Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 31, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | PROASSURANCE CORP | |
Entity Central Index Key | 1,127,703 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 53,618,980 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Investments | ||
Fixed maturities, at fair value; cost or amortized cost, $2,178,066 and $2,257,188, respectively | $ 2,155,693 | $ 2,280,242 |
Equity investments, at fair value; cost, $474,306 and $425,942, respectively | 496,026 | 470,609 |
Short-term investments | 212,945 | 432,126 |
Business owned life insurance | 63,017 | 62,113 |
Investment in unconsolidated subsidiaries | 390,214 | 330,591 |
Other investments, $33,020 and $52,301 at fair value, respectively, otherwise at cost or amortized cost | 35,909 | 110,847 |
Total Investments | 3,353,804 | 3,686,528 |
Cash and cash equivalents | 66,715 | 134,495 |
Premiums receivable | 279,645 | 238,085 |
Receivable from reinsurers on paid losses and loss adjustment expenses | 10,035 | 7,317 |
Receivable from reinsurers on unpaid losses and loss adjustment expenses | 324,168 | 335,585 |
Prepaid reinsurance premiums | 50,478 | 39,916 |
Deferred policy acquisition costs | 52,193 | 50,261 |
Deferred tax asset, net | 18,196 | 9,930 |
Real estate, net | 31,316 | 31,975 |
Intangible assets, net | 79,864 | 82,952 |
Goodwill | 210,725 | 210,725 |
Other assets | 106,325 | 101,428 |
Total Assets | 4,583,464 | 4,929,197 |
Policy liabilities and accruals | ||
Reserve for losses and loss adjustment expenses | 2,078,817 | 2,048,381 |
Unearned premiums | 421,065 | 398,884 |
Reinsurance premiums payable | 51,569 | 37,726 |
Total Policy Liabilities | 2,551,451 | 2,484,991 |
Other liabilities | 169,126 | 437,600 |
Debt less debt issuance costs | 288,271 | 411,811 |
Total Liabilities | 3,008,848 | 3,334,402 |
Shareholders' Equity | ||
Common shares, par value $0.01 per share, 100,000,000 shares authorized, 62,986,474 and 62,824,523 shares issued, respectively | 630 | 628 |
Additional paid-in capital | 383,001 | 383,077 |
Accumulated other comprehensive income (loss), net of deferred tax expense (benefit) of ($4,027) and $5,218, respectively | (16,143) | 14,911 |
Retained earnings | 1,625,137 | 1,614,186 |
Treasury shares, at cost, 9,367,545 shares and 9,367,502 shares, respectively | (418,009) | (418,007) |
Total Shareholders' Equity | 1,574,616 | 1,594,795 |
Total Liabilities and Shareholders' Equity | $ 4,583,464 | $ 4,929,197 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Debt Securities, at cost | $ 2,178,066 | $ 2,257,188 |
Equity Investments, fair value, cost | 474,306 | 425,942 |
Other investments, portion carried at fair value | $ 33,020 | $ 52,301 |
Common shares, par value (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) | 62,986,474 | 62,824,523 |
Deferred tax expense (benefit) on accumulated other comprehensive income (loss) | $ (4,027) | $ 5,218 |
Treasury shares, number of shares (in shares) | 9,367,545 | 9,367,502 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Changes in Capital (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | $ 1,594,795 | $ 1,798,702 | |||||
Common shares issued for compensation and effect of shares reissued to stock purchase plan | 1,314 | 1,878 | |||||
Share-based compensation | 2,479 | 6,092 | |||||
Net effect of restricted and performance shares issued | (3,869) | (5,323) | |||||
Dividends to shareholders | (34,246) | (33,040) | |||||
Other comprehensive income (loss) | (34,470) | 8,665 | |||||
Net income | $ 28,423 | $ 19,518 | 40,279 | 60,973 | |||
Ending Balance | 1,574,616 | 1,838,096 | 1,574,616 | 1,838,096 | |||
Accounting Standards Update 2016-01 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | $ 8,334 | |||||
Accounting Standards Update 2018-02 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | 0 | |||||
Accounting Standards Update 2016-09 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | $ 149 | |||||
Common Stock | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | 628 | 627 | |||||
Net effect of restricted and performance shares issued | 2 | 1 | |||||
Ending Balance | 630 | 628 | 630 | 628 | |||
Additional Paid-in Capital | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | 383,077 | 376,518 | |||||
Common shares issued for compensation and effect of shares reissued to stock purchase plan | 1,316 | 1,876 | |||||
Share-based compensation | 2,479 | 6,092 | |||||
Net effect of restricted and performance shares issued | (3,871) | (5,324) | |||||
Ending Balance | 383,001 | 379,587 | 383,001 | 379,587 | |||
Additional Paid-in Capital | Accounting Standards Update 2016-09 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | 425 | |||||
Accumulated Other Comprehensive Income (Loss) | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | 14,911 | 17,399 | |||||
Other comprehensive income (loss) | (34,470) | 8,665 | |||||
Ending Balance | (16,143) | 26,064 | (16,143) | 26,064 | |||
Accumulated Other Comprehensive Income (Loss) | Accounting Standards Update 2018-02 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | 3,416 | |||||
Retained Earnings | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | 1,614,186 | 1,824,088 | |||||
Dividends to shareholders | (34,246) | (33,040) | |||||
Net income | 40,279 | 60,973 | |||||
Ending Balance | 1,625,137 | 1,851,745 | 1,625,137 | 1,851,745 | |||
Retained Earnings | Accounting Standards Update 2016-01 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | 8,334 | |||||
Retained Earnings | Accounting Standards Update 2018-02 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | $ (3,416) | |||||
Retained Earnings | Accounting Standards Update 2016-09 | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Cumulative-effect adjustment adoption of ASU | [1] | $ (276) | |||||
Treasury Stock | |||||||
Increase (Decrease) in Stockholders' Equity: | |||||||
Beginning Balance | (418,007) | (419,930) | |||||
Common shares issued for compensation and effect of shares reissued to stock purchase plan | (2) | 2 | |||||
Ending Balance | $ (418,009) | $ (419,928) | $ (418,009) | $ (419,928) | |||
[1] | See Note 1 for discussion of accounting guidance adopted during the period. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues | ||||
Net premiums earned | $ 223,591 | $ 180,353 | $ 410,750 | $ 363,256 |
Net investment income | 22,384 | 22,677 | 44,411 | 45,863 |
Equity in earnings (loss) of unconsolidated subsidiaries | 5,380 | 2,516 | 7,019 | 4,324 |
Net realized investment gains (losses): | ||||
OTTI losses | (404) | 0 | (404) | (419) |
Portion of OTTI losses recognized in other comprehensive income before taxes | 0 | 0 | 0 | 248 |
Net impairment losses recognized in earnings | (404) | 0 | (404) | (171) |
Other net realized investment gains (losses) | 3,199 | (2,219) | (9,318) | 11,232 |
Total net realized investment gains (losses) | 2,795 | (2,219) | (9,722) | 11,061 |
Other income | 2,044 | 2,250 | 4,767 | 4,071 |
Total revenues | 256,194 | 205,577 | 457,225 | 428,575 |
Expenses | ||||
Net losses and loss adjustment expenses | 161,728 | 115,550 | 291,515 | 234,701 |
Underwriting, policy acquisition and operating expenses | ||||
Operating expense | 33,958 | 34,972 | 66,422 | 69,454 |
DPAC amortization | 25,653 | 22,913 | 50,547 | 45,540 |
Segregated portfolio cells dividend expense (income) | 2,785 | 8,811 | 4,532 | 11,186 |
Interest expense | 3,958 | 4,145 | 7,663 | 8,278 |
Total expenses | 228,082 | 186,391 | 420,679 | 369,159 |
Income before income taxes | 28,112 | 19,186 | 36,546 | 59,416 |
Provision for income taxes | ||||
Current expense (benefit) | (1,175) | 6,700 | (2,503) | (1,579) |
Deferred expense (benefit) | 864 | (7,032) | (1,230) | 22 |
Total income tax expense (benefit) | (311) | (332) | (3,733) | (1,557) |
Net income | 28,423 | 19,518 | 40,279 | 60,973 |
Other comprehensive income (loss), after tax, net of reclassification adjustments | (8,096) | 5,741 | (34,470) | 8,665 |
Comprehensive income (loss) | $ 20,327 | $ 25,259 | $ 5,809 | $ 69,638 |
Earnings per share | ||||
Basic (USD per share) | $ 0.53 | $ 0.37 | $ 0.75 | $ 1.14 |
Diluted (USD per share) | $ 0.53 | $ 0.36 | $ 0.75 | $ 1.14 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 53,610 | 53,402 | 53,567 | 53,359 |
Diluted (in shares) | 53,741 | 53,607 | 53,716 | 53,571 |
Cash dividends declared per common share (USD per share) | $ 0.31 | $ 0.31 | $ 0.62 | $ 0.62 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Operating Activities | ||
Net income | $ 40,279 | $ 60,973 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization, net of accretion | 11,036 | 13,949 |
(Increase) decrease in cash surrender value of BOLI | (904) | (897) |
Net realized investment (gains) losses | 9,722 | (11,061) |
Share-based compensation | 2,517 | 6,092 |
Deferred income taxes | (1,230) | 22 |
Policy acquisition costs, net of amortization (net deferral) | (1,932) | (3,400) |
Equity in (earnings) loss of unconsolidated subsidiaries | (7,019) | (4,324) |
Distributed earnings from unconsolidated subsidiaries | 4,595 | 12,894 |
Other | 796 | (438) |
