net investment gains (losses) | $ | (268) | $ | 2,912 | $ | (3,180) | (109.2 | %) | |||||||||||||||
(1) Consolidated other net investment gains (losses) in the three months ended March 31, 2023 include a gain of $1.0 million reflecting the change in the fair value of contingent consideration issued in connection with the NORCAL acquisition (see Note 2 and Note 6 of the Notes to Condensed Consolidated Financial Statements). We do not consider this adjustment in assessing the financial performance of any of our segments and therefore, we have excluded it from the Segment Results sections that follow. See Note 12 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of our segment results to our consolidated results. |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Foreign currency exchange rate gains (losses) | $ | 1,929 | $ | (827) | $ | 2,756 | 333.3 | % | |||||||||||||||
Other | 2,026 | 1,614 | 412 | 25.5 | % | ||||||||||||||||||
Other income | $ | 3,955 | $ | 787 | $ | 3,168 | 402.5 | % |
Three Months Ended March 31 | |||||||||||||||||
($ in millions) | 2024 | 2023 | Change | ||||||||||||||
Current accident year net loss ratio | |||||||||||||||||
Consolidated ratio | 79.9 | % | 82.7 | % | (2.8 | pts) | |||||||||||
Specialty P&C | 81.7 | % | 86.4 | % | (4.7 | pts) | |||||||||||
Workers' Compensation Insurance | 77.0 | % | 72.6 | % | 4.4 | pts | |||||||||||
Segregated Portfolio Cell Reinsurance | 65.1 | % | 64.9 | % | 0.2 | pts | |||||||||||
Calendar year net loss ratio | |||||||||||||||||
Consolidated ratio | 79.7 | % | 85.6 | % | (5.9 | pts) | |||||||||||
Specialty P&C | 81.0 | % | 90.4 | % | (9.4 | pts) | |||||||||||
Workers' Compensation Insurance | 77.0 | % | 75.6 | % | 1.4 | pts | |||||||||||
Segregated Portfolio Cell Reinsurance | 71.0 | % | 55.1 | % | 15.9 | pts | |||||||||||
Favorable (unfavorable) reserve development, prior accident years | |||||||||||||||||
Consolidated | $ | 0.4 | $ | (7.1) | $ | 7.5 | |||||||||||
Specialty P&C | $ | 1.3 | $ | (7.4) | $ | 8.7 | |||||||||||
Workers' Compensation Insurance | $ | — | $ | (1.2) | $ | 1.2 | |||||||||||
Segregated Portfolio Cell Reinsurance | $ | (0.9) | $ | 1.5 | $ | (2.4) | |||||||||||
Increase (Decrease) 2024 versus 2023 | |||||
(In percentage points) | Comparative three-month periods | ||||
Estimated ratio increase (decrease) attributable to: | |||||
Specialty P&C | (3.6 pts) | ||||
Workers' Compensation Insurance | 0.7 pts | ||||
Segregated Portfolio Cell Reinsurance | 0.1 pts | ||||
Decrease in the consolidated current accident year net loss ratio | (2.8 pts) | ||||
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net favorable (unfavorable) reserve development | $ | (1,240) | $ | (9,566) | $ | 8,326 | (87.0 | %) | |||||||||||||||
NORCAL Acquisition - Purchase Accounting Amortization | 1,656 | 2,510 | (854) | (34.0 | %) | ||||||||||||||||||
Total net favorable (unfavorable) reserve development | $ | 416 | $ | (7,056) | $ | 7,472 | (105.9 | %) | |||||||||||||||
Three Months Ended March 31 | |||||||||||||||||
Underwriting Expense Ratio | 2024 | 2023 | Change | ||||||||||||||
Consolidated | 31.9 | % | 28.3 | % | 3.6 | pts | |||||||||||
Specialty P&C | 27.0 | % | 23.2 | % | 3.8 | pts | |||||||||||
Workers' Compensation Insurance | 35.3 | % | 31.8 | % | 3.5 | pts | |||||||||||
Segregated Portfolio Cell Reinsurance | 33.3 | % | 32.9 | % | 0.4 | pts | |||||||||||
Corporate (1) | 3.6 | % | 3.4 | % | 0.2 | pts | |||||||||||
(1) There are no net premiums earned associated with the Corporate segment. Ratios shown are the contribution of the Corporate segment to the consolidated ratio (Corporate operating expenses divided by consolidated net premiums earned). |
Increase (Decrease) 2024 versus 2023 | |||||
(In percentage points) | Comparative three-month periods | ||||
Estimated ratio increase (decrease) attributable to: | |||||
Change in Net Premiums Earned and DPAC amortization | 0.2 pts | ||||
Employee Retention Credit | 1.6 pts | ||||
Contingent Consideration Remeasurement Adjustment | 0.4 pts | ||||
All other, net | 1.4 pts | ||||
Increase in the underwriting expense ratio | 3.6 pts | ||||
($ in thousands) | Three Months Ended March 31 | ||||||||||||||||||||||
2024 | 2023 | Change | |||||||||||||||||||||
Income (loss) before income taxes | $ | 5,318 | $ | (8,346) | $ | 13,664 | 163.7 | % | |||||||||||||||
Income tax expense (benefit) | 692 | (2,172) | 2,864 | 131.9 | % | ||||||||||||||||||
Net income (loss) | $ | 4,626 | $ | (6,174) | $ | 10,800 | 174.9 | % | |||||||||||||||
Effective tax rate | 13.0% | 26.0% | (13.0 pts) |
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Projected annual effective tax rate | 17.3 | % | 19.9 | % | |||||||
Tax effect of discrete items | (4.3 | %) | 6.1 | % | |||||||
Total effective tax rate | 13.0 | % | 26.0 | % |
Three Months Ended March 31 | |||||||||||
2024 | 2023 | Change | |||||||||
Combined ratio | 111.6 | % | 113.9 | % | (2.3 | pts) | |||||
Less: investment income ratio | 13.9 | % | 12.6 | % | 1.3 | pts | |||||
Operating ratio | 97.7 | % | 101.3 | % | (3.6 | pts) | |||||
Increase (Decrease) 2024 versus 2023 | |||||
(In percentage points) | Comparative three-month periods | ||||
Estimated ratio increase (decrease) attributable to: | |||||
Change in Net Premiums Earned and DPAC amortization | 0.2 pts | ||||
NORCAL Acquisition - Purchase Accounting Amortization | 0.3 pts | ||||
Contingent Consideration Remeasurement Adjustment | 0.4 pts | ||||
Employee Retention Credit | 1.6 pts | ||||
Investment Income | (1.3 pts) | ||||
Change in Prior Accident Year Reserve Development (1) | (3.4 pts) | ||||
All other, net | (1.4 pts) | ||||
Decrease in the operating ratio | (3.6 pts) | ||||
(1) Excludes the impact of purchase accounting amortization on prior accident year reserve development. |
Three Months Ended March 31 | |||||||||||
(In thousands, except per share data) | 2024 | 2023 | |||||||||
Net income (loss) | $ | 4,626 | $ | (6,174) | |||||||
Items excluded in the calculation of Non-GAAP operating income (loss): | |||||||||||
Net investment (gains) losses (1) | 268 | (2,912) | |||||||||
Net investment gains (losses) attributable to SPCs which no profit/loss is retained (2) | 1,151 | 913 | |||||||||
Foreign currency exchange rate (gains) losses (3) | (1,929) | 827 | |||||||||
Guaranty fund assessments (recoupments) | 87 | (74) | |||||||||
Pre-tax effect of exclusions | (423) | (1,246) | |||||||||
Tax effect, at 21% (4) | (26) | 2 | |||||||||
After-tax effect of exclusions | (449) | (1,244) | |||||||||
Non-GAAP operating income (loss) | $ | 4,177 | $ | (7,418) | |||||||
Per diluted common share: | |||||||||||
Net income (loss) | $ | 0.09 | $ | (0.11) | |||||||
Effect of exclusions | (0.01) | (0.03) | |||||||||
Non-GAAP operating income (loss) per diluted common share | $ | 0.08 | $ | (0.14) | |||||||
(1) Net investment gains (losses) for the three months ended March 31, 2023 include a gain of $1.0 million related to the change in the fair value of contingent consideration issued in connection with the NORCAL acquisition. We have excluded this adjustment as it does not reflect normal operating results. See further discussion around the contingent consideration in Notes 2 and 6 of the Notes to Condensed Consolidated Financial Statements. | |||||||||||
(2) Net investment gains (losses) on investments related to SPCs are recognized in our Segregated Portfolio Cell Reinsurance segment. SPC results, including any net investment gain or loss, that are attributable to external cell participants are reflected in the SPC dividend expense (income). To be consistent with our exclusion of net investment gains (losses) recognized in earnings, we are excluding the portion of net investment gains (losses) that is included in the SPC dividend expense (income) which is attributable to the external cell participants. | |||||||||||
(3) Foreign currency exchange rate gains (losses) relate to the impact of foreign exchange rate movements on foreign currency denominated loss reserves predominately associated with premium assumed from an international medical professional liability insured in our Specialty P&C segment. Our participation in this program has grown in recent years which has led to greater volatility in our results of operations even with nominal movements in exchange rates given the size of the reserve. We mitigate foreign exchange rate exposure on our Condensed Consolidated Balance Sheet by generally matching the currency and duration of associated investments to the corresponding loss reserves. In accordance with GAAP, the impact on the market value of available-for-sale fixed maturities due to changes in foreign currency exchange rates is reflected as a part of OCI. Conversely, the impact of changes in foreign currency exchange rates on loss reserves is reflected through net income (loss) as a component of other income. Therefore, we believe foreign currency exchange rate gains (losses) in our Condensed Consolidated Statements of Income and Comprehensive Income in isolation are not indicative of our operating performance. | |||||||||||
(4) The 21% rate is the annual expected statutory tax rate associated with the taxable or tax deductible items listed above. We utilized the estimated annual effective tax rate method for the three months ended March 31, 2024 and 2023. See further discussion on this method in the Critical Accounting Estimates section under the heading "Estimation of Taxes" and in Note 4 of the Notes to Condensed Consolidated Financial Statements. For the 2024 and 2023 periods, our effective tax rate was applied to these items in calculating net income (loss), excluding net investment gains (losses) and related adjustments which were treated as discrete items and were tax effected at the annual expected statutory tax rate (21%) in the period they were included in our consolidated tax provision and net income (loss). The 2023 gain related to the change in the fair value of the contingent consideration was non-taxable and therefore had no associated income tax impact. The taxes associated with the net investment gains (losses) related to SPCs in our Segregated Portfolio Cell Reinsurance segment are paid by the individual SPCs and are not included in our consolidated tax provision or net income (loss); therefore, both the net investment gains (losses) from our Segregated Portfolio Cell Reinsurance segment and the adjustment to exclude the portion of net investment gains (losses) included in the SPC dividend expense (income) in the table above are not tax effected. |
Three Months Ended March 31 | ||||||||||||||
2024 | 2023 | Change | ||||||||||||
ROE(1) | 1.7 | % | (2.5 | %) | 4.2 | pts | ||||||||
Pre-tax effect of items excluded in the calculation of Non-GAAP operating ROE | (0.2 | %) | (0.1 | %) | (0.1 | pts) | ||||||||
Tax effect, at 21%(2) | — | % | — | % | — | pts | ||||||||
Non-GAAP operating ROE | 1.5 | % | (2.6 | %) | 4.1 | pts | ||||||||
(1) The change in the fair value of contingent consideration issued in connection with the NORCAL acquisition was not annualized in our quarterly calculation of ROE for the 2023 three-month period as this item is considered non-recurring in nature. | ||||||||||||||
(2) The 21% rate is the annual expected statutory tax rate associated with the taxable or tax deductible items. See further discussion in footnote 4 in this section under the heading "Non-GAAP Operating Income." |
Book Value Per Share | |||||
Book Value Per Share at December 31, 2023 | $ | 21.82 | |||
Less: AOCI Per Share(1) | (4.01) | ||||
Non-GAAP Adjusted Book Value Per Share at December 31, 2023 | 25.83 | ||||
Increase (decrease) to Non-GAAP Adjusted Book Value Per Share during the three months ended March 31, 2024 attributable to: | |||||
Net income (loss) | 0.09 | ||||
Other(2) | (0.04) | ||||
Non-GAAP Adjusted Book Value Per Share at March 31, 2024 | 25.88 | ||||
Add: AOCI Per Share(1) | (4.06) | ||||
Book Value Per Share at March 31, 2024 | $ | 21.82 | |||
(1) Primarily the impact of accumulated unrealized investment gains (losses) on our available-for-sale fixed maturity investments. See Note 9 of the Notes to Condensed Consolidated Financial Statements for additional information. | |||||
(2) Includes the impact of share-based compensation. |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net premiums written | $ | 218,699 | $ | 217,390 | $ | 1,309 | 0.6 | % | |||||||||||||||
Net premiums earned | $ | 188,888 | $ | 183,684 | $ | 5,204 | 2.8 | % | |||||||||||||||
Other income | 1,353 | 990 | 363 | 36.7 | % | ||||||||||||||||||
Net losses and loss adjustment expenses | (152,994) | (166,029) | 13,035 | (7.9 | %) | ||||||||||||||||||
Underwriting, policy acquisition and operating expenses | (51,049) | (42,681) | (8,368) | 19.6 | % | ||||||||||||||||||
Segment results | $ | (13,802) | $ | (24,036) | $ | 10,234 | 42.6 | % | |||||||||||||||
Net loss ratio | 81.0% | 90.4% | (9.4 pts) | ||||||||||||||||||||
Underwriting expense ratio | 27.0% | 23.2% | 3.8 pts | ||||||||||||||||||||
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Gross premiums written | $ | 238,718 | $ | 242,363 | $ | (3,645) | (1.5 | %) | |||||||||||||||
Less: Ceded premiums written | 20,019 | 24,973 | (4,954) | (19.8 | %) | ||||||||||||||||||
Net premiums written | $ | 218,699 | $ | 217,390 | $ | 1,309 | 0.6 | % |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Medical Professional Liability (1)(2) | $ | 218,966 | $ | 221,831 | $ | (2,865) | (1.3 | %) | |||||||||||||||
Medical Technology Liability (3) | 9,419 | 9,070 | 349 | 3.8 | % | ||||||||||||||||||
Lloyd's Syndicates (4) | 3,710 | 3,489 | 221 | 6.3 | % | ||||||||||||||||||
Other (5) | 6,623 | 7,973 | (1,350) | (16.9 | %) | ||||||||||||||||||
Total Gross Premiums Written | $ | 238,718 | $ | 242,363 | $ | (3,645) | (1.5 | %) |
Three Months Ended March 31 | |||||
2024 | |||||
Specialty P&C segment* | 7 | % | |||
MPL | 8 | % | |||
Medical Technology Liability | 1 | % | |||
Other | 2 | % | |||
* Excludes Lloyd's Syndicates premium. | |||||
Three Months Ended March 31 | |||||||||||
(In millions) | 2024 | 2023 | |||||||||
MPL | $ | 9.3 | $ | 9.4 | |||||||
Medical Technology Liability | 0.9 | 1.1 | |||||||||
Other | 0.2 | 0.3 | |||||||||
Total | $ | 10.4 | $ | 10.8 | |||||||
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Specialty P&C segment* | 86 | % | 85 | % | |||||||
MPL | 86 | % | 85 | % | |||||||
Medical Technology Liability | 94 | % | 90 | % | |||||||
Other | 78 | % | 83 | % | |||||||
* Excludes Lloyd's Syndicates premium. | |||||||||||
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Excess of loss reinsurance arrangements (1) | $ | 11,783 | $ | 11,224 | $ | 559 | 5.0 | % | ||||||
Premium ceded to SPCs (2) | (63) | 2,889 | (2,952) | (102.2 | %) | |||||||||
Other ceded premiums written (3) | 8,299 | 8,660 | (361) | (4.2 | %) | |||||||||
Adjustment to premiums owed under reinsurance agreements, prior accident years, net (4) | — | 2,200 | (2,200) | nm | ||||||||||
Total ceded premiums written | $ | 20,019 | $ | 24,973 | $ | (4,954) | (19.8 | %) |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Ceded premiums ratio | 8.4 | % | 10.3 | % | (1.9 | pts) | |||||||||||
Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed) | — | % | 0.9 | % | (0.9 | pts) | |||||||||||
Ratio, current accident year | 8.4 | % | 9.4 | % | (1.0 | pts) |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Gross premiums earned | $ | 206,627 | $ | 204,053 | $ | 2,574 | 1.3 | % | |||||||||||||||
Less: Ceded premiums earned | 17,739 | 20,369 | (2,630) | (12.9 | %) | ||||||||||||||||||
Net premiums earned | $ | 188,888 | $ | 183,684 | $ | 5,204 | 2.8 | % |
Net Loss Ratios (1) | |||||||||||||||||
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Calendar year net loss ratio | 81.0 | % | 90.4 | % | (9.4 | pts) | |||||||||||
Less impact of prior accident years on the net loss ratio | (0.7 | %) | 4.0 | % | (4.7 | pts) | |||||||||||
Current accident year net loss ratio(2) | 81.7 | % | 86.4 | % | (4.7 | pts) | |||||||||||
(In percentage points) | Increase (Decrease) 2024 versus 2023 | |||||||
Comparative three-month periods | ||||||||
Estimated ratio increase (decrease) attributable to: | ||||||||
Lloyd's Syndicates | (0.2 pts) | |||||||
Ceded Premium Adjustment, Prior Accident Years | (1.2 pts) | |||||||
All other, net | (3.3 pts) | |||||||
Decrease in current accident year net loss ratio | (4.7 pts) | |||||||
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Net favorable (unfavorable) reserve development | $ | — | $ | (10,110) | $ | 10,110 | (100.0 | %) | |||||||||||||||
Lloyd's Syndicates net favorable (unfavorable) reserve development | (405) | 249 | (654) | (262.7 | %) | ||||||||||||||||||
NORCAL Acquisition - Purchase Accounting Amortization | 1,656 | 2,510 | (854) | (34.0 | %) | ||||||||||||||||||
Total net favorable (unfavorable) reserve development | $ | 1,251 | $ | (7,351) | $ | 8,602 | (117.0 | %) | |||||||||||||||
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
DPAC amortization | $ | 25,843 | $ | 24,806 | $ | 1,037 | 4.2 | % | |||||||||||||||
Management fees | 1,145 | 1,164 | (19) | (1.6 | %) | ||||||||||||||||||
Other underwriting and operating expenses | 24,061 | 16,711 | 7,350 | 44.0 | % | ||||||||||||||||||
Total | $ | 51,049 | $ | 42,681 | $ | 8,368 | 19.6 | % |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Underwriting expense ratio | 27.0 | % | 23.2 | % | 3.8 | pts |
Increase (Decrease) 2024 versus 2023 | |||||
(In percentage points) | Comparative three-month periods | ||||
Estimated ratio increase (decrease) attributable to: | |||||
Change in Net Premiums Earned and DPAC amortization | 0.2 pts | ||||
Employee Retention Credit | 2.1 pts | ||||
Contingent Consideration Remeasurement Adjustment | 0.5 pts | ||||
All other, net | 1.0 pts | ||||
Increase in the underwriting expense ratio | 3.8 pts | ||||
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Net premiums written | $ | 50,353 | $ | 47,572 | $ | 2,781 | 5.8 | % | ||||||
Net premiums earned | $ | 41,094 | $ | 40,803 | $ | 291 | 0.7 | % | ||||||
Other income | 477 | 581 | (104) | (17.9 | %) | |||||||||
Net losses and loss adjustment expenses | (31,636) | (30,844) | (792) | 2.6 | % | |||||||||
Underwriting, policy acquisition and operating expenses | (14,490) | (12,980) | (1,510) | 11.6 | % | |||||||||
Segment results | $ | (4,555) | $ | (2,440) | $ | (2,115) | (86.7 | %) | ||||||
Net loss ratio | 77.0% | 75.6% | 1.4 pts | |||||||||||
Underwriting expense ratio | 35.3% | 31.8% | 3.5 pts |
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Gross premiums written | $ | 72,615 | $ | 73,431 | $ | (816) | (1.1 | %) | ||||||
Less: Ceded premiums written | 22,262 | 25,859 | (3,597) | (13.9 | %) | |||||||||
Net premiums written | $ | 50,353 | $ | 47,572 | $ | 2,781 | 5.8 | % |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Traditional business: | |||||||||||||||||||||||
Guaranteed cost | $ | 40,744 | $ | 37,799 | $ | 2,945 | 7.8 | % | |||||||||||||||
Policyholder dividend | 8,086 | 7,170 | 916 | 12.8 | % | ||||||||||||||||||
Deductible | 3,273 | 2,331 | 942 | 40.4 | % | ||||||||||||||||||
Retrospective | 6 | 305 | (299) | (98.0 | %) | ||||||||||||||||||
Other | 1,531 | 1,703 | (172) | (10.1 | %) | ||||||||||||||||||
Change in EBUB estimate | — | 1,000 | (1,000) | nm | |||||||||||||||||||
Total traditional business (1) | 53,640 | 50,308 | 3,332 | 6.6 | % | ||||||||||||||||||
Alternative market business(2) | 18,975 | 23,123 | (4,148) | (17.9 | %) | ||||||||||||||||||
Total | $ | 72,615 | $ | 73,431 | $ | (816) | (1.1 | %) |
Three Months Ended March 31 | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
($ in millions) | Traditional Business | Alternative Market Business | Segment Results | Traditional Business | Alternative Market Business | Segment Results | |||||||||||||||||
New business | $ | 8.2 | $ | 1.3 | $ | 9.5 | $ | 6.6 | $ | 1.2 | $ | 7.8 | |||||||||||
Audit premium (excluding EBUB) | $ | 1.9 | $ | 1.4 | $ | 3.3 | $ | 2.5 | $ | 1.2 | $ | 3.7 | |||||||||||
Retention rate (1) | 87 | % | 76 | % | 84 | % | 83 | % | 90 | % | 85 | % | |||||||||||
Change in renewal pricing (2) | (5 | %) | (2 | %) | (4 | %) | (6 | %) | (5 | %) | (6 | %) | |||||||||||
(1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal. Our retention rate can be impacted by various factors, including price or other competitive issues, insureds being acquired, or a decision not to renew based on our underwriting evaluation. | |||||||||||||||||||||||
(2) The pricing of our business includes an assessment of the underlying policy exposure and market conditions. We continue to base our pricing on expected losses, as indicated by our historical loss data. |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Premiums ceded to SPCs(1) | $ | 15,997 | $ | 19,992 | $ | (3,995) | (20.0 | %) | |||||||||||||||
Premiums ceded to external reinsurers(2) | 4,039 | 3,429 | 610 | 17.8 | % | ||||||||||||||||||
Premiums ceded to unaffiliated captive insurers(1) | 2,978 | 3,131 | (153) | (4.9 | %) | ||||||||||||||||||
Change in return premium estimate under external reinsurance (3) | (30) | 15 | (45) | (300.0 | %) | ||||||||||||||||||
Estimated revenue share under external reinsurance (4) | (722) | (708) | (14) | 2.0 | % | ||||||||||||||||||
Total ceded premiums written | $ | 22,262 | $ | 25,859 | $ | (3,597) | (13.9 | %) | |||||||||||||||
(1) Represents alternative market business that is ceded under 100% quota share reinsurance agreements to the SPCs in our Segregated Portfolio Cell Reinsurance segment. Premiums ceded to unaffiliated captive insurers represent alternative market business for two programs that are ceded under 100% quota share reinsurance agreements. See further discussion on alternative market gross premiums written in our Segment Results - Segregated Portfolio Cell Reinsurance section under the heading "Gross Premiums Written" that follows. | |||||||||||||||||||||||
(2) Under our external reinsurance treaty for traditional business, we retain the first $0.5 million in risk insured by us and cede losses in excess of this amount on each loss occurrence, subject to an AAD, equal to 3.5% of subject earned premium for the treaty years effective May 1, 2023 and 2022. Premiums ceded under our traditional reinsurance treaty are based on premiums earned during the treaty period. Our ceded premium increased for the three months ended March 31, 2024 as compared to the same period of 2023, reflecting higher reinsurance rates at our May 1, 2023 renewal. | |||||||||||||||||||||||
(3) Changes in the return premium estimate reflect adjustments to our estimate of expected future recovery of ceded premium based on the underlying loss experience of our reinsurance treaties that include a provision for return premium. Increases in reinsured losses reduce the return premium estimate, while decreases in reinsured losses increase the return premium estimate. | |||||||||||||||||||||||
(4) We are party to a revenue sharing agreement with our reinsurance broker under which we participate in the broker's revenue earned under our reinsurance treaties based on the volume of premium ceded. We estimate the amount of revenue we expect to receive under this agreement as premiums are recognized and ceded to the reinsurers. |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Ceded premiums ratio, as reported | 33.2 | % | 33.3 | % | (0.1 | pts) | |||||||||||
Less the effect of: | |||||||||||||||||
Premiums ceded to SPCs (100%) | 23.2 | % | 24.2 | % | (1.0 | pts) | |||||||||||
Premiums ceded to unaffiliated captive insurers (100%) | 2.6 | % | 2.7 | % | (0.1 | pts) | |||||||||||
Estimated revenue share | (1.6 | %) | (1.7 | %) | 0.1 | pts | |||||||||||
Assumed premiums earned (not ceded to external reinsurers) | (0.3 | %) | (0.3 | %) | — | pts | |||||||||||
Ceded premiums ratio (related to external reinsurance), less the effects of above | 9.3 | % | 8.4 | % | 0.9 | pts |
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Gross premiums earned | $ | 61,539 | $ | 61,166 | $ | 373 | 0.6 | % | ||||||
Less: Ceded premiums earned | 20,445 | 20,363 | 82 | 0.4 | % | |||||||||
Net premiums earned | $ | 41,094 | $ | 40,803 | $ | 291 | 0.7 | % |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Calendar year net loss ratio | 77.0 | % | 75.6 | % | 1.4 | pts | |||||||||||
Less impact of prior accident years on the net loss ratio | — | % | 3.0 | % | (3.0 | pts) | |||||||||||
Current accident year net loss ratio | 77.0 | % | 72.6 | % | 4.4 | pts | |||||||||||
Less estimated ratio increase (decrease) attributable to: | |||||||||||||||||
ULAE | 6.5 | % | 7.3 | % | (0.8 | pts) | |||||||||||
Change in the AAD (1) | 3.7 | % | 3.4 | % | 0.3 | pts | |||||||||||
Current accident year net loss ratio, excluding the effect of items above | 66.8 | % | 61.9 | % | 4.9 | pts | |||||||||||
(1) See previous discussion of the AAD under the heading "Ceded Premiums Written." |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
DPAC amortization | $ | 7,380 | $ | 7,010 | $ | 370 | 5.3 | % | |||||||||||||||
Management fees | 545 | 550 | (5) | (0.9 | %) | ||||||||||||||||||
Other underwriting and operating expenses | 10,051 | 8,986 | 1,065 | 11.9 | % | ||||||||||||||||||
SPC ceding commission offset | (3,486) | (3,566) | 80 | (2.2 | %) | ||||||||||||||||||
Total | $ | 14,490 | $ | 12,980 | $ | 1,510 | 11.6 | % |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Underwriting expense ratio, as reported | 35.3 | % | 31.8 | % | 3.5 | pts | |||||||||||
Less estimated ratio increase (decrease) attributable to: | |||||||||||||||||
Impact of ceding commissions received from SPCs | 4.4 | % | 3.5 | % | 0.9 | pts | |||||||||||
Impact of audit premium | (1.0 | %) | (1.8 | %) | 0.8 | pts | |||||||||||
Underwriting expense ratio, less listed effects | 31.9 | % | 30.1 | % | 1.8 | pts |
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Net premiums written | $ | 13,621 | $ | 19,947 | $ | (6,326) | (31.7 | %) | ||||||
Net premiums earned | $ | 14,168 | $ | 15,300 | $ | (1,132) | (7.4 | %) | ||||||
Net investment income | 693 | 420 | 273 | 65.0 | % | |||||||||
Net investment gains (losses) | 1,471 | 1,160 | 311 | 26.8 | % | |||||||||
Other income (expenses) | (1) | 1 | (2) | (200.0 | %) | |||||||||
Net losses and loss adjustment expenses | (10,064) | (8,423) | (1,641) | 19.5 | % | |||||||||
Underwriting, policy acquisition and operating expenses | (4,713) | (5,035) | 322 | (6.4 | %) | |||||||||
SPC U.S. federal income tax (expense) benefit (1) | (416) | (532) | 116 | (21.8 | %) | |||||||||
SPC net results | 1,138 | 2,891 | (1,753) | (60.6 | %) | |||||||||
SPC dividend (expense) income (2) | (607) | (1,942) | 1,335 | (68.7 | %) | |||||||||
Segment results (3) | $ | 531 | $ | 949 | $ | (418) | (44.0 | %) | ||||||
Net loss ratio | 71.0% | 55.1% | 15.9 pts | |||||||||||
Underwriting expense ratio | 33.3% | 32.9% | 0.4 pts | |||||||||||
(1) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs. | ||||||||||||||
(2) Represents the net (profit) loss attributable to external cell participants. | ||||||||||||||
(3) Represents our share of the net profit (loss) and OCI of the SPCs in which we participate. |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Gross premiums written | $ | 15,934 | $ | 22,881 | $ | (6,947) | (30.4 | %) | |||||||||||||||
Less: Ceded premiums written | 2,313 | 2,934 | (621) | (21.2 | %) | ||||||||||||||||||
Net premiums written | $ | 13,621 | $ | 19,947 | $ | (6,326) | (31.7 | %) |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Workers' compensation | $ | 15,997 | $ | 19,992 | $ | (3,995) | (20.0 | %) | |||||||||||||||
Medical professional liability | (63) | 2,889 | (2,952) | (102.2 | %) | ||||||||||||||||||
Gross Premiums Written | $ | 15,934 | $ | 22,881 | $ | (6,947) | (30.4 | %) |
Three Months Ended March 31 | |||||||||||
($ in millions) | 2024 | 2023 | |||||||||
New business | $ | 1.3 | $ | 1.2 | |||||||
Audit premium | $ | 1.4 | $ | 1.2 | |||||||
Retention rate (1) | 76 | % | 90 | % | |||||||
Change in renewal pricing (2) | (2 | %) | (5 | %) | |||||||
(1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal. Our retention rate can be impacted by various factors, including price or other competitive issues, insureds being acquired, or a decision not to renew based on our underwriting evaluation. | |||||||||||
(2) The pricing of our business includes an assessment of the underlying policy exposure and market conditions. We continue to base our pricing on expected losses, as indicated by our historical loss data. |
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Ceded premiums written | $ | 2,313 | $ | 2,934 | $ | (621) | (21.2 | %) |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Ceded premiums ratio | 14.5% | 14.7% | (0.2 pts) |
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Gross premiums earned | $ | 16,410 | $ | 17,603 | $ | (1,193) | (6.8 | %) | ||||||
Less: Ceded premiums earned | 2,242 | 2,303 | (61) | (2.6 | %) | |||||||||
Net premiums earned | $ | 14,168 | $ | 15,300 | $ | (1,132) | (7.4 | %) |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Calendar year net loss ratio | 71.0 | % | 55.1 | % | 15.9 | pts | |||||||||||
Less impact of prior accident years on the net loss ratio | 5.9 | % | (9.8 | %) | 15.7 | pts | |||||||||||
Current accident year net loss ratio | 65.1 | % | 64.9 | % | 0.2 | pts | |||||||||||
Less estimated ratio increase (decrease) attributable to: | |||||||||||||||||
Change in estimated aggregate reinsurance (1) | 0.5 | % | (0.1 | %) | 0.6 | pts | |||||||||||
Current accident year net loss ratio, excluding the effect of the change in estimated aggregate reinsurance | 64.6 | % | 65.0 | % | (0.4 | pts) | |||||||||||
(1) See additional information regarding the SPC's aggregate reinsurance agreements in our Liquidity and Capital Resources and Financial Condition section under the heading "Operating Activities and Related Cash Flows." |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
DPAC amortization | $ | 4,304 | $ | 4,576 | $ | (272) | (5.9 | %) | |||||||||||||||
Other underwriting and operating expenses | 409 | 459 | (50) | (10.9 | %) | ||||||||||||||||||
Total | $ | 4,713 | $ | 5,035 | $ | (322) | (6.4 | %) |
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | Change | |||||||||||||||
Underwriting expense ratio, as reported | 33.3% | 32.9% | 0.4 pts | ||||||||||||||
Less: impact of audit premium on expense ratio | (3.5%) | (2.6%) | 0.9 pts | ||||||||||||||
Underwriting expense ratio, excluding the effect of audit premium | 36.8% | 35.5% | 1.3 pts | ||||||||||||||
Three Months Ended March 31 | ||||||||||||||
($ in thousands) | 2024 | 2023 | Change | |||||||||||
Net investment income | $ | 33,204 | $ | 29,890 | $ | 3,314 | 11.1 | % | ||||||
Equity in earnings (loss) of unconsolidated subsidiaries | $ | 2,963 | $ | (1,121) | $ | 4,084 | 364.3 | % | ||||||
Net investment gains (losses) | $ | (1,739) | $ | 752 | $ | (2,491) | (331.3 | %) | ||||||
Other income | $ | 3,061 | $ | 327 | $ | 2,734 | 836.1 | % | ||||||
Operating expense | $ | 8,688 | $ | 8,204 | $ | 484 | 5.9 | % | ||||||
Interest expense | $ | 5,657 | $ | 5,463 | $ | 194 | 3.6 | % | ||||||
Income tax expense (benefit) | $ | 692 | $ | (2,172) | $ | 2,864 | 131.9 | % |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Fixed maturities | $ | 30,957 | $ | 27,020 | $ | 3,937 | 14.6 | % | |||||||||||||||
Equities | 892 | 807 | 85 | 10.5 | % | ||||||||||||||||||
Short-term investments, including Other | 3,075 | 3,101 | (26) | (0.8 | %) | ||||||||||||||||||
BOLI | 452 | 657 | (205) | (31.2 | %) | ||||||||||||||||||
Investment fees and expenses | (2,172) | (1,695) | (477) | 28.1 | % | ||||||||||||||||||
Net investment income | $ | 33,204 | $ | 29,890 | $ | 3,314 | 11.1 | % |
Three Months Ended March 31 | |||||||||||
2024 | 2023 | ||||||||||
Average income yield | 3.3% | 2.9% | |||||||||
Average tax equivalent income yield | 3.3% | 2.9% |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
All other investments, primarily investment fund LPs/LLCs | $ | 3,066 | $ | (767) | $ | 3,833 | 499.7 | % | |||||||||||||||
Tax credit partnerships | (103) | (354) | 251 | (70.9 | %) | ||||||||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | $ | 2,963 | $ | (1,121) | $ | 4,084 | 364.3 | % |
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Total impairment losses | |||||||||||
Corporate debt | $ | (1,316) | $ | (2,936) | |||||||
Asset-backed securities | (194) | 3 | |||||||||
Portion of impairment losses recognized in other comprehensive income before taxes: | |||||||||||
Corporate debt | 576 | — | |||||||||
Net impairment losses recognized in earnings | (934) | (2,933) | |||||||||
Gross realized gains, available-for-sale fixed maturities | 366 | 79 | |||||||||
Gross realized (losses), available-for-sale fixed maturities | (1,099) | (457) | |||||||||
Net realized gains (losses), trading fixed securities | 15 | (108) | |||||||||
Net realized gains (losses), equity investments | (704) | — | |||||||||
Net realized gains (losses), other investments | 1,776 | 229 | |||||||||
Change in unrealized holding gains (losses), trading fixed securities | 214 | 97 | |||||||||
Change in unrealized holding gains (losses), equity investments | (249) | 2,669 | |||||||||
Change in unrealized holding gains (losses), convertible securities, carried at fair value as a part of other investments | (1,119) | 1,132 | |||||||||
Other | (5) | 44 | |||||||||
Net investment gains (losses) | $ | (1,739) | $ | 752 |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Foreign currency exchange rate gains (losses)(1) | $ | 1,929 | $ | (824) | $ | 2,753 | 334.1 | % | |||||||||||||||
Other | 1,132 | 1,151 | (19) | (1.7 | %) | ||||||||||||||||||
Total other income | $ | 3,061 | $ | 327 | $ | 2,734 | 836.1 | % | |||||||||||||||
(1) See further information on foreign currency exchange rate gains (losses) in the Executive Summary of Operations section under the heading "Revenues." |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Operating expenses | $ | 10,378 | $ | 9,918 | $ | 460 | 4.6 | % | |||||||||||||||
Management fee offset | (1,690) | (1,714) | 24 | (1.4 | %) | ||||||||||||||||||
Total | $ | 8,688 | $ | 8,204 | $ | 484 | 5.9 | % |
Three Months Ended March 31 | |||||||||||||||||||||||
($ in thousands) | 2024 | 2023 | Change | ||||||||||||||||||||
Senior Notes due 2023 | $ | — | $ | 3,357 | $ | (3,357) | nm | ||||||||||||||||
Contribution Certificates (including accretion)(1) | 1,898 | 1,859 | 39 | 2.1 | % | ||||||||||||||||||
Revolving Credit Agreement (including fees and amortization) | 2,640 | 247 | 2,393 | 968.8 | % | ||||||||||||||||||
Term Loan (including fees and amortization) | 2,477 | — | 2,477 | nm | |||||||||||||||||||
(Gain)/loss on cash flow hedges reclassified from AOCI | (1,358) | — | (1,358) | nm | |||||||||||||||||||
Interest expense | $ | 5,657 | $ | 5,463 | $ | 194 | 3.6 | % | |||||||||||||||
(1) Includes accretion of approximately $0.5 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively, which is recorded as an increase to interest expense as a result of the difference between the recorded acquisition date fair value and the principal balance of the Contribution Certificates associated with our acquisition of NORCAL. | |||||||||||||||||||||||
Three Months Ended March 31 | |||||||||||
(In thousands) | 2024 | 2023 | |||||||||
Consolidated income tax expense (benefit) | $ | 692 | $ | (2,172) | |||||||
Three Months Ended March 31 | |||||||||||||||||
2024 | 2023 | ||||||||||||||||
($ in thousands) | Income tax (benefit) expense | Rate Impact | Income tax (benefit) expense | Rate Impact | |||||||||||||
Computed "expected" tax expense (benefit) at statutory rate | $ | 1,117 | 21.0 | % | $ | (1,753) | 21.0 | % | |||||||||
Tax-exempt income (1) | (249) | (4.7 | %) | (318) | 3.8 | % | |||||||||||
Tax credits | (8) | (0.1 | %) | (43) | 0.5 | % | |||||||||||
Non-U.S. operating results | (287) | (5.4 | %) | (168) | 2.0 | % | |||||||||||
Non-taxable contingent consideration (2) | — | — | % | (420) | 5.0 | % | |||||||||||
Estimated annual tax rate differential (3) | (680) | (12.8 | %) | 1,431 | (17.1 | %) | |||||||||||
State Income Taxes | 854 | 16.1 | % | (543) | 6.5 | % | |||||||||||
Interest Income from IRS refunds | — | — | % | (333) | 4.0 | % | |||||||||||
Other | (55) | (1.1 | %) | (25) | 0.3 | % | |||||||||||
Total income tax expense (benefit) | $ | 692 | 13.0 | % | $ | (2,172) | 26.0 | % |
Interest Rate Shift in Basis Points | |||||||||||||||||||||||||||||
March 31, 2024 | |||||||||||||||||||||||||||||
($ in millions) | (200) | (100) | Current | 100 | 200 | ||||||||||||||||||||||||
Fair Value: | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | 254 | $ | 247 | $ | 241 | $ | 235 | $ | 229 | |||||||||||||||||||
U.S. Government-sponsored enterprise obligations | 20 | 20 | 19 | 18 | 18 | ||||||||||||||||||||||||
State and municipal bonds | 516 | 495 | 474 | 455 | 435 | ||||||||||||||||||||||||
Corporate debt | 1,825 | 1,768 | 1,714 | 1,662 | 1,613 | ||||||||||||||||||||||||
Asset-backed securities | 1,160 | 1,128 | 1,096 | 1,064 | 1,032 | ||||||||||||||||||||||||
Total fixed maturities, available-for-sale | $ | 3,775 | $ | 3,658 | $ | 3,544 | $ | 3,434 | $ | 3,327 | |||||||||||||||||||
Duration: | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
U.S. Treasury obligations | 2.71 | 2.65 | 2.59 | 2.53 | 2.48 | ||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | 3.36 | 3.39 | 3.42 | 3.42 | 3.38 | ||||||||||||||||||||||||
State and municipal bonds | 4.13 | 4.15 | 4.20 | 4.25 | 4.25 | ||||||||||||||||||||||||
Corporate debt | 3.23 | 3.21 | 3.17 | 3.13 | 3.07 | ||||||||||||||||||||||||
Asset-backed securities | 2.74 | 2.88 | 2.97 | 3.06 | 3.10 | ||||||||||||||||||||||||
Total fixed maturities, available-for-sale | 3.17 | 3.20 | 3.21 | 3.21 | 3.20 |
Interest Rate Shift in Basis Points | |||||||||||||||||||||||||||||
December 31, 2023 | |||||||||||||||||||||||||||||
($ in millions) | (200) | (100) | Current | 100 | 200 | ||||||||||||||||||||||||
Fair Value: | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
U.S. Treasury obligations | $ | 258 | $ | 251 | $ | 244 | $ | 237 | $ | 230 | |||||||||||||||||||
U.S. Government-sponsored enterprise obligations | 20 | 19 | 19 | 18 | 18 | ||||||||||||||||||||||||
State and municipal bonds | 492 | 473 | 454 | 436 | 418 | ||||||||||||||||||||||||
Corporate debt | 1,865 | 1,807 | 1,751 | 1,697 | 1,645 | ||||||||||||||||||||||||
Asset-backed securities | 1,090 | 1,058 | 1,026 | 995 | 963 | ||||||||||||||||||||||||
Total fixed maturities, available-for-sale | $ | 3,725 | $ | 3,608 | $ | 3,494 | $ | 3,383 | $ | 3,274 | |||||||||||||||||||
Duration: | |||||||||||||||||||||||||||||
Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||
U.S. Treasury obligations | 2.95 | 2.88 | 2.82 | 2.76 | 2.70 | ||||||||||||||||||||||||
U.S. Government-sponsored enterprise obligations | 3.46 | 3.46 | 3.41 | 3.35 | 3.27 | ||||||||||||||||||||||||
State and municipal bonds | 3.90 | 3.97 | 4.07 | 4.19 | 4.30 | ||||||||||||||||||||||||
Corporate debt | 3.26 | 3.25 | 3.23 | 3.18 | 3.12 | ||||||||||||||||||||||||
Asset-backed securities | 2.82 | 2.94 | 3.03 | 3.10 | 3.14 | ||||||||||||||||||||||||
Total fixed maturities, available-for-sale | 3.19 | 3.23 | 3.25 | 3.26 | 3.25 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs* (In thousands) | ||||||||||||||||||||||
January 1 - January 31, 2024 | — | N/A | — | $55,902 | ||||||||||||||||||||||
February 1 - February 29, 2024 | — | N/A | — | $55,902 | ||||||||||||||||||||||
March 1 - March 31, 2024 | — | N/A | — | $55,902 | ||||||||||||||||||||||
Total | — | $— | — |
Exhibit Number | Description | |||||||
Amendment to Subsidiaries of ProAssurance Corporation effective March 31, 2024. | ||||||||
Certification of Principal Executive Officer of ProAssurance as required under SEC rule 13a-14(a). | ||||||||
Certification of Principal Financial and Accounting Officer of ProAssurance as required under SEC rule 13a-14(a). | ||||||||
Certification of Principal Executive Officer of ProAssurance as required under SEC Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as amended (18 U.S.C. 1350). | ||||||||
Certification of Principal Financial and Accounting Officer of ProAssurance as required under SEC Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as amended (18 U.S.C. 1350). | ||||||||
XBRL Instance Document | ||||||||
XBRL Taxonomy Extension Schema Document | ||||||||
XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||
XBRL Taxonomy Extension Definition Linkbase Document | ||||||||
XBRL Taxonomy Extension Labels Linkbase Document | ||||||||
XBRL Taxonomy Extension Presentation Linkbase Document |
PROASSURANCE CORPORATION |
/s/ Dana S. Hendricks | ||
Dana S. Hendricks | ||
Chief Financial Officer | ||
(Duly authorized officer and principal financial officer) |
/s/ Edward L. Rand, Jr. | ||
Edward L. Rand, Jr. | ||
Chief Executive Officer and principal executive officer |
/s/ Dana S. Hendricks | ||
Dana S. Hendricks | ||
Chief Financial Officer and principal financial officer |
/s/ Edward L. Rand, Jr. | ||
Edward L. Rand, Jr. | ||
Chief Executive Officer and principal executive officer |
/s/ Dana S. Hendricks | ||
Dana S. Hendricks | ||
Chief Financial Officer, and principal financial officer |
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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Available for sale securities, amortized cost | $ 3,813,857 | $ 3,758,720 |
Allowance for expected credit losses | 1,137 | 555 |
Trading securities, cost | 49,409 | 48,449 |
Equity investments at fair value, cost | 150,099 | 164,262 |
Other investments, portion carried at fair value | 55,732 | 62,604 |
Premium receivable, allowance for credit loss | $ 8,072 | $ 7,809 |
Common shares, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common shares, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common shares, shares issued (in shares) | 63,616,659 | 63,576,932 |
Deferred tax expense (benefit) on accumulated other comprehensive income (loss) | $ (55,743) | $ (55,738) |
Treasury shares (in shares) | 12,606,968 |
Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of ProAssurance Corporation, its wholly owned subsidiaries and VIEs in which ProAssurance is the primary beneficiary (ProAssurance, PRA or the Company). See Note 10 for more information on ProAssurance's VIE interests. The financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. ProAssurance’s results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2023 report on Form 10-K. Beginning in the third quarter of 2023, ProAssurance operates in four reportable segments as follows: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate. For more information on the Company's segment reporting, including the nature of products and services provided and financial information by segment, refer to Note 12. Reclassifications As a result of the third quarter 2023 segment reorganization, prior period segment information in Note 12 has been recast to conform to the Company's current segment reporting. Accounting Policies The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosures related to these amounts at the date of the financial statements. The Company evaluates these estimates and assumptions on an ongoing basis based on current and historical developments, market conditions, industry trends and other information that the Company believes to be reasonable under the circumstances. The Company can make no assurance that actual results will conform to its estimates and assumptions; reported results of operations may be materially affected by changes in these estimates and assumptions. The significant accounting policies followed by ProAssurance in making estimates that materially affect financial reporting are summarized in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K. Accounting Changes Adopted The Company did not adopt any new accounting standards during the three months ended March 31, 2024. Accounting Changes Not Yet Adopted Disclosure Improvements (ASU 2023-06) In October 2023, the FASB amended guidance to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements and align the requirements in the Codification with the SEC's regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X becomes effective, with early adoption prohibited. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures. Improvements to Reportable Segment Disclosures (ASU 2023-07) Effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and requiring retrospective application to all prior periods presented in the financial statements, the FASB amended disclosure requirements for segment reporting by modifying and adding disclosure requirements, primarily related to significant segment expenses which are regularly provided to the Company’s CODM. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures. Improvements to Income Tax Disclosures (ASU 2023-09) Effective for fiscal years beginning after December 31, 2024, the FASB amended disclosure requirements to provide greater transparency on income tax disclosures, including the disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures.
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Fair Value Measurement |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:
Fair values of assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are shown in the following tables. Where applicable, the tables also indicate the fair value hierarchy of the valuation techniques utilized to determine those fair values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. Assessments of the significance of a particular input to the fair value measurement require judgment and consideration of factors specific to the assets being valued. For more information on the valuation methodologies used regarding securities in the Level 2 and Level 3 categories, see Note 2 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K.
Level 3 Valuations See Note 2 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K for a summary description of the valuation methodologies used regarding securities in the Level 3 category, by security type. Quantitative Information Regarding Level 3 Valuations Below is quantitative information regarding securities in the Level 3 category, by security type:
The significant unobservable inputs used in the fair value measurement of the above listed securities were the valuations of comparable securities with similar issuers, credit quality and maturity. Changes in the availability of comparable securities could result in changes in the fair value measurements. Fair Value Measurements - Level 3 Assets & Liabilities The following tables present summary information regarding changes in the fair value of assets and liabilities measured using Level 3 inputs.
Transfers Transfers shown in the preceding Level 3 tables were as of the end of the period in which the transfer occurred. All transfers were to or from Level 2. All transfers in and out of Level 3 during the three months ended March 31, 2024 and 2023 related to securities held for which the level of market activity for identical or nearly identical securities varies from period to period. The securities were valued using multiple observable inputs when those inputs were available; otherwise the securities were valued using limited observable inputs. Fair Values Not Categorized At March 31, 2024 and December 31, 2023, certain LPs/LLCs and investment funds measure fund assets at fair value on a recurring basis and provide a NAV for ProAssurance's interest. The carrying value of these interests is based on the NAV provided and was considered to approximate the fair value of the interests. For investment in unconsolidated subsidiaries, ProAssurance recognizes any changes in the NAV of its interests in equity in earnings (loss) of unconsolidated subsidiaries during the period of change. In accordance with GAAP, the fair value of these investments was not classified within the fair value hierarchy. The amount of ProAssurance's unfunded contractual commitments related to these investments as of March 31, 2024 and fair values of these investments as of March 31, 2024 and December 31, 2023 were as follows:
Below is additional information regarding each of the investments listed in the table above as of March 31, 2024. (1)This investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent, while the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from to eight years. (2)This investment is comprised of one LP fund, which holds long and short publicly traded securities that will passively generate income. Redemptions are permitted with 30 days written notice if outside of a lock-up period. (3)This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years. (4)This investment is comprised of multiple unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The remaining funds focus on private middle market company mezzanine and senior secured loans, opportunities across the credit spectrum, mortgage backed-loans, as well as various types of loan-backed investments. One fund allows redemptions at any quarter-end with prior notice requirements of 180 days, while two other funds allow for redemptions with consent of the General Partner. The remaining funds do not allow redemptions. For the funds that do not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames throughout the remaining life of the funds. (5)This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is an LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. A third fund is an LLC focused on acquiring ownership stakes in insurance agencies. For all three funds, redemptions are not permitted. The remaining funds are real estate focused LPs, two of which allow for redemption with prior notice. ProAssurance may not sell, transfer or assign its interest in any of the above LPs/LLCs without special consent from the LPs/LLCs. Nonrecurring Fair Value Measurement ProAssurance did not have any assets or liabilities that were measured at fair value on a nonrecurring basis at March 31, 2024 or December 31, 2023. Financial Instruments - Methodologies Other Than Fair Value The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category.
The fair value of the BOLI was equal to the cash surrender value associated with the policies on the valuation date. Other investments listed in the table above include FHLB common stock carried at cost and an annuity investment carried at amortized cost. Three of ProAssurance's insurance subsidiaries are members of an FHLB. The estimated fair value of the FHLB common stock was based on the amount the subsidiaries would receive if their memberships were canceled, as the memberships cannot be sold. The fair value of the annuity represents the present value of the expected future cash flows discounted using a rate available in active markets for similarly structured instruments. Other assets and other liabilities primarily consisted of related investment assets and liabilities associated with funded deferred compensation agreements. The fair value of the funded deferred compensation assets was based upon quoted market prices, which is categorized as a Level 1 valuation, and had a fair value of $33.8 million and $32.3 million at March 31, 2024 and December 31, 2023, respectively. Other assets also included an unsecured note receivable. The fair value of the note receivable was based on the present value of expected cash flows from the note receivable, discounted at market rates on the valuation date for receivables with similar credit standings and similar payment structures. Other liabilities primarily consisted of liabilities associated with funded deferred compensation agreements. The reported balance is determined based on the amount of elective deferrals and employer contributions adjusted for periodic changes in the fair value of the participant balances based on the performance of the funds selected by the participants and had a fair value of $33.5 million and $32.0 million at March 31, 2024 and December 31, 2023, respectively. The fair value of the debt, excluding the Contribution Certificates, was estimated based on the present value of expected future cash outflows, discounted at rates available on the valuation date for similar debt issued by entities with a similar credit standing to ProAssurance. The fair value of the Contribution Certificates was estimated based on a binomial option pricing model. The Contribution Certificates were a portion of the purchase consideration for the NORCAL acquisition and were issued to certain NORCAL policyholders in the conversion, and those instruments are an obligation of NORCAL Insurance Company, the successor of NORCAL Mutual Insurance Company (see Note 6 for further discussion of the terms of the Contribution Certificates).
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments Available-for-sale fixed maturities at March 31, 2024 and December 31, 2023 included the following:
The recorded cost basis and estimated fair value of available-for-sale fixed maturities at March 31, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Excluding obligations of the U.S. Government, U.S. Government-sponsored enterprises and a U.S. Government obligations money market fund, no investment in any entity or its affiliates exceeded 10% of shareholders’ equity at March 31, 2024. Cash and securities with a carrying value of $53.5 million at March 31, 2024 were on deposit with various state insurance departments to meet regulatory requirements. ProAssurance also held securities with a carrying value of $70.6 million at March 31, 2024 that are pledged as collateral security for advances under the Company's borrowing relationships with FHLBs. As a member of Lloyd's, ProAssurance is required to maintain capital at Lloyd's, referred to as FAL, to support the Company's previous participation in underwriting years that remain open at Syndicate 1729. At March 31, 2024, the fair value of ProAssurance's FAL investments was $20.2 million and were comprised of investment securities, primarily short-term investments, and cash and cash equivalents on deposit with Lloyd's in order to satisfy these FAL requirements. Investments Held in a Loss Position The following tables provide summarized information with respect to investments held in an unrealized loss position at March 31, 2024 and December 31, 2023, including the length of time the investment had been held in a continuous unrealized loss position.
As of March 31, 2024, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 2,545 debt securities (64.8% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 1,328 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $5.3 million and $3.3 million, respectively. The securities were evaluated for impairment as of March 31, 2024. As of December 31, 2023, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 2,531 debt securities (65.6% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 1,319 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $5.0 million and $3.2 million, respectively. The securities were evaluated for impairment as of December 31, 2023. Each quarter, ProAssurance performs a detailed analysis for the purpose of assessing whether any of the securities it holds in an unrealized loss position has suffered an impairment due to credit or non-credit factors. A detailed discussion of the factors considered in the assessment is included in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2023 report on Form 10-K. Fixed maturity securities held in an unrealized loss position at March 31, 2024, excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue. Expected future cash flows of asset-backed securities, excluding those issued by GNMA, FNMA and FHLMC, held in an unrealized loss position were estimated as part of the March 31, 2024 impairment evaluation using the most recently available six-month historical performance data for the collateral (loans) underlying the security or, if historical data was not available, sector based assumptions, and equaled or exceeded the current amortized cost basis of the security. The following tables present a roll forward of the allowance for expected credit losses on available-for-sale fixed maturities for the three months ended March 31, 2024 and 2023.
Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows:
Net Investment Income Net investment income (loss) by investment category was as follows:
Investment in Unconsolidated Subsidiaries ProAssurance's investment in unconsolidated subsidiaries were as follows:
Qualified affordable housing project tax credit partnership interests held by ProAssurance generate investment returns by providing tax benefits to fund investors in the form of tax credits and project operating losses. The carrying value of these investments reflects ProAssurance's total commitments (both funded and unfunded) to the partnerships, less any amortization. At March 31, 2024 and December 31, 2023, ProAssurance did not have an ownership percentage greater than 20% in any tax credit partnership interests. Since ProAssurance has the ability to exert influence over the partnerships but does not control them, all are accounted for using the equity method. See further discussion of the entities in which ProAssurance holds passive interests in Note 10. ProAssurance holds interests in investment fund LPs/LLCs and other equity method investments and LPs/LLCs which are not considered to be investment funds. ProAssurance's ownership percentage relative to four of the LPs/LLCs is greater than 25% at March 31, 2024 and December 31, 2023 which is likely to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $24.0 million at March 31, 2024 and $23.0 million at December 31, 2023. ProAssurance's ownership percentage relative to the remaining investments and LPs/LLCs is less than 25%; these interests had a carrying value of $254.4 million at March 31, 2024 and $253.1 million at December 31, 2023. ProAssurance does not have the ability to exert control over any of these funds. Equity in Earnings (Loss) of Unconsolidated Subsidiaries Equity in earnings (loss) of unconsolidated subsidiaries included losses from qualified affordable housing project tax credit partnerships and a historic tax credit partnership. Investment results recorded reflect ProAssurance's allocable portion of partnership operating results. Tax credits reduce income tax expense in the period they are utilized. The results recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows:
ProAssurance accounts for its tax credit partnership investments under the equity method of accounting and records its allocable portion of the operating losses of the underlying properties based on estimates provided by the partnerships. For the Company's qualified affordable housing project tax credit partnerships, it adjusts its estimates of their allocable portion of operating losses periodically as actual operating results of the underlying properties become available. The primary benefits of tax credits and tax-deductible operating losses from the historic tax credit partnerships are earned in a short period with potential for additional cash flows extending over several years. For the three months ended March 31, 2024 and 2023, the Company generated a nominal amount of tax credits from its tax credit partnership investments, which were deferred and are expected to be utilized in future periods. As of March 31, 2024, the Company had approximately $52.7 million of available tax credit carryforwards generated from its investments in tax credit partnerships which they expect to utilize in future periods. Tax credits provided by the underlying projects of the Company's historic tax credit partnership are typically available in the tax year in which the project is put into active service, whereas the tax credits provided by qualified affordable housing project tax credit partnerships are provided over approximately a ten-year period. Net Investment Gains (Losses) Realized investment gains and losses are recognized on the first-in, first-out basis. The following table provides detailed information regarding net investment gains (losses):
For the three months ended March 31, 2024, ProAssurance recognized $0.9 million of credit-related impairment losses in earnings related to a corporate bond in the consumer sector as well as an asset-backed security. The Company recognized non-credit impairment losses in OCI of $0.6 million related to a corporate bond during the three months ended March 31, 2024. For the three months ended March 31, 2023, ProAssurance recognized credit-related impairment losses in earnings of $2.9 million related to two corporate bonds in the financial sector. The Company did not recognize any non-credit impairment losses in OCI during the three months ended March 31, 2023. The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the impairment was recorded in OCI.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For interim periods, ProAssurance generally utilizes the estimated annual effective tax rate method under which the Company determines its provision (benefit) for income taxes based on the current estimate of its annual effective tax rate. For the three months ended March 31, 2024 and March 31, 2023, we utilized the estimated annual effective tax rate method. Under this method, items which are unusual, infrequent, or that cannot be reliably estimated are considered in the effective tax rate in the period in which the item is included in income, and are referred to as discrete items. For the three months ended March 31, 2024 and 2023, the provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income (loss) before income taxes primarily due to the estimated tax rate differential between the Company's actual effective tax rate and its projected annual effective tax rate as calculated under the estimated annual effective tax rate method and, to a lesser extent, the effects of tax-favored income. In addition, the provision for income taxes for the three months ended March 31, 2023 was impacted by the $2.0 million decrease in the contingent consideration liability related to the NORCAL acquisition, all of which was non-taxable. See further discussion on the Company's contingent consideration in Note 2 and Note 6. ProAssurance had a liability for U.S. federal and U.K. income taxes carried as a part of other liabilities of $3.0 million as of March 31, 2024 and $4.0 million as of December 31, 2023. At March 31, 2024 and December 31, 2023, the liability for unrecognized tax benefits, which is included in the total liability for U.S. federal and U.K. income taxes, was $5.4 million and $5.3 million, respectively, which included an accrued liability for interest of approximately $0.6 million and $0.5 million, respectively.
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Reserve for Losses and Loss Adjustment Expenses |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve for Losses and Loss Adjustment Expenses | Reserve for Losses and Loss Adjustment Expenses The reserve for losses is established based on estimates of individual claims and actuarially determined estimates of future losses based on ProAssurance’s past loss experience, available industry data and projections as to future claims frequency, severity, inflationary trends and settlement patterns. Estimating the reserve, particularly the reserve appropriate for liability exposures, is a complex process. For a high proportion of the risks insured or reinsured by ProAssurance, claims may be resolved over an extended period of time, often five years or more, and may be subject to litigation. Estimating losses requires ProAssurance to make and revise judgments and assessments regarding multiple uncertainties over an extended period of time. As a result, the reserve estimate may vary considerably from the eventual outcome. The assumptions used in establishing ProAssurance’s reserve are regularly reviewed and updated by management as new data becomes available. Changes to estimates of previously established reserves are included in earnings in the period in which the estimate is changed. For additional information regarding ProAssurance's reserve for losses, see Note 1 and Note 7 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2023 report on Form 10-K. Activity in the reserve for losses and loss adjustment expenses is summarized as follows:
(1) Net prior year reserve development recognized for the three months ended March 31, 2024 and 2023 as well as the year ended December 31, 2023 included $1.7 million, $2.5 million and $8.3 million, respectively, of amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses. Estimating liability reserves is complex and requires the use of many assumptions. As time passes and ultimate losses for prior years are either known or become subject to a more precise estimation, ProAssurance increases or decreases the reserve estimates established in prior periods. The consolidated net favorable prior year reserve development recognized for the three months ended March 31, 2024 primarily reflected: •Net favorable development recognized in the Specialty P&C segment of $1.7 million related to the amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses. •Consolidated net favorable loss development recognized in the three months ended March 31, 2024 was partially offset by net unfavorable reserve development of $0.9 million recognized in the Segregated Portfolio Cell Reinsurance segment and unfavorable reserve development of $0.4 million attributable to the Company's Lloyd’s Syndicates operations in the Specialty P&C segment. The unfavorable development in the Segregated Portfolio Cell Reinsurance segment includes net favorable development in the workers' compensation business of $0.5 million that was more than offset by net unfavorable development of $1.4 million in the medical professional liability business related to higher than expected claim frequency in on program in which the Company does not participate in the underwriting results. For additional information regarding ProAssurance's prior year reserve development recognized for the three months ended March 31, 2023 and the year ended December 31, 2023, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in ProAssurance's March 31, 2023 report on Form 10-Q and Note 7 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2023 report on Form 10-K, respectively.
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Commitments and Contingencies |
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Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies ProAssurance is involved in various legal actions related to insurance policies and claims handling including, but not limited to, claims asserted by policyholders. These types of legal actions arise in the Company's ordinary course of business and, in accordance with GAAP for insurance entities, are considered as a part of the Company's loss reserving process, which is described in detail under the heading "Losses and Loss Adjustment Expenses" in the Accounting Policies section in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2023 report on Form 10-K. ProAssurance also has other direct actions against the Company unrelated to its claims activity which are evaluated and accounted for as a part of other liabilities. For these corporate legal actions, the Company evaluates each case separately and establishes what it believes is an appropriate reserve based on GAAP guidance related to contingent liabilities. As of March 31, 2024, there were no material reserves established for corporate legal actions. As a member of Lloyd's, ProAssurance has obligations to Syndicate 1729 including FAL requirements. ProAssurance provides FAL to support its previous participation in underwriting years that remain open at Syndicate 1729, which is comprised of investment securities, primarily short-term investments, and cash and cash equivalents deposited with Lloyd's with a total fair value of approximately $20.2 million at March 31, 2024 (see Note 3). ProAssurance has entered into financial instrument transactions that may present off-balance sheet credit risk or market risk. These transactions include a short-term loan commitment and commitments to provide funding to non-public investment entities. Under the short-term loan commitment, ProAssurance has agreed to advance funds on a 30 day basis to a counterparty provided there is no violation of any condition established in the contract. As of March 31, 2024, ProAssurance had total funding commitments related to non-public investment entities as well as the short-term loan commitment of approximately $161.9 million which included the amount at risk if the full short-term loan is extended and the counterparties default. However, the credit risk associated with the short-term loan commitment is minimal as the counterparties to the contract are highly rated commercial institutions and to-date have been performing in accordance with their contractual obligations. As such, ProAssurance’s expected credit losses associated with this short-term loan commitment were nominal in amount as of March 31, 2024. ProAssurance entered into a services agreement with a company to provide data analytics services for certain product lines within the Company's MPL book of business. Under the services agreement, the Company has committed to an annual fee of approximately $3.5 million for three years. In addition, the services agreement contains an annual one-year auto-extension feature, in November, unless either party elects to non-renew the services agreement by providing notice at least six-months prior to the end of the contract. In April 2024, ProAssurance provided such notice of termination of the services agreement. As a result, the services agreement will expire on November 30, 2024. ProAssurance incurred operating expenses associated with this services agreement of $0.8 million and $0.9 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the remaining commitment under this agreement was estimated to be approximately $2.2 million. The purchase consideration in the NORCAL acquisition included contingent consideration. NORCAL policyholders who elected to receive NORCAL stock and tender it to ProAssurance are eligible for a share of contingent consideration in an amount of up to approximately $84 million. As defined in the purchase agreement, the contingent consideration is dependent upon the after-tax development of NORCAL's ultimate net losses for accident years ended on or before December 31, 2020 determined as of December 31, 2023 by a mutually agreed upon independent actuarial consultant. This independent actuarial consultant has until June 30, 2024 to complete their estimate. As of May 1, 2024, the independent actuarial consultant had not completed their estimate. As of March 31, 2024 and December 31, 2023, the contingent consideration liability was $6.5 million carried at fair value utilizing a stochastic model. This estimate of fair value does not guarantee nor suggest that contingent consideration will ultimately be paid, and any amounts ultimately paid by the Company may be greater than or less than the $6.5 million current fair value estimate. As of March 31, 2024 and December 31, 2023, the Company's analysis of NORCAL's reserves related to accident years 2020 and prior suggests that no contingent consideration will be due; however, the actual amount due to be paid, if any, will be determined based on analysis to be performed by an independent actuary, as previously discussed. This remaining uncertainty is a significant component in the determination of the fair value of the liability as of March 31, 2024 and December 31, 2023. See further discussion around the contingent consideration in Note 2.
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Debt |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt ProAssurance’s outstanding debt consisted of the following:
Covenant Compliance There are no financial covenants associated with the Contribution Certificates due 2031. The Revolving Credit Agreement contains customary representations, covenants and events constituting default, and remedies for default, as previously discussed. As of March 31, 2024, ProAssurance is in compliance with all covenants of the Revolving Credit Agreement. Additional Information For additional information regarding ProAssurance's debt, see Note 10 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2023 report on Form 10-K.
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Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | Derivatives ProAssurance is exposed to certain risks relating to its ongoing business and investment activities. ProAssurance utilizes derivative instruments as part of its risk management strategy to reduce the market risk related to fluctuations in future interest rates associated with a portion of its variable-rate debt. See Note 1 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2023 report on Form 10-K for the Company's accounting policy regarding derivative instruments. To manage the Company's exposure to variability in cash flows of forecasted interest payments attributable to variability in the selected base rates on borrowings under both the Revolving Credit Agreement and Term Loan, ProAssurance entered into two forward-starting interest rate swap agreements ("Interest Rate Swaps") on May 2, 2023, each with an effective date of December 29, 2023 and a maturity date of March 31, 2028. As ProAssurance's Interest Rate Swaps are designated and qualify as highly effective cash flow hedges, changes in the fair value of the Interest Rate Swaps are recorded in AOCI, net of tax, and are reclassified into earnings when the hedged cash flows impact earnings. The Interest Rate Swap hedging the variability in cash flows associated with interest payments on the Revolving Credit Agreement will have a constant $125 million notional amount throughout the term of the swap, while the Interest Rate Swap hedging the variability in cash flows associated with interest payments on the Term Loan will have an amortizing $125 million notional amount, which is designed to match the outstanding principal on the Term Loan throughout the term of the swap. Borrowings under the Revolving Credit Agreement and Term Loan will accrue interest at a selected base rate, adjusted by a margin. The Interest Rate Swaps effectively fix the base rate on borrowings under the Revolving Credit Agreement and Term Loan to 3.187% and 3.207%, respectively. The margin component of the interest rate, which can vary from 0% to 2.375%, will remain variable and is based on ProAssurance’s debt to capitalization ratio. As of March 31, 2024, the margin component of the interest rate on the outstanding borrowings under the Revolving Credit Agreement and Term Loan was 2.23% and 2.35%, respectively, based on ProAssurance's debt to capitalization ratio as of December 31, 2023 resulting in a total interest rate of 5.42% and 5.56%, respectively, including the effect of the Interest Rate Swaps on the base rate. Additional information regarding the Company's Revolving Credit Agreement and Term Loan is provided in Note 10 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2023 report on Form 10-K. ProAssurance received cash collateral from the counterparty to secure the net present value of future cash flows associated with the Interest Rate Swaps which is reflected as a component of other liabilities on the Condensed Consolidated Balance Sheet. Those cash collateral balances were $9.1 million and $4.0 million at March 31, 2024 and December 31, 2023, respectively. The following table provides a summary of the volume and fair value position of the Interest Rate Swaps as well as the reporting location in the Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023.
(1) Volume is represented by the derivative instruments' notional amount. (2) Additional information regarding the fair value of the Company's Interest Rate Swaps is provided in Note 2. For the three months ended March 31, 2024, ProAssurance reclassified a gain on the Interest Rate Swaps from AOCI, net of tax, into earnings as shown in the table below:
At March 31, 2024, management estimates that it will reclassify approximately $4.3 million of pre-tax net gains on the Interest Rate Swaps from AOCI to earnings over the next twelve months, which will be recorded to interest expense. See additional information on gains or losses related to the Interest Rate Swaps reported as a component of AOCI in Note 9. As a result of the Interest Rate Swaps, ProAssurance is exposed to risk that the counterparty will fail to meet its contractual obligations. To mitigate this counterparty credit risk, ProAssurance only enters into derivative contracts with carefully selected major financial institutions based upon their credit ratings and monitors their creditworthiness. As of March 31, 2024, the counterparty had an investment grade rating of A and has performed in accordance with their contractual obligations.
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Shareholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity At March 31, 2024 and December 31, 2023, ProAssurance had 100 million shares of authorized common stock and 50 million shares of authorized preferred stock. 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. ProAssurance declared cash dividends of $0.05 per share during the first quarter of 2023 totaling $2.7 million. In light of the price range in which the Company's stock traded in the second quarter of 2023, the Board decided to suspend payment of a quarterly cash dividend. Instead, the Company used available capital to repurchase shares pursuant to the existing share repurchase authorization. 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. See Note 12 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2023 report on Form 10-K for additional information. At March 31, 2024, Board authorizations for the repurchase of common shares or the retirement of outstanding debt of $55.9 million remained available for use. ProAssurance did not repurchase any common shares during the three months ended March 31, 2024 or 2023. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) The following tables provide a detailed breakout of the components of AOCI and the amounts reclassified from AOCI to net income (loss). The tax effects of all amounts in the tables below, except for an immaterial amount of unrealized gains and losses on available-for-sale securities held at the Company's U.K. subsidiary, were computed using the enacted U.S. federal corporate tax rate of 21%. OCI included a nominal deferred tax benefit and deferred tax expense of $10.8 million for the three months ended March 31, 2024 and 2023, respectively. The changes in the balance of each component of AOCI for the three months ended March 31, 2024 and 2023 were as follows:
(1) ProAssurance entered into two forward-starting interest rate swap agreements ("Interest Rate Swaps") on May 2, 2023, which are designated and qualify as highly effective cash flow hedges. See Note 8 for additional information on the Interest Rate Swaps.
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Variable Interest Entities |
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Mar. 31, 2024 | |
Variable Interest Entities [Abstract] | |
Variable Interest Entities | Variable Interest Entities ProAssurance holds passive interests in a number of entities that are considered to be VIEs under GAAP guidance. ProAssurance's VIE interests principally consist of interests in LPs/LLCs formed for the purpose of achieving diversified equity and debt returns. ProAssurance's VIE interests, carried as a part of investment in unconsolidated subsidiaries, totaled $252.9 million at March 31, 2024 and $250.4 million at December 31, 2023. ProAssurance does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Investments in entities where ProAssurance holds a greater than minor interest but does not hold a controlling interest are accounted for using the equity method. Therefore, ProAssurance has not consolidated these VIEs. ProAssurance’s involvement with each of these VIEs is limited to its direct ownership interest in the VIE. Except for the funding commitments disclosed in Note 6, ProAssurance has no arrangements with any of these VIEs to provide other financial support to or on behalf of the VIE. At March 31, 2024, ProAssurance’s maximum loss exposure relative to these investments was limited to the carrying value of ProAssurance’s investment in the VIE. ProAssurance is the primary beneficiary of PPM RRG. While there is no direct ownership of PPM RRG by ProAssurance, it manages the business operations of PPM RRG through its management services agreement and has effective control of the PPM RRG's Board of Directors through an irrevocable voting proxy. The management services agreement allows ProAssurance to provide management and oversight services to PPM RRG, which includes the ability to make business decisions impacting the operations of PPM RRG. PPM RRG has a $5 million surplus note to NORCAL which is its only source of capital. At March 31, 2024 and December 31, 2023, approximately $135 million and $142 million of ProAssurance's assets, respectively, and approximately $135 million and $142 million of its liabilities, respectively, included on the Condensed Consolidated Balance Sheet were related to PPM RRG.
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Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share Diluted weighted average shares is calculated as basic weighted average shares plus the effect, calculated using the treasury stock method, of assuming that restricted share units and performance share units have vested. The following table provides a reconciliation between the Company's basic weighted average number of common shares outstanding to its diluted weighted average number of common shares outstanding:
The diluted weighted average number of common shares outstanding for the three months ended March 31, 2024 excluded approximately 251,000 of common share equivalents issuable under the Company's stock compensation plans as their effect would have been antidilutive. There were no antidilutive common share equivalents for the three months ended March 31, 2023. Dilutive common share equivalents are reflected in the earnings (loss) per share calculation while antidilutive common share equivalents are not reflected in the earnings (loss) per share calculation. For the three months ended March 31, 2023, all incremental common share equivalents were not included in the computation of diluted loss per share because to do so would have been antidilutive.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information ProAssurance's segments are based on the Company's internal management reporting structure for which financial results are regularly evaluated by the Company's CODM to determine resource allocation and assess operating performance. The Company continually assesses its internal management reporting structure and information evaluated by its CODM to determine whether any changes have occurred that would impact its segment reporting structure. Segment Reorganization Effective September 2023, ProAssurance elected to discontinue its participation in the results of Syndicate 1729 beginning with the 2024 underwriting year. The results from the Company's participation in Syndicate 1729 from open underwriting years prior to 2024 will continue to earn out pro rata over the entire policy period of the underlying business. Due to the quarter lag, the Company's ceased participation in Syndicate 1729 will begin to be reflected in its results in the second quarter of 2024. During the third quarter of 2023, ProAssurance reorganized the financial results evaluated by its CODM; therefore, ProAssurance changed its operating and reportable segments to align with how the CODM currently oversees the business, allocates resources and evaluates operating performance. As a result, ProAssurance now reports the underwriting results from its participation in Lloyd’s Syndicates in the Specialty P&C segment and the investment results of assets solely allocated to its Lloyd's Syndicate operations and U.K. income taxes in the Corporate segment. All prior period segment information has been recast to conform to the current period presentation. The segment reorganization had no impact on previously reported consolidated financial results. The Company operates in four segments that are organized around the nature of the products and services provided: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate. Additional information regarding ProAssurance's segments is included in Note 16 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K. A description of each of ProAssurance's four operating and reportable segments follows. •Specialty P&C primarily includes medical professional liability insurance and medical technology liability insurance. The Specialty P&C segment also includes the underwriting results from ProAssurance's participation in Lloyd's of London Syndicate 1729 and Syndicate 6131. •Workers' Compensation Insurance includes workers' compensation insurance products which are provided primarily to employers with 1,000 or fewer employees. •Segregated Portfolio Cell Reinsurance includes the results (underwriting profit or loss, plus investment results, net of U.S. federal income taxes) of SPCs at Inova Re and Eastern Re, the Company's Cayman Islands SPC operations. •Corporate includes ProAssurance's investment operations excluding those reported in the Company's Segregated Portfolio Cell Reinsurance segment. In addition, this segment includes corporate expenses, interest expense, U.S. and U.K. income taxes and non-premium revenues generated outside of the Company's insurance entities. The accounting policies of the segments are described in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K. ProAssurance evaluates the performance of its Specialty P&C and Workers' Compensation Insurance segments based on before tax underwriting profit or loss. ProAssurance evaluates the performance of its Segregated Portfolio Cell Reinsurance segment based on operating profit or loss, which includes investment results of investment assets solely allocated to SPC operations, net of U.S. federal income taxes. Performance of the Corporate segment is evaluated based on the contribution made to consolidated after-tax results. ProAssurance accounts for inter-segment transactions as if the transactions were to third parties at current market prices. Assets are not allocated to segments because investments, other than the investments discussed above that are solely allocated to the Segregated Portfolio Cell Reinsurance segment, and other assets are not managed at the segment level. The tabular information that follows shows the financial results of the Company's reportable segments reconciled to results reflected in the Condensed Consolidated Statements of Income and Comprehensive Income. ProAssurance does not consider goodwill or intangible asset impairments, changes in the fair value of contingent consideration or transaction-related costs for completed business combinations, including any related tax impacts, in assessing the financial performance of its operating and reportable segments, and thus are included in the reconciliation of segment results to consolidated results. Financial results by segment were as follows:
The following table provides detailed information regarding ProAssurance's gross premiums earned by product as well as a reconciliation to net premiums earned. All gross premiums earned are from external customers except as noted. ProAssurance's insured risks are primarily within the U.S.
(1) Premium for all periods is assumed from the Workers' Compensation Insurance segment. (2) Premium for all periods is assumed from the Specialty P&C segment.
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Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2024 |
Mar. 31, 2023 |
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Pay vs Performance Disclosure | ||
Net income (loss) | $ 4,626 | $ (6,174) |
Insider Trading Arrangements |
3 Months Ended |
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Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of ProAssurance Corporation, its wholly owned subsidiaries and VIEs in which ProAssurance is the primary beneficiary (ProAssurance, PRA or the Company). See Note 10 for more information on ProAssurance's VIE interests. The financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. ProAssurance’s results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2023 report on Form 10-K. Beginning in the third quarter of 2023, ProAssurance operates in four reportable segments as follows: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate. For more information on the Company's segment reporting, including the nature of products and services provided and financial information by segment, refer to Note 12.
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Accounting Policies | Accounting Policies The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosures related to these amounts at the date of the financial statements. The Company evaluates these estimates and assumptions on an ongoing basis based on current and historical developments, market conditions, industry trends and other information that the Company believes to be reasonable under the circumstances. The Company can make no assurance that actual results will conform to its estimates and assumptions; reported results of operations may be materially affected by changes in these estimates and assumptions. The significant accounting policies followed by ProAssurance in making estimates that materially affect financial reporting are summarized in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K.
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Accounting Changes Adopted and Accounting Changes Not Yet Adopted | Accounting Changes Adopted The Company did not adopt any new accounting standards during the three months ended March 31, 2024. Accounting Changes Not Yet Adopted Disclosure Improvements (ASU 2023-06) In October 2023, the FASB amended guidance to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements and align the requirements in the Codification with the SEC's regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X becomes effective, with early adoption prohibited. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures. Improvements to Reportable Segment Disclosures (ASU 2023-07) Effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and requiring retrospective application to all prior periods presented in the financial statements, the FASB amended disclosure requirements for segment reporting by modifying and adding disclosure requirements, primarily related to significant segment expenses which are regularly provided to the Company’s CODM. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures. Improvements to Income Tax Disclosures (ASU 2023-09) Effective for fiscal years beginning after December 31, 2024, the FASB amended disclosure requirements to provide greater transparency on income tax disclosures, including the disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. ProAssurance is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures.
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Fair Value Measurement (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Assets | Fair values of assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are shown in the following tables. Where applicable, the tables also indicate the fair value hierarchy of the valuation techniques utilized to determine those fair values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. Assessments of the significance of a particular input to the fair value measurement require judgment and consideration of factors specific to the assets being valued. For more information on the valuation methodologies used regarding securities in the Level 2 and Level 3 categories, see Note 2 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2023 report on Form 10-K.
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Schedule of Quantitative Information Regarding Level 3 Valuations | Quantitative Information Regarding Level 3 Valuations Below is quantitative information regarding securities in the Level 3 category, by security type:
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Schedule of Fair Value Measurements - Level 3 Assets & Liabilities | The following tables present summary information regarding changes in the fair value of assets and liabilities measured using Level 3 inputs.
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Schedule of Investments in LLCs and Limited Partnerships | The amount of ProAssurance's unfunded contractual commitments related to these investments as of March 31, 2024 and fair values of these investments as of March 31, 2024 and December 31, 2023 were as follows:
Below is additional information regarding each of the investments listed in the table above as of March 31, 2024. (1)This investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent, while the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from to eight years. (2)This investment is comprised of one LP fund, which holds long and short publicly traded securities that will passively generate income. Redemptions are permitted with 30 days written notice if outside of a lock-up period. (3)This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years. (4)This investment is comprised of multiple unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The remaining funds focus on private middle market company mezzanine and senior secured loans, opportunities across the credit spectrum, mortgage backed-loans, as well as various types of loan-backed investments. One fund allows redemptions at any quarter-end with prior notice requirements of 180 days, while two other funds allow for redemptions with consent of the General Partner. The remaining funds do not allow redemptions. For the funds that do not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames throughout the remaining life of the funds. (5)This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is an LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. A third fund is an LLC focused on acquiring ownership stakes in insurance agencies. For all three funds, redemptions are not permitted. The remaining funds are real estate focused LPs, two of which allow for redemption with prior notice.
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Schedule of Financial Instruments Not Measured at Fair Value | The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category.
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-For-Sale Fixed Maturities | Available-for-sale fixed maturities at March 31, 2024 and December 31, 2023 included the following:
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Schedule of Available-For-Sale Securities by Contractual Maturity | The recorded cost basis and estimated fair value of available-for-sale fixed maturities at March 31, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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Schedule of Investments Held in an Unrealized Loss Position | The following tables provide summarized information with respect to investments held in an unrealized loss position at March 31, 2024 and December 31, 2023, including the length of time the investment had been held in a continuous unrealized loss position.
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Schedule of a Roll Forward of Cumulative Credit Losses Recorded in Earnings Related to Impaired Debt Securities | The following tables present a roll forward of the allowance for expected credit losses on available-for-sale fixed maturities for the three months ended March 31, 2024 and 2023.
The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the impairment was recorded in OCI.
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Schedule of Other Information Regarding Available-For-Sale Securities | Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows:
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Schedule of Net Investment Income | Net investment income (loss) by investment category was as follows:
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Schedule of Investment in Unconsolidated Subsidiaries | ProAssurance's investment in unconsolidated subsidiaries were as follows:
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Schedule of Equity Method Investments | The results recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows:
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Schedule of Net Realized Investment Gains (Losses) | Realized investment gains and losses are recognized on the first-in, first-out basis. The following table provides detailed information regarding net investment gains (losses):
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Reserve for Losses and Loss Adjustment Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reserve for Losses and Loss Adjustment Expenses | Activity in the reserve for losses and loss adjustment expenses is summarized as follows:
(1) Net prior year reserve development recognized for the three months ended March 31, 2024 and 2023 as well as the year ended December 31, 2023 included $1.7 million, $2.5 million and $8.3 million, respectively, of amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses.
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Outstanding Debt | ProAssurance’s outstanding debt consisted of the following:
|
Derivatives (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Swaps | The following table provides a summary of the volume and fair value position of the Interest Rate Swaps as well as the reporting location in the Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023.
(1) Volume is represented by the derivative instruments' notional amount. (2) Additional information regarding the fair value of the Company's Interest Rate Swaps is provided in Note 2.
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Schedule of Derivative Instruments, Gain (Loss) | For the three months ended March 31, 2024, ProAssurance reclassified a gain on the Interest Rate Swaps from AOCI, net of tax, into earnings as shown in the table below:
|
Shareholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of AOCI, Net of Tax | The changes in the balance of each component of AOCI for the three months ended March 31, 2024 and 2023 were as follows:
(1) ProAssurance entered into two forward-starting interest rate swap agreements ("Interest Rate Swaps") on May 2, 2023, which are designated and qualify as highly effective cash flow hedges. See Note 8 for additional information on the Interest Rate Swaps.
|
Earnings (Loss) Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table provides a reconciliation between the Company's basic weighted average number of common shares outstanding to its diluted weighted average number of common shares outstanding:
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The tabular information that follows shows the financial results of the Company's reportable segments reconciled to results reflected in the Condensed Consolidated Statements of Income and Comprehensive Income. ProAssurance does not consider goodwill or intangible asset impairments, changes in the fair value of contingent consideration or transaction-related costs for completed business combinations, including any related tax impacts, in assessing the financial performance of its operating and reportable segments, and thus are included in the reconciliation of segment results to consolidated results. Financial results by segment were as follows:
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Schedule of Gross Premiums by Product | The following table provides detailed information regarding ProAssurance's gross premiums earned by product as well as a reconciliation to net premiums earned. All gross premiums earned are from external customers except as noted. ProAssurance's insured risks are primarily within the U.S.
(1) Premium for all periods is assumed from the Workers' Compensation Insurance segment. (2) Premium for all periods is assumed from the Specialty P&C segment.
|
Basis of Presentation (Details) |
3 Months Ended |
---|---|
Mar. 31, 2024
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 4 |
Fair Value Measurement (Narrative) (Details) |
Mar. 31, 2024
USD ($)
subsidiary
|
Dec. 31, 2023
USD ($)
|
---|---|---|
Credit Derivatives [Line Items] | ||
Number of proassurance's insurance subsidiaries | subsidiary | 3 | |
Fair value of funded deferred compensation assets | $ 33,800,000 | $ 32,300,000 |
Fair Value | ||
Credit Derivatives [Line Items] | ||
Deferred compensation liabilities | 33,500,000 | 32,000,000 |
Fair Value, Nonrecurring | ||
Credit Derivatives [Line Items] | ||
Fair value, net asset (liability) | $ 0 | $ 0 |
Investments (Sales and Purchases of Available-for-Sale Securities) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Proceeds from sales (exclusive of maturities and paydowns) | $ 17,100 | $ 3,800 |
Purchases | $ 230,549 | $ 68,755 |
Investments (Net Investment Income) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Net Investment Income | ||
Investment fees and expenses | $ (2,309) | $ (1,831) |
Net investment income | 33,897 | 30,310 |
Fixed maturities | ||
Net Investment Income | ||
Interest and dividend income, operating | 31,451 | 27,327 |
Equities | ||
Net Investment Income | ||
Interest and dividend income, operating | 892 | 807 |
Short-term investments, including Other | ||
Net Investment Income | ||
Interest and dividend income, operating | 3,411 | 3,350 |
BOLI | ||
Net Investment Income | ||
BOLI | $ 452 | $ 657 |
Investments (Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated subsidiaries | $ 278,931 | $ 276,756 |
Qualified affordable housing project tax credit partnerships | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated subsidiaries | 562 | 666 |
All other investments, primarily investment fund LPs/LLCs | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated subsidiaries | $ 278,369 | $ 276,090 |
Investments (Equity in Earnings (Loss) of Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Losses recorded | $ 103 | $ 354 |
Tax credits recognized | $ 8 | $ 43 |
Investments (Roll Forward of Cumulative Credit Losses Recorded in Earnings) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||
Balance beginning of period | $ 57 | $ 57 |
No impairment has been previously recognized | 740 | 0 |
Balance ending of period | $ 797 | $ 57 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
Income Tax Disclosure [Abstract] | ||
Decrease in contingent consideration liability | $ 2.0 | |
Income taxes payable | 3.0 | $ 4.0 |
Unrecognized tax benefits | 5.4 | 5.3 |
Accrued liability for interest related to unrecognized tax benefits | $ 0.6 | $ 0.5 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
Other Commitments [Line Items] | |||
Period to advance funds | 30 days | ||
NORCAL Group | |||
Other Commitments [Line Items] | |||
Contingent consideration, maximum estimate | $ 84.0 | ||
Fair value of contingent consideration in NORCAL acquisition | (6.5) | $ (6.5) | |
Data Analytics Services | |||
Other Commitments [Line Items] | |||
Annual fee | $ 3.5 | ||
Purchase commitment, period | 3 years | ||
Extension period for long-term purchase commitment | 1 year | ||
Non-renew notice, period | 6 months | ||
Operating expense | $ 0.8 | $ 0.9 | |
Purchase obligation | 2.2 | ||
Funding Commitments | |||
Other Commitments [Line Items] | |||
Commitments total | 161.9 | ||
Lloyd's Syndicates | |||
Other Commitments [Line Items] | |||
Required FAL deposit | $ 20.2 |
Debt (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Debt Instrument [Line Items] | ||
Gross debt | $ 429,865,000 | $ 429,387,000 |
Less unamortized debt issuance costs | 2,091,000 | 2,254,000 |
Debt less unamortized debt issuance costs | 427,774,000 | 427,133,000 |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 125,000,000 | 125,000,000 |
Stated interest rate on debt | 7.53% | |
Line of credit, borrowing capacity including accordion feature | $ 300,000,000 | |
Accordion feature borrowing capacity | 50,000,000 | |
Contribution Certificates | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 179,865,000 | 179,387,000 |
Stated interest rate on debt | 3.00% | |
Effective interest rate on debt | 4.35% | |
Term Loan | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 125,000,000 | $ 125,000,000 |
Term Loan | Line of Credit | ||
Debt Instrument [Line Items] | ||
Effective interest rate on debt | 7.65% |
Derivatives (Volume and Fair Value) (Details) $ in Thousands |
Mar. 31, 2024
USD ($)
derivative_instrument
|
Dec. 31, 2023
USD ($)
derivative_instrument
|
---|---|---|
Derivative [Line Items] | ||
Number of instruments (in derivative instruments) | derivative_instrument | 2 | |
Interest Rate Swaps | Cash Flow Hedging | ||
Derivative [Line Items] | ||
Number of instruments (in derivative instruments) | derivative_instrument | 2 | 2 |
Aggregate Notional Amount | $ | $ 250,000 | $ 250,000 |
Estimated fair value | $ | $ 7,674 | $ 3,876 |
Derivatives (Schedule of Derivative Instruments, Gain (Loss)) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Interest Rate Swaps | Interest Expense | ||
Derivative [Line Items] | ||
Qualifying Cash Flow Hedges - Gains (Losses) Reclassified from AOCI, net of tax, to Earnings | $ 1,073 | $ 0 |
Shareholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
Equity [Abstract] | |||
Common shares, shares authorized (in shares) | 100,000,000 | 100,000,000 | |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | |
Cash dividends declared per common share (in usd per share) | $ 0 | $ 0.05 | |
Dividend declared | $ 2.7 | ||
Total authorizations which remain available for use | $ 55.9 | ||
Deferred tax (benefit) expense included in OCI | $ 10.8 |
Variable Interest Entities (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Variable Interest Entity [Line Items] | ||
VIEs carrying value | $ 5,650,036 | $ 5,631,925 |
Liabilities | 4,536,971 | 4,519,945 |
Variable Interest Entity, Not Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
VIEs carrying value | 252,900 | 250,400 |
Variable Interest Entity, Primary Beneficiary | PPM RRG | ||
Variable Interest Entity [Line Items] | ||
VIEs carrying value | 135,000 | 142,000 |
Surplus notes | 5,000 | |
Liabilities | $ 135,000 | $ 142,000 |
Earnings (Loss) Per Share (Earnings Per Share) (Details) - $ / shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average number of common shares outstanding, basic (in shares) | 51,013 | 53,987 |
Weighted average number of common shares outstanding, diluted (in shares) | 51,149 | 54,117 |
Effect of dilutive shares on earnings (loss) per share (in usd per share) | $ 0 | $ 0 |
Antidilutive shares excluded from computation of earnings per share (in shares) | 251 | |
Restricted Share Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Dilutive effect of securities (in shares) | 112 | 103 |
Performance Share Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Dilutive effect of securities (in shares) | 24 | 27 |
Segment Information (Narrative) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2024
employee
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Number of reportable segments | 4 |
Number of employees | employee | 1,000 |
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