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Segment Information
 9 Months Ended
Sep. 30, 2024
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.
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:
Three Months Ended September 30, 2024
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell ReinsuranceCorporateInter-segment EliminationsConsolidated
Net premiums earned$188,704 $41,829 $12,627 $— $— $243,160 
Net investment income— — 1,009 36,263 — 37,272 
Equity in earnings (loss) of unconsolidated subsidiaries— — — 4,767 — 4,767 
Net investment gains (losses)— — 599 1,653 — 2,252 
Other income (expense)(1)
982 537 1 (2,747)(971)(2,198)
Net losses and loss adjustment expenses(136,337)(32,193)(7,801)— — (176,331)
Underwriting, policy acquisition and operating expenses(1)
(51,492)(14,383)(4,143)(11,342)971 (80,389)
SPC U.S. federal income tax benefit (expense)(2)
— — (377)— — (377)
SPC dividend (expense) income— — (1,360)— — (1,360)
Interest expense— — — (5,698)— (5,698)
Income tax benefit (expense)— — — (4,657)— (4,657)
Segment results$1,857 $(4,210)$555 $18,239 $— 16,441 
Net income (loss)$16,441 
Significant non-cash items:
Depreciation and amortization, net of accretion$2,065 $1,270 $(671)$1,216 $— $3,880 
Nine Months Ended September 30, 2024
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned
$562,137 $124,692 $40,347 $— $— $727,176 
Net investment income
— — 2,687 105,040 — 107,727 
Equity in earnings (loss) of unconsolidated subsidiaries
— — — 16,383 — 16,383 
Net investment gains (losses)— — 2,327 (3,921)— (1,594)
Other income (expense)(1)
3,359 1,483 1 2,281 (3,252)3,872 
Net losses and loss adjustment expenses(434,564)(95,980)(26,481)— — (557,025)
Underwriting, policy acquisition and operating expenses(1)
(153,415)(44,008)(14,105)(29,812)3,252 (238,088)
SPC U.S. federal income tax benefit (expense)(2)
— — (1,043)— — (1,043)
SPC dividend (expense) income
— — (2,479)— — (2,479)
Interest expense
— — — (17,004)— (17,004)
Income tax benefit (expense)
— — — (7,837)— (7,837)
Segment results
$(22,483)$(13,813)$1,254 $65,130 $— 30,088 
Reconciliation of segments to consolidated results:
Contingent Consideration(3)
6,740 
Transaction-related costs, net(4)
(253)
Net income (loss)$36,575 
Significant non-cash items:
Depreciation and amortization, net of accretion$6,784 $3,747 $(1,661)$4,775 $— $13,645 
Three Months Ended September 30, 2023
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned$195,772 $39,885 $6,763 $— $— $242,420 
Net investment income— — 601 32,153 — 32,754 
Equity in earnings (loss) of unconsolidated subsidiaries— — — (61)— (61)
Net investment gains (losses)— — (525)(3,677)— (4,202)
Other income (expense)(1)
1,089 333 2 2,847 (935)3,336 
Net losses and loss adjustment expenses(162,677)(41,208)(5,006)— — (208,891)
Underwriting, policy acquisition and operating expenses(1)
(49,395)(13,542)(3,668)(8,344)935 (74,014)
SPC U.S. federal income tax benefit (expense)(2)
— — 175 — — 175 
SPC dividend (expense) income— — 2,518 — — 2,518 
Interest expense— — — (5,514)— (5,514)
Income tax benefit (expense)— — — 4,655 — 4,655 
Segment results$(15,211)$(14,532)$860 $22,059 $— (6,824)
Reconciliation of segments to consolidated results:
Goodwill impairment
(44,110)
Contingent Consideration (3)
1,500 
Net income (loss)$(49,434)
Significant non-cash items:
Depreciation and amortization, net of accretion$2,728 $851 $300 $2,575 $— $6,454 
Goodwill impairment
$44,110 
Nine Months Ended September 30, 2023
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned$562,206 $121,706 $46,156 $— $— $730,068 
Net investment income— — 1,625 93,089 — 94,714 
Equity in earnings (loss) of unconsolidated subsidiaries— — — 5,450 — 5,450 
Net investment gains (losses)— — 1,830 (3,174)— (1,344)
Other income (expense)(1)
3,106 1,565 3 5,347 (3,157)6,864 
Net losses and loss adjustment expenses
(476,187)(101,813)(27,245)— — (605,245)
Underwriting, policy acquisition and operating expenses(1)
(140,949)(40,923)(15,241)(24,823)3,157 (218,779)
SPC U.S. federal income tax benefit (expense)(2)
— — (1,351)— — (1,351)
SPC dividend (expense) income
— — (3,171)— — (3,171)
Interest expense
— — — (16,478)— (16,478)
Income tax benefit (expense)
— — — 3,901 — 3,901 
Segment results
$(51,824)$(19,465)$2,606 $63,312 $— (5,371)
Reconciliation of segments to consolidated results:
Goodwill impairment
(44,110)
Contingent Consideration(3)
4,500 
Net income (loss)$(44,981)
Significant non-cash items:
Depreciation and amortization, net of accretion$7,927 $2,573 $(187)$9,772 $— $20,085 
Goodwill impairment
$44,110 
(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 and, for the nine months ended September 30, 2024, the reversal of a nominal amount of associated contingent investment banker fees accrued during purchase accounting, all of which are 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.
(4) Represents actuarial consulting fees, after-tax, paid in connection with the final determination of contingent consideration associated with the acquisition of NORCAL. For the nine months ended September 30, 2024, pre-tax transaction-related costs of approximately $0.3 million were included as a component of consolidated operating expense and the associated nominal income tax benefit was included as a component of consolidated income tax benefit (expense) on the Condensed Consolidated Statements of Income and Comprehensive Income.
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.
Three Months Ended September 30Nine Months Ended September 30
(In thousands)2024202320242023
Specialty P&C Segment
Gross premiums earned:
MPL
$186,376 $183,501 $551,791 $553,644 
Medical Technology Liability
11,262 10,904 33,196 32,060 
Lloyd's Syndicates
2,897 4,931 12,256 14,499 
Other5,373 6,350 16,986 19,527 
Ceded premiums earned(17,204)(9,914)(52,092)(57,524)
Segment net premiums earned188,704 195,772 562,137 562,206 
Workers' Compensation Insurance Segment
Gross premiums earned:
Traditional business46,148 43,423 136,310 131,623 
Alternative market business
15,674 17,311 49,130 52,421 
Ceded premiums earned(19,993)(20,849)(60,748)(62,338)
Segment net premiums earned41,829 39,885 124,692 121,706 
Segregated Portfolio Cell Reinsurance Segment
Gross premiums earned:
Workers' compensation(1)
14,095 15,979 44,767 48,613 
MPL(2)
518 (6,971)1,881 4,388 
Ceded premiums earned(1,986)(2,245)(6,301)(6,845)
Segment net premiums earned12,627 6,763 40,347 46,156 
Consolidated net premiums earned$243,160 $242,420 $727,176 $730,068 
(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.