Other changes in assets and liabilities: | ||
Premiums receivable | (41,560) | (11,637) |
Reinsurance related assets and liabilities | 11,980 | (7,291) |
Other assets | 969 | (2,613) |
Reserve for losses and loss adjustment expenses | 30,436 | (1,563) |
Unearned premiums | 22,181 | 24,932 |
Other liabilities | (16,300) | (8,730) |
Net cash provided (used) by operating activities | 65,566 | 66,908 |
Purchases of: | ||
Fixed maturities, available for sale | (552,451) | (359,080) |
Fixed maturities, trading | (29,999) | 0 |
Equity investments | (91,054) | (101,854) |
Other investments | (15,228) | (8,879) |
Funding of qualified affordable housing project tax credit partnerships | (74) | (320) |
Investment in unconsolidated subsidiaries | (27,734) | (19,787) |
Proceeds from sales or maturities of: | ||
Fixed maturities, available for sale | 658,337 | 434,075 |
Equity investments | 75,376 | 85,907 |
Other investments | 14,725 | 12,689 |
Return of invested capital from unconsolidated subsidiaries | 36,154 | 21,130 |
Net sales or maturities (purchases) of short-term investments | 219,053 | 172,250 |
Unsettled security transactions, net change | (3,044) | 12,714 |
Purchases of capital assets | (5,113) | (6,593) |
Repayments (advances) under Syndicate Credit Agreement | 1,050 | 1,026 |
Other | 0 | 951 |
Net cash provided (used) by investing activities | 277,898 | 242,177 |
Financing Activities | ||
Borrowings (repayments) under Revolving Credit Agreement | (123,000) | (22,000) |
Repayments of Mortgage Loans | (698) | 0 |
Dividends to shareholders | (283,313) | (282,180) |
Capital contribution received from (return of capital to) external segregated portfolio cell owners | (329) | 162 |
Other | (3,904) | (4,951) |
Net cash provided (used) by financing activities | (411,244) | (308,969) |
Increase (decrease) in cash and cash equivalents | (67,780) | 116 |
Cash and cash equivalents at beginning of period | 134,495 | 117,347 |
Cash and cash equivalents at end of period | 66,715 | 117,463 |
Significant Non-Cash Transactions | ||
Dividends declared and not yet paid | $ 17,630 | $ 16,524 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2018 | |
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 and its consolidated subsidiaries (ProAssurance, PRA or the Company). 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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2017 report on Form 10-K. In connection with its preparation of the Condensed Consolidated Financial Statements, ProAssurance evaluated events that occurred subsequent to June 30, 2018 for recognition or disclosure in its financial statements and notes to financial statements. ProAssurance operates in four reportable segments as follows: Specialty P&C , Workers' Compensation, Lloyd's Syndicates and Corporate. For more information on the nature of products and services provided and for financial information by segment, refer to Note 13 . Reclassifications Certain insignificant prior period amounts have been reclassified to conform to the current period presentation. Accounting Policies Except as added below, 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, 2017 report on Form 10-K. Retroactive Insurance Contracts In certain instances, ProAssurance’s insurance contracts cover losses both on a prospective basis and retroactive basis and, accordingly, ProAssurance bifurcates the prospective and retroactive provisions of these contracts and accounts for each component separately, where practicable. The prospective provisions of a contract are accounted for consistently with the Company’s other insurance contracts as discussed in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2017 report on Form 10-K. Under the retroactive provisions of a contract, all premiums received and losses assumed are recognized immediately in earnings at the inception of the contract as all of the underlying loss events occurred in the past. If the estimated losses assumed differ from the premium received related to the retroactive provision of a contract, the resulting difference is deferred and recognized over the estimated claim payment period with the periodic amortization reflected in earnings as a component of net losses and loss adjustment expenses. Deferred gains are included as a component of the reserve for losses and loss adjustment expenses and deferred losses are included as a component of other assets on the Condensed Consolidated Balance Sheet. Subsequent changes to the estimated timing or amount of future loss payments in relation to the losses assumed under retroactive provisions also produce changes in deferred balances. Changes in such estimates are applied retrospectively and the resulting changes in deferred balances, together with periodic amortization, are included in earnings in the period of change. Other Liabilities Other liabilities consisted of the following: (In thousands) June 30, 2018 December 31, 2017 SPC dividends payable $ 48,439 $ 46,925 Unpaid dividends 17,630 267,292 All other 103,057 123,383 Total other liabilities $ 169,126 $ 437,600 SPC dividends payable are the cumulative undistributed earnings contractually payable to the external cell owners of the SPC s operated by Eastern Re and Inova Re , ProAssurance's Cayman Islands reinsurance subsidiaries. Unpaid dividends represent common stock dividends declared by ProAssurance's Board that had not yet been paid as of June 30, 2018 . Unpaid dividends at December 31, 2017 reflected a special dividend declared in the fourth quarter of 2017 that was paid in January 2018 . Accounting Changes Adopted Restricted Cash ( ASU 2016-18) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance related to the classification of restricted cash presented in the statement of cash flows with the objective of reducing diversity in practice. Under the new guidance, entities are required to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts as presented on the statement of cash flows. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Intra-Entity Transfers of Assets Other than Inventory ( ASU 2016-16) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting standards related to the income tax consequences of intra-entity transfers of assets other than inventory between tax-paying components. A tax-paying component is an individual entity or group of entities that is consolidated for tax purposes. Under the new guidance, entities are required to recognize income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs instead of delaying recognition until the asset has been sold to an outside party. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Classification of Certain Cash Receipts and Cash Payments ( ASU 2016-15) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance related to the classification of certain cash receipts and cash payments presented in the statement of cash flows with the objective of reducing diversity in practice. ProAssurance adopted the guidance as of January 1, 2018 and elected to use the cumulative earnings approach for presenting distributions from equity method investees. Adoption of the guidance had no material effect on ProAssurance’s results of operations or financial position; however, ProAssurance reclassified approximately $12.9 million in distributions from unconsolidated subsidiaries from investing activities to operating activities in the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2017 . Revenue from Contracts with Customers ( ASU 2014-09) Effective for fiscal years beginning after December 15, 2017 the FASB issued guidance related to revenue from contracts with customers. The core principle of the new guidance is that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ProAssurance adopted the guidance as of January 1, 2018 under the modified retrospective method. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Recognition and Measurement of Financial Assets and Financial Liabilities ( ASU 2016-01) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The new guidance also specifies that an entity use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and present financial assets and liabilities by measurement category and form of financial asset. Other provisions of the new guidance include: revised disclosure requirements related to the presentation in comprehensive income of changes in the fair value of liabilities; elimination, for public companies, of disclosure requirements relative to the methods and significant assumptions underlying fair values disclosed for financial instruments measured at amortized cost; and simplified impairment assessments for equity investments without readily determinable fair values. ProAssurance adopted the guidance as of January 1, 2018 using a modified retrospective application and recorded a cumulative-effect after-tax adjustment of approximately $8.3 million to beginning retained earnings in the Condensed Consolidated Statement of Changes in Capital for the six months ended June 30, 2018 . LP s/ LLC s previously reported using the cost method are now reported at fair value with increases in fair value of approximately $3.6 million and $5.9 million recognized as a component of equity in earnings (loss) of unconsolidated subsidiaries on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 , respectively. Modification Accounting for Employee Share-Based Payment Awards ( ASU 2017-09) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting standards when there is a change in the terms or conditions of a share-based payment award. The new guidance clarifies that an entity should apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Reclassification of Certain Tax Effects from AOCI ( ASU 2018-02) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted, the FASB issued guidance which permits a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate tax rate from the TCJA . The amount of the reclassification from AOCI to retained earnings will be the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate on deferred tax items originally established through OCI and not net income. The guidance allows entities to adopt in any interim or annual period for which financial statements have not yet been issued and apply the guidance either (1) in the period of adoption or (2) retrospectively to each period in which the effect of the change in the tax rate is recognized. ProAssurance adopted this guidance as of January 1, 2018 and elected to apply this guidance in the period of adoption using the specific identification method. Using a modified retrospective application, ProAssurance recorded a cumulative-effect adjustment which increased beginning AOCI by approximately $3.4 million and decreased beginning retained earnings by the same amount in the Condensed Consolidated Statement of Changes in Capital for the six months ended June 30, 2018 . Adoption of this guidance had no material effect on ProAssurance's financial position, results of operations or cash flows. Accounting Changes Not Yet Adopted Technical Corrections and Improvements to Financial Instruments - Overall ( ASU 2018-03) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years beginning after June 15, 2018, the FASB amended the new standard on recognizing and measuring financial assets and financial liabilities to clarify certain aspects of the guidance. Under the amended guidance, an entity that uses the measurement alternative for equity investments without readily determinable fair values can change its measurement approach to a fair value method through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Also, entities are required to use the prospective transition approach only for equity investments they elect to measure using the new measurement alternative. Additionally, the guidance clarifies how to apply the measurement alternative and presentation requirements for financial liabilities measured under the fair value option. ProAssurance plans to adopt the guidance beginning July 1, 2018. As of June 30, 2018 , ProAssurance does not have any equity investments without readily determinable fair values or financial liabilities measured under the fair value option; therefore, adoption of the guidance is not expected to have a material effect on ProAssurance’s financial position, results of operations or cash flows. Leases ( ASU 2016-02) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance that requires a lessee to recognize for all leases (with the exception of short-term leases) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ProAssurance plans to adopt the guidance beginning January 1, 2019 using a modified retrospective application and plans to elect the transition option provided that allows companies to continue to apply legacy GAAP in comparative periods. As of June 30, 2018 , ProAssurance is currently in the process of evaluating all of its leases. As the majority of ProAssurance's leases are real estate operating leases and are not considered to be material, adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. In addition, ProAssurance's Revolving Credit Agreement contains a financial covenant regarding permitted leverage ratios based upon Consolidated Funded Indebtedness to Consolidated Total Capitalization; however, ProAssurance does not anticipate that the adoption of this guidance would have a material impact on the covenant. ProAssurance’s Mortgage Loans also contain a financial covenant regarding permitted leverage ratios, principally based upon SAP Consolidated Net Worth; however, as the NAIC is not anticipated to adopt the principles in the FASB guidance around capitalizing operating leases, adoption of the guidance would have no impact on the covenant. Premium Amortization on Purchased Callable Debt Securities ( ASU 2017-08) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance that will require the premium for certain callable debt securities to be amortized over a shorter period than is currently required. Currently amortization is permitted over the contractual life of the instrument and the guidance shortens the amortization to the earliest call date. The purpose of the guidance is to more closely align the amortization period of premiums to expectations incorporated in market pricing on the underlying securities. ProAssurance plans to adopt the guidance beginning January 1, 2019. As ProAssurance amortizes premium on callable debt securities to the earliest call date, adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. Derivatives and Hedging ( ASU 2017-12) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance to improve financial reporting of hedging relationships to better portray the entity's risk management activities in the consolidated financial statements. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. ProAssurance plans to adopt the guidance beginning January 1, 2019. ProAssurance's derivative instrument at June 30, 2018 is not designated as a hedging instrument; therefore, adoption is not expected to have a material effect on ProAssurance's results of operations, financial position or cash flows. Improvements to Nonemployee Share-Based Payment Accounting ( ASU 2018-07) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting for nonemployee share-based payment awards. The new guidance substantially aligns the accounting for nonemployee share-based payment awards with the accounting guidance for employee share-based payment awards with certain exceptions, including the inputs used in estimating the fair value of the nonemployee awards and the period of time and pattern of expense recognition. ProAssurance plans to adopt the guidance as of January 1, 2019. Adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. Improvements to Financial Instruments - Credit Losses ( ASU 2016-13) Effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, the FASB issued guidance that replaces the incurred loss impairment methodology, which delays recognition of credit losses until a probable loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the new guidance, credit losses are required to be recorded through an allowance for credit losses account and the income statement reflects the measurement for newly recognized financial assets, as well as increases or decreases of expected credit losses that have taken place during the period. Credit losses on available-for-sale fixed maturity securities will be measured in a manner similar to current GAAP, although the new guidance requires that credit losses be presented as an allowance, rather than as a write-down of the asset, limited to the amount by which the fair value is below amortized cost. In addition, this guidance could impact ProAssurance's receivables from reinsurers; however, ProAssurance has not historically experienced material credit losses due to the financial condition of a reinsurer. ProAssurance plans to adopt the guidance beginning January 1, 2020 and is in the process of evaluating the effect the new guidance would have on its results of operations and financial position. Simplifying the Test for Goodwill Impairment ( ASU 2017-04) Effective for the fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, the FASB issued guidance that simplifies the requirements to test goodwill for impairment for business entities that have goodwill reported in their financial statements. The guidance eliminates the second step of the impairment test which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount. In addition, the guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. ProAssurance plans to adopt the guidance beginning January 1, 2020. Adoption is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2018 | |
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: Level 1: quoted (unadjusted) market prices in active markets for identical assets and liabilities. For ProAssurance, Level 1 inputs are generally quotes for debt or equity 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. Fair values of assets measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 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. June 30, 2018 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 $ — $ 146,457 $ — $ 146,457 U.S. Government-sponsored enterprise obligations — 31,702 — 31,702 State and municipal bonds — 331,100 — 331,100 Corporate debt, multiple observable inputs 2,262 1,184,985 — 1,187,247 Corporate debt, limited observable inputs — — 8,380 8,380 Residential mortgage-backed securities — 204,236 — 204,236 Agency commercial mortgage-backed securities — 13,812 — 13,812 Other commercial mortgage-backed securities — 32,715 — 32,715 Other asset-backed securities — 160,852 9,420 170,272 Fixed maturities, trading Corporate debt — 29,772 — 29,772 Equity investments Financial 74,656 — — 74,656 Utilities/Energy 57,936 — — 57,936 Consumer oriented 55,459 — — 55,459 Industrial 46,285 — — 46,285 Bond funds 146,795 — — 146,795 All other 94,638 — — 94,638 Short-term investments 200,366 12,579 — 212,945 Other investments — 33,015 5 33,020 Other assets — 2,588 — 2,588 Total assets categorized within the fair value hierarchy $ 678,397 $ 2,183,813 $ 17,805 2,880,015 Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: Equity investments 20,257 Investment in unconsolidated subsidiaries 277,505 Total assets at fair value $ 3,177,777 December 31, 2017 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 $ — $ 133,627 $ — $ 133,627 U.S. Government-sponsored enterprise obligations — 20,956 — 20,956 State and municipal bonds — 632,243 — 632,243 Corporate debt, multiple observable inputs 2,371 1,151,084 — 1,153,455 Corporate debt, limited observable inputs — — 13,703 13,703 Residential mortgage-backed securities — 196,789 1,055 197,844 Agency commercial mortgage-backed securities — 10,742 — 10,742 Other commercial mortgage-backed securities — 15,961 — 15,961 Other asset-backed securities — 97,780 3,931 101,711 Equity investments Financial 76,051 — — 76,051 Utilities/Energy 54,388 — — 54,388 Consumer oriented 54,529 — — 54,529 Industrial 53,936 — — 53,936 Bond funds 156,563 — — 156,563 All other 75,142 — — 75,142 Short-term investments 404,204 27,922 — 432,126 Other investments 607 31,155 409 32,171 Other assets — 1,731 — 1,731 Total assets categorized within the fair value hierarchy $ 877,791 $ 2,319,990 $ 19,098 3,216,879 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 210,759 Other investments 20,130 Total assets at fair value $ 3,447,768 The fair values for securities included in the Level 2 category, with the few exceptions described below, were developed by one of several third party, nationally recognized pricing services, including services that price only certain types of securities. Each service uses complex methodologies to determine values for securities and subject the values they develop to quality control reviews. Management selected a primary source for each type of security in the portfolio and reviewed the values provided for reasonableness by comparing data to alternate pricing services and to available market and trade data. Values that appeared inconsistent were further reviewed for appropriateness. Any value that did not appear reasonable was discussed with the service that provided the value and adjusted, if necessary. There were no material changes to the values supplied by the pricing services during the three and six months ended June 30, 2018 and 2017 . Level 2 Valuations Below is a summary description of the valuation methodologies primarily used by the pricing services for securities in the Level 2 category, by security type: U.S. Treasury obligations were valued based on quoted prices for identical assets, or, in markets that are not active, quotes for similar assets, taking into consideration adjustments for variations in contractual cash flows and yields to maturity. U.S. Government-sponsored enterprise obligations were valued using pricing models that consider current and historical market data, normal trading conventions, credit ratings, and the particular structure and characteristics of the security being valued, such as yield to maturity, redemption options, and contractual cash flows. Adjustments to model inputs or model results were included in the valuation process when necessary to reflect recent regulatory, government or corporate actions or significant economic, industry or geographic events affecting the security’s fair value. State and municipal bonds were valued using a series of matrices that considered credit ratings, the structure of the security, the sector in which the security falls, yields, and contractual cash flows. Valuations were further adjusted, when necessary, to reflect the expected effect on fair value of recent significant economic or geographic events or ratings changes. Corporate debt, multiple observable inputs consisted primarily of corporate bonds, but also included a small number of bank loans. The methodology used to value Level 2 corporate bonds was the same as the methodology previously described for U.S. Government-sponsored enterprise obligations. Bank loans were valued based on an average of broker quotes for the loans in question, if available. If quotes were not available, the loans were valued based on quoted prices for comparable loans or, if the loan was newly issued, by comparison to similar seasoned issues. Broker quotes were compared to actual trade prices to permit assessment of the reliability of the quotes; unreliable quotes were not considered in quoted averages. Residential and commercial mortgage-backed securities were valued using a pricing matrix which considers the issuer type, coupon rate and longest cash flows outstanding. The matrix used was based on the most recently available market information. Agency and non-agency collateralized mortgage obligations were both valued using models that consider the structure of the security, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Other asset-backed securities were valued using models that consider the structure of the security, monthly payment information, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Spreads and prepayment speeds consider collateral type. Short-term investments were securities maturing within one year, carried at fair value which approximated the cost of the securities due to their short-term nature. Other investments consisted primarily of convertible bonds valued using a pricing model that incorporated selected dealer quotes as well as current market data regarding equity prices and risk free rates. If dealer quotes were unavailable for the security being valued, quotes for securities with similar terms and credit status were used in the pricing model. Dealer quotes selected for use were those considered most accurate based on parameters such as underwriter status and historical reliability. Other assets consisted of an interest rate cap derivative instrument valued using a model which considers the volatilities from other instruments with similar maturities, strike prices, durations and forward yield curves. Level 3 Valuations Below is a summary description of the valuation processes and methodologies used as well as quantitative information regarding securities in the Level 3 category. Level 3 Valuation Processes • Level 3 securities are priced by the Chief Investment Officer. • Level 3 valuations are computed quarterly. Prices are evaluated quarterly against prior period prices and the expected change in prices. • ProAssurance's Level 3 securities are primarily NRSRO rated debt instruments for which comparable market inputs are commonly available for evaluating the securities in question. Valuation of these debt instruments is not overly sensitive to changes in the unobservable inputs used. Level 3 Valuation Methodologies Corporate debt, limited observable inputs consisted of corporate bonds valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At June 30, 2018 , 76% of the securities were rated and the average rating was BBB+ . At December 31, 2017 , 84% of the securities were rated and the average rating was BBB+ . Residential mortgage-backed and other asset-backed securities consisted of securitizations of receivables valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At June 30, 2018 , 70% of the securities were rated and the average rating was AAA . At December 31, 2017 , 21% of the securities were rated and the average rating was AAA . Other investments consisted of convertible securities for which limited observable inputs were available at June 30, 2018 and December 31, 2017 . The securities were valued internally based on expected cash flows, including the expected final recovery, discounted at a yield that considered the lack of liquidity and the financial status of the issuer. Quantitative Information Regarding Level 3 Valuations Fair Value at (In thousands) June 30, 2018 December 31, 2017 Valuation Technique Unobservable Input Range Assets: Corporate debt, limited observable inputs $8,380 $13,703 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Residential mortgage-backed and other asset-backed securities $9,420 $4,986 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Other investments $5 $409 Discounted Cash Flows Comparability Adjustment 0% - 10% (5%) 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 The following tables (the Level 3 Tables) present summary information regarding changes in the fair value of assets measured at fair value using Level 3 inputs. June 30, 2018 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance March 31, 2018 $ 15,097 $ 17,323 $ 365 $ 32,785 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (36 ) 1 — (35 ) Net realized investment gains (losses) (8 ) — 6 (2 ) Included in other comprehensive income (90 ) (111 ) — (201 ) Purchases — 3,225 — 3,225 Sales (1,644 ) (158 ) (366 ) (2,168 ) Transfers in 558 — — 558 Transfers out (5,497 ) (10,860 ) — (16,357 ) Balance June 30, 2018 $ 8,380 $ 9,420 $ 5 $ 17,805 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2018 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance December 31, 2017 $ 13,703 $ 4,986 $ 409 $ 19,098 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (74 ) 1 — (73 ) Net realized investment gains (losses) (8 ) — (38 ) (46 ) Included in other comprehensive income (128 ) (141 ) — (269 ) Purchases 6,005 16,678 — 22,683 Sales (4,549 ) (185 ) (366 ) (5,100 ) Transfers in 2,627 — — 2,627 Transfers out (9,196 ) (11,919 ) — (21,115 ) Balance June 30, 2018 $ 8,380 $ 9,420 $ 5 $ 17,805 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2017 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance March 31, 2017 $ 18,914 $ 3,002 $ 903 $ 22,819 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (34 ) — — (34 ) Net realized investment gains (losses) — — (124 ) (124 ) Included in other comprehensive income (70 ) 3 138 71 Purchases 4,841 — — 4,841 Sales (1,848 ) — (912 ) (2,760 ) Transfers in 10 — — 10 Transfers out (3,964 ) — — (3,964 ) Balance June 30, 2017 $ 17,849 $ 3,005 $ 5 $ 20,859 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2017 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance December 31, 2016 $ 14,810 $ 3,007 $ 3 $ 17,820 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (73 ) — — (73 ) Net realized investment gains (losses) 13 — (124 ) (111 ) Included in other comprehensive income (278 ) (2 ) 140 (140 ) Purchases 11,889 — — 11,889 Sales (3,560 ) — (912 ) (4,472 ) Transfers in 10 — 898 908 Transfers out (4,962 ) — — (4,962 ) Balance June 30, 2017 $ 17,849 $ 3,005 $ 5 $ 20,859 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — Transfers There were no transfers between the Level 1 and Level 2 categories during the three and six months ended June 30, 2018 or the three months ended June 30, 2017 . During the six months ended June 30, 2017 , equity securities of approximately $35.4 million were transferred from Level 2 to Level 1. Transfers shown in the preceding Level 3 tables were as of the end of the quarter in which the transfer occurred. All transfers were to or from Level 2. All transfers during the three and six months ended June 30, 2018 and 2017 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 June 30, 2018 and December 31, 2017 , certain LP s/ LLC s 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 commitments related to these investments as of June 30, 2018 and fair values of these investments as of June 30, 2018 and December 31, 2017 was as follows: Unfunded Fair Value (In thousands) June 30, June 30, December 31, Equity investments: Mortgage fund (1)* None $ 20,257 $ — Investment in unconsolidated subsidiaries: Private debt funds (2) $4,945 26,174 42,206 Long equity fund (3) None 7,712 7,847 Long/short equity funds (4) None 32,134 31,352 Non-public equity funds (5) $78,693 109,337 100,062 Multi-strategy fund of funds (6) None 9,357 9,100 Credit funds (7) None 18,075 6,561 Long/short commodities fund (8) None 13,380 13,025 Strategy focused funds (9) $19,247 61,336 606 277,505 210,759 Other investments: Mortgage fund (1)* See above — 20,130 Total investments carried at NAV $ 297,762 $ 230,889 * In the first quarter of 2018, ProAssurance began presenting this investment previously reported as a part of other investments as a part of equity investments on the Condensed Consolidated Balance Sheet. Prior year amounts have not been reclassified. Below is additional information regarding each of the investments listed in the table above as of June 30, 2018 . (1) This investment fund is focused on the structured mortgage market. The fund will primarily invest in U.S. Agency mortgage-backed securities. Redemptions are allowed at the end of any calendar quarter with a prior notice requirement of 65 days and are paid within 45 days at the end of the redemption dealing day. (2) The 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; the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP s over an anticipated time frame that spans from three to eight years. (3) The fund is a LP that holds long equities of public international companies. Redemptions are allowed at the end of any calendar month with a prior notice requirement of 15 days and are paid within 10 days of the end of the calendar month of the redemption request. (4) The investment is comprised of interests in multiple unrelated LP funds. The funds hold primarily long and short North American equities and target absolute returns using strategies designed to take advantage of market opportunities. The funds generally permit quarterly or semi-annual capital redemptions subject to notice requirements of 30 to 90 days . For some funds, redemptions above specified thresholds (lowest threshold is 90% ) may be only partially payable until after a fund audit is completed and are then payable within 30 days . (5) The 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 and other private equity-oriented LP s. Two of the LP s 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 nine years. (6) This fund is a LLC structured to build and manage low volatility, multi-manager portfolios that have little or no correlation to the broader fixed income and equity security markets. Redemptions are not permitted but offers to repurchase units of the LLC may be extended periodically. (7) The investment is comprised of two unrelated LP funds. One fund seeks to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The second fund seeks event driven opportunities across the corporate credit spectrum. For both funds, redemptions are allowed at any quarter-end with a prior notice requirement of 90 days . (8) This fund is a LLC invested across a broad range of commodities and focuses primarily on market neutral, relative value strategies, seeking to generate absolute returns with low correlation to broad commodity, equity and fixed income markets. Following an initial one-year lock-up period, redemptions are allowed with a prior notice requirement of 30 days and are payable within 30 days . (9) The investment is comprised of multiple unrelated LP s/ LLC s funds. One fund is a LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. Redemptions are not permitted. Another fund is a LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LP s, one of which allows for redemption with prior notice. ProAssurance may not sell, transfer or assign its interest in any of the above LP s/ LLC s without special consent from the LP s/ LLC s. Nonrecurring Fair Value Measurement At June 30, 2018 , ProAssurance did no t have any assets or liabilities that were measured at fair value on a nonrecurring basis. At December 31, 2017 , ProAssurance held an equity method early stage business investment measured at fair value on a nonrecurring basis due to a recognized OTTI of $8.5 million . The investment was valued using significant unobservable inputs (Level 3) and had a fair value of $1.2 million at December 31, 2017 . The fair value of the investment was measured as ProAssurance's ownership percentage in the projected earnings and cash flows expected to be generated by the investment. Financial Instruments - Methodologies Other Than Fair Value The following table provides the estimated fair value of our financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. All fair values provided primarily fall within the Level 3 fair value category. June 30, 2018 December 31, 2017 (In thousands) Carrying Fair Carrying Fair Financial assets: BOLI $ 63,017 $ 63,017 $ 62,113 $ 62,113 Other investments $ 2,889 $ 2,889 $ 58,546 $ 69,095 Other assets $ 37,745 $ 37,411 $ 34,020 $ 33,742 Financial liabilities: Senior notes due 2023* $ 250,000 $ 263,943 $ 250,000 $ 273,153 Revolving Credit Agreement* $ — $ — $ 123,000 $ 123,000 Mortgage loans* $ 39,762 $ 39,762 $ 40,460 $ 40,460 Other liabilities $ 22,303 $ 22,303 $ 21,154 $ 21,154 * Carrying value excludes debt issuance costs. 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. Two 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 $22.3 million and $20.2 million at June 30, 2018 and December 31, 2017 , respectively. The deferred compensation liabilities are adjusted to match the fair value of the deferred compensation assets. Other assets also included a secured note receivable and unsecured note receivable under two separate line of credit agreements. Fair value of these notes receivable was based on the present value of expected cash flows from the notes receivable, discounted at market rates on the valuation date for receivables with similar credit standings and similar payment structures. The fair value of the debt 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. |
Investments
Investments | 6 Months Ended |
Jun. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments Available-for-sale fixed maturities at June 30, 2018 and December 31, 2017 included the following: June 30, 2018 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available for sale U.S. Treasury obligations $ 148,588 $ 249 $ 2,380 $ 146,457 U.S. Government-sponsored enterprise obligations 32,331 21 650 31,702 State and municipal bonds 326,705 5,488 1,093 331,100 Corporate debt 1,213,362 4,655 22,390 1,195,627 Residential mortgage-backed securities 208,052 1,150 4,966 204,236 Agency commercial mortgage-backed securities 14,080 — 268 13,812 Other commercial mortgage-backed securities 33,105 47 437 32,715 Other asset-backed securities 171,917 20 1,665 170,272 $ 2,148,140 $ 11,630 $ 33,849 $ 2,125,921 December 31, 2017 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available for sale U.S. Treasury obligations $ 134,323 $ 485 $ 1,181 $ 133,627 U.S. Government-sponsored enterprise obligations 21,089 73 206 20,956 State and municipal bonds 618,414 14,248 419 632,243 Corporate debt 1,157,660 15,205 5,707 1,167,158 Residential mortgage-backed securities 196,741 2,438 1,335 197,844 Agency commercial mortgage-backed securities 10,827 23 108 10,742 Other commercial mortgage-backed securities 16,004 91 134 15,961 Other asset-backed securities 102,130 47 466 101,711 $ 2,257,188 $ 32,610 $ 9,556 $ 2,280,242 The recorded cost basis and estimated fair value of available-for-sale fixed maturities at June 30, 2018 , 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. (In thousands) Amortized Due in one Due after Due after Due after Total Fair Fixed maturities, available for sale U.S. Treasury obligations $ 148,588 $ 37,731 $ 84,483 $ 21,407 $ 2,836 $ 146,457 U.S. Government-sponsored enterprise obligations 32,331 206 11,647 19,715 134 31,702 State and municipal bonds 326,705 25,562 126,115 140,281 39,142 331,100 Corporate debt 1,213,362 116,559 666,434 374,029 38,605 1,195,627 Residential mortgage-backed securities 208,052 204,236 Agency commercial mortgage-backed securities 14,080 13,812 Other commercial mortgage-backed securities 33,105 32,715 Other asset-backed securities 171,917 170,272 $ 2,148,140 $ 2,125,921 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 June 30, 2018 . Cash and securities with a carrying value of $45.7 million at June 30, 2018 were on deposit with various state insurance departments to meet regulatory requirements. As a member of Lloyd's and a capital provider to Syndicate 1729 and Syndicate 6131 , which began active operations on January 1, 2018, ProAssurance is required to maintain capital at Lloyd's , referred to as FAL . ProAssurance's FAL investments at June 30, 2018 included available-for-sale fixed maturities with a fair value of $123.6 million and short-term investments with a fair value of approximately $1.0 million 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 June 30, 2018 and December 31, 2017 , including the length of time the investment had been held in a continuous unrealized loss position. June 30, 2018 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 $ 128,506 $ 2,380 $ 96,926 $ 1,589 $ 31,580 $ 791 U.S. Government-sponsored enterprise obligations 30,769 650 23,960 397 6,809 253 State and municipal bonds 100,622 1,093 98,073 1,035 2,549 58 Corporate debt 919,141 22,390 801,410 17,525 117,731 4,865 Residential mortgage-backed securities 173,133 4,966 131,124 2,839 42,009 2,127 Agency commercial mortgage-backed securities 13,812 268 11,929 135 1,883 133 Other commercial mortgage-backed securities 26,251 437 24,311 390 1,940 47 Other asset-backed securities 155,165 1,665 141,632 1,474 13,533 191 $ 1,547,399 $ 33,849 $ 1,329,365 $ 25,384 $ 218,034 $ 8,465 December 31, 2017 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 $ 110,788 $ 1,181 $ 67,135 $ 554 $ 43,653 $ 627 U.S. Government-sponsored enterprise obligations 17,032 206 10,182 64 6,850 142 State and municipal bonds 23,122 419 15,168 102 7,954 317 Corporate debt 487,578 5,707 365,541 2,730 122,037 2,977 Residential mortgage-backed securities 109,659 1,335 64,121 402 45,538 933 Agency commercial mortgage-backed securities 4,423 108 2,458 34 1,965 74 Other commercial mortgage-backed securities 12,878 134 7,939 82 4,939 52 Other asset-backed securities 85,358 466 70,924 346 14,434 120 $ 850,838 $ 9,556 $ 603,468 $ 4,314 $ 247,370 $ 5,242 As of June 30, 2018 , excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 1,024 debt securities ( 50.0% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 548 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.6 million and $0.4 million , respectively. The securities were evaluated for OTTI as of June 30, 2018 . As of December 31, 2017 , excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 629 debt securities ( 26.5% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 375 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.4 million and $0.3 million , respectively. The securities were evaluated for OTTI as of December 31, 2017 . 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 OTTI . A detailed discussion of the factors considered in the assessment is included in Note 1 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2017 Form 10-K. Fixed maturity securities held in an unrealized loss position at June 30, 2018 , excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue doing so. 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 June 30, 2018 OTTI 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. Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows: Three Months Ended June 30 Six Months Ended June 30 (In millions) 2018 2017 2018 2017 Proceeds from sales (exclusive of maturities and paydowns) $ 115.8 $ 156.3 $ 495.0 $ 235.5 Purchases $ 184.6 $ 198.7 $ 552.5 $ 359.1 Equity Investments ProAssurance's equity investments are carried at fair value with changes in fair value recognized in income as a component of net realized investment gains (losses) during the period of change. Equity investments on the Condensed Consolidated Balance Sheet as of June 30, 2018 primarily included stocks, bonds and investment funds. Short-term Investments ProAssurance's short-term investments, which have a maturity at purchase of one year or less, are primarily comprised of investments in U.S. treasury obligations, commercial paper and money market funds. Short-term investments are carried at fair value which approximates the cost of the securities due to their short-term nature. BOLI ProAssurance holds BOLI policies that are carried at the current cash surrender value of the policies (original cost $33 million ). All insured individuals were members of ProAssurance management at the time the policies were acquired. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies. ProAssurance is the owner and beneficiary of these policies. Net Investment Income Net investment income by investment category was as follows: Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Fixed maturities $ 17,506 $ 18,841 $ 34,586 $ 38,962 Equities 4,998 4,298 9,865 7,942 Short-term investments, including Other 1,332 978 2,639 1,778 BOLI 455 442 904 897 Investment fees and expenses (1,907 ) (1,882 ) (3,583 ) (3,716 ) Net investment income $ 22,384 $ 22,677 $ 44,411 $ 45,863 Investment in Unconsolidated Subsidiaries ProAssurance's investment in unconsolidated subsidiaries were as follows: June 30, 2018 Carrying Value (In thousands) Percentage June 30, December 31, Qualified affordable housing project tax credit partnerships See below $ 74,895 $ 84,607 Other tax credit partnerships See below 4,980 6,118 All other investments, primarily investment fund LPs/LLCs See below 310,339 239,866 $ 390,214 $ 330,591 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. ProAssurance's ownership percentage relative to two of the tax credit partnership interests is almost 100% ; these interests had a carrying value of $28.5 million at June 30, 2018 and $32.5 million at December 31, 2017 . ProAssurance's ownership percentage relative to the remaining tax credit partnership interests is less than 20% ; these interests had a carrying value of $46.4 million at June 30, 2018 and $52.1 million at December 31, 2017 . 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 11 . Other tax credit partnerships are comprised entirely of investments in historic tax credit partnerships. The historic tax credit partnerships generate investment returns by providing benefits to fund investors in the form of tax credits, tax deductible project operating losses and positive cash flows. The carrying value of these investments reflects ProAssurance's total funded commitments less any amortization. ProAssurance's ownership percentage relative to the historic tax credit partnerships is almost 100% . 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 11 . ProAssurance holds interests in investment fund LP s/ LLC s and other equity method investments and LP s/ LLC s which are not considered to be investment funds. ProAssurance's ownership percentage relative to three of the LP s/ LLC s is greater than 25%, which is expected to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $28.4 million at June 30, 2018 and $30.8 million at December 31, 2017 . ProAssurance's ownership percentage relative to the remaining investments and LP s/ LLC s is less than 25%; these interests had a carrying value of $281.9 million at June 30, 2018 and $209.1 million at December 31, 2017 . 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 historic tax credit partnerships. Losses recorded reflect ProAssurance's allocable portion of partnership operating losses. Tax credits reduce income tax expense in the period they are recognized. Losses recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows: Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Qualified affordable housing project tax credit partnerships Losses recorded $ 5,612 $ 3,964 $ 9,712 $ 7,272 Tax credits recognized $ 4,624 $ 4,612 $ 9,237 $ 9,225 Historic tax credit partnerships Losses recorded $ 1,506 $ 2,350 $ 3,382 $ 2,766 Tax credits recognized $ 693 $ 820 $ 1,355 $ 2,624 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 realized investment gains (losses): Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Total OTTI losses: Corporate debt $ (404 ) $ — $ (404 ) $ (419 ) Portion of OTTI losses recognized in other comprehensive income before taxes: Corporate debt — — — 248 Net impairment losses recognized in earnings (404 ) — (404 ) (171 ) Gross realized gains, available-for-sale fixed maturities 438 746 4,902 2,599 Gross realized (losses), available-for-sale fixed maturities (1,725 ) (1,401 ) (3,772 ) (1,468 ) Net realized gains (losses), trading fixed maturities (73 ) — (73 ) — Net realized gains (losses), equity investments 3,488 794 12,706 7,356 Net realized gains (losses), other investments 402 546 1,090 1,719 Change in unrealized holding gains (losses), trading fixed maturities (170 ) — (219 ) — Change in unrealized holding gains (losses), equity investments 745 (3,191 ) (23,099 ) 424 Change in unrealized holding gains (losses), convertible securities, carried at fair value 90 285 (864 ) 598 Other 4 2 11 4 Net realized investment gains (losses) $ 2,795 $ (2,219 ) $ (9,722 ) $ 11,061 ProAssurance recognized OTTI in earnings of $0.4 million during the three and six months ended June 30, 2018 related to debt instruments from one issuer in the energy sector. ProAssurance did no t recognize any OTTI during the three months ended June 30, 2017 . During the six months ended June 30, 2017 , ProAssurance recognized OTTI in earnings of $0.2 million and $0.2 million of non-credit OTTI in OCI , both of which related to corporate bonds. 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 OTTI was recorded in OCI . Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Balance beginning of period $ 1,313 $ 1,329 $ 1,313 $ 1,158 Additional credit losses recognized during the period, related to securities for which: No OTTI has been previously recognized — — — 171 Reductions due to: Securities sold during the period (realized) — (16 ) — (16 ) Balance June 30 $ 1,313 $ 1,313 $ 1,313 $ 1,313 |
Retroactive Insurance
Retroactive Insurance | 6 Months Ended |
Jun. 30, 2018 | |
Insurance [Abstract] | |
Retroactive Insurance | Retroactive Insurance Contracts ProAssurance offers custom alternative risk solutions including loss portfolio transfers for large healthcare entities who, most commonly, are exiting a line of business, changing an insurance approach or simply preferring to transfer risk. A loss portfolio transfer is a form of retroactive insurance coverage as the Company is assuming and accepting an entity’s existing open and future claim liabilities through the transfer of the entity’s loss reserves. In the second quarter of 2018, ProAssurance entered into a loss portfolio transfer with a large healthcare organization. Per the agreement, ProAssurance will cover a specific inventory of existing claims as well as provide tail coverage. As the contract included both prospective (tail) coverage and retroactive coverage, ProAssurance bifurcated the provisions of the contract and accounted for each component separately. As of the contract effective date, ProAssurance recognized total net premiums written and earned of $26.6 million , comprised of $7.9 million of prospective coverage and $18.7 million of retroactive coverage, and total net losses and loss adjustment expenses of $25.4 million in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 . In addition, ProAssurance recorded a deferred gain of $0.6 million in the reserve for losses and loss adjustment expenses on the Condensed Consolidated Balance Sheet as of June 30, 2018 representing the excess of premiums received over losses assumed related to the retroactive coverage which will be amortized into earnings over the estimated claim payment period. For additional information regarding ProAssurance's accounting policy for retroactive insurance contracts, see Note 1 . |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes ProAssurance estimates its annual effective tax rate at the end of each quarterly reporting period and uses this estimated rate to record the provision for income taxes in the interim financial statements. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes primarily because a portion of ProAssurance’s investment income is tax-exempt, and because ProAssurance utilizes tax credit benefits transferred from tax credit partnership investments. In addition, ProAssurance's provision for income taxes in 2018 was impacted by certain provisions of the TCJA , as discussed below. ProAssurance had a total liability for federal and U.K. income taxes of $4.0 million at June 30, 2018 and $8.0 million at December 31, 2017 , both carried as a part of other liabilities. The liability for unrecognized tax benefits, which is included in the total liability for federal and U.K. income taxes, was $5.1 million and $5.8 million at June 30, 2018 and December 31, 2017 , respectively, which included an accrued liability for interest of approximately $0.6 million and $0.5 million , respectively. Tax Cuts and Jobs Act The TCJA was signed into law on December 22, 2017 and contains several key provisions that impact the Company's business, including the reduction of the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, the reduction in the amount of executive compensation that could qualify as a tax deduction, a minimum tax on payments made to related foreign entities and a change in how property and casualty taxpayers discount loss reserves. Effective January 1, 2018, the TCJA introduced a minimum tax on payments made to related foreign entities referred to as the BEAT . The BEAT is imposed by adding back into the U.S. tax base any base erosion payment made by the U.S. taxpayer to a related foreign entity and applying a minimum tax rate to this newly calculated modified taxable income. Base erosion payments represent any amount paid or accrued by the U.S. taxpayer to a related foreign entity for which a deduction is allowed. Premiums the Company cedes to the SPC s at its newly formed wholly owned Cayman Islands reinsurance subsidiary, Inova Re , do not fall within the scope of base erosion payments as the SPC s at Inova Re intend to elect to be taxed as U.S. taxpayers. However, premiums the Company cedes to the one active SPC at its wholly owned Cayman Islands reinsurance subsidiary, Eastern Re , fall within the scope of base erosion payments and therefore could be significantly impacted by the BEAT . See further discussion on the Company’s new subsidiary, Inova Re , and its Cayman Islands SPC operations in Note 13 . Management has evaluated its exposure to the BEAT and has concluded that the Company’s expected outbound deductible payments to related foreign entities are below the threshold for application of the BEAT ; therefore, ProAssurance has not recognized any incremental tax expense for the BEAT provision of the TCJA for the six months ended June 30, 2018 . ProAssurance was able to complete its accounting for all areas of the TCJA during the period of enactment except as described below. Provisional amount As noted in ProAssurance's December 31, 2017 Form 10-K, ProAssurance was able to make a reasonable estimate of the effects on its existing deferred tax asset balances at December 31, 2017 as it relates to the limitation on the future deductibility of certain executive compensation and recorded a provisional charge to income tax expense from continuing operations for the year ended December 31, 2017 . As of June 30, 2018 , ProAssurance has not made any measurement-period adjustments to this provisional amount and any future guidance from the IRS addressing the effects of the TCJA on executive compensation could result in a material change to this provisional amount. Provisional amount not reasonably estimable As noted in ProAssurance's December 31, 2017 Form 10-K, ProAssurance was unable to reasonably estimate the impact of the change in loss reserve discounting factors due to the TCJA ; therefore, no provisional amount was recorded at December 31, 2017 . As of June 30, 2018 , the IRS has yet to release the 2018 discount factors; therefore, ProAssurance has not adjusted its deferred tax balances due to the enactment of the TCJA . ProAssurance continues to utilize the discount factors based on existing accounting guidance and the provisions of the tax laws that were in effect immediately prior to enactment of the TCJA . Once the IRS releases the 2018 loss reserve discount factors, ProAssurance will complete its analysis and include the effect of the difference in the reserve discount factors in the period the analysis is complete or the impact is reasonably estimable. |
Reserve for Losses and Loss Adj
Reserve for Losses and Loss Adjustment Expenses | 6 Months Ended |
Jun. 30, 2018 | |
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. 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. ProAssurance believes that the methods it uses to establish reserves are reasonable and appropriate. Each year, ProAssurance uses internal actuaries to review the reserve for losses of each insurance subsidiary. ProAssurance also engages consulting actuaries to review ProAssurance claims data and provide observations regarding cost trends, rate adequacy and ultimate loss costs. ProAssurance considers the views of the actuaries as well as other factors, such as known, anticipated or estimated changes in frequency and severity of claims, loss retention levels and premium rates, in establishing the amount of its reserve for losses. The statutory filings of each insurance company with the insurance regulators must be accompanied by a consulting actuary's certification as to their respective reserves. ProAssurance partitions its reserve by accident year, which is the year in which the claim becomes its liability. As claims are incurred (reported) and claim payments are made, they are aggregated by accident year for analysis purposes. ProAssurance also partitions its reserve by reserve type: case reserves and IBNR reserves. Case reserves are established by the claims department based upon the particular circumstances of each reported claim and represent ProAssurance’s estimate of the future loss costs (often referred to as expected losses) that will be paid on reported claims. Case reserves are decremented as claim payments are made and are periodically adjusted upward or downward as estimates regarding the amount of future losses are revised; a reported loss for an individual claim equates to the case reserve at any point in time plus the claim payments that have been made to date. IBNR reserves represent an estimate, in the aggregate, of future development on losses that have been reported to ProAssurance plus an estimate of losses that have been incurred but not reported. Development of Prior Accident Years In addition to setting the initial reserve for the current accident year, each period ProAssurance reassesses the amount of reserve required for prior accident years. The foundation of ProAssurance’s reserve re-estimation process is an actuarial analysis that is performed by both the internal and consulting actuaries. This detailed analysis projects ultimate losses based on partitions which include line of business, geography, coverage layer and accident year. The procedure uses the most representative data for each partition, capturing its unique patterns of development and trends. In all, there are 200 different partitions of ProAssurance's business for purposes of this analysis. ProAssurance believes that the use of consulting actuaries provides an independent view of the loss data as well as a broader perspective on industry loss trends. Activity in the reserve for losses and loss adjustment expenses is summarized as follows: (In thousands) Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 Year Ended December 31, 2017 Balance, beginning of year $ 2,048,381 $ 1,993,428 $ 1,993,428 Less reinsurance recoverables on unpaid losses and loss adjustment expenses 335,585 273,475 273,475 Net balance, beginning of year 1,712,796 1,719,953 1,719,953 Net losses: Current year* 337,116 292,489 603,518 Favorable development of reserves established in prior years, net (45,601 ) (57,788 ) (134,360 ) Total 291,515 234,701 469,158 Paid related to: Current year (34,174 ) (33,115 ) (106,633 ) Prior years (215,488 ) (210,006 ) (369,682 ) Total paid (249,662 ) (243,121 ) (476,315 ) Net balance, end of period 1,754,649 1,711,533 1,712,796 Plus reinsurance recoverables on unpaid losses and loss adjustment expenses 324,168 280,332 335,585 Balance, end of period $ 2,078,817 $ 1,991,865 $ 2,048,381 * Current year net losses during the 2018 six-month period included incurred losses of $25.4 million related to a loss portfolio transfer entered into during the second quarter of 2018 (see Note 4). The favorable loss development of $45.6 million recognized in the six months ended June 30, 2018 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) for accident years 2011 through 2015 . The favorable loss development of $57.8 million recognized in the six months ended June 30, 2017 primarily reflected a lower than anticipated claims severity trend for accident years 2010 through 2014 . The favorable loss development of $134.4 million recognized in the twelve months ended December 31, 2017 primarily reflected a lower than anticipated claims severity trend for accident years 2010 through 2014. 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, 2017 Form 10-K. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
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 2017 Form 10-K. As a member of Lloyd's , ProAssurance is required to provide capital to support its Lloyd's Syndicates through 2022 of up to $200 million , referred to as FAL . At June 30, 2018 , ProAssurance is satisfying the FAL requirement with investment securities on deposit with Lloyd's with a carrying value of $124.6 million (see Note 3 ). ProAssurance has issued an unconditional revolving credit agreement to the Premium Trust Fund of Syndicate 1729 for the purpose of providing working capital. Permitted borrowings were expanded from £20.0 million to £30.0 million under an amended Syndicate Credit Agreement executed in February 2018. Under the amended Syndicate Credit Agreement , advances bear interest at 3.8% annually and may be repaid at any time but are repayable upon demand after December 31, 2019 . As of June 30, 2018 , the unused commitment under the Syndicate Credit Agreement approximated £4.1 million (approximately $5.4 million ). |
Debt
Debt | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Debt ProAssurance’s outstanding debt consisted of the following: (In thousands) June 30, December 31, Senior Notes due 2023, unsecured, interest at 5.3% annually $ 250,000 $ 250,000 Revolving Credit Agreement, outstanding borrowings were fully secured and carried at a weighted average interest rate of 1.91%. Outstanding borrowings are not permitted to exceed $250 million aggregately; Revolving Credit Agreement expires in 2020. The interest rate on borrowings is set at the time the respective borrowing is initiated or renewed. — 123,000 Mortgage Loans, outstanding borrowings are secured by first priority liens on two office buildings, and bear an interest rate of three-month LIBOR plus 1.325% (3.65% and 2.86%, respectively) determined on a quarterly basis. 39,762 40,460 Total principal 289,762 413,460 Less debt issuance costs 1,491 1,649 Debt less debt issuance costs $ 288,271 $ 411,811 Covenant Compliance There are no financial covenants associated with the Senior Notes due 2023. The Revolving Credit Agreement contains customary representations, covenants and events constituting default, and remedies for default. The Revolving Credit Agreement also defines financial covenants regarding permitted leverage ratios. ProAssurance is currently in compliance with all covenants of the Revolving Credit Agreement . The Mortgage Loans contain customary representations, covenants and events constituting default, and remedies for default. The Mortgage Loans also define a financial covenant regarding a permitted leverage ratio for each of the two ProAssurance subsidiaries that entered into the Mortgage Loans. ProAssurance's subsidiaries are currently in compliance with the financial covenant of the Mortgage Loans. Additional Information For additional information regarding ProAssurance's debt, see Note 9 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2017 Form 10-K. |
Derivatives
Derivatives | 6 Months Ended |
Jun. 30, 2018 | |
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. As of June 30, 2018 , ProAssurance has not designated any derivative instruments as hedging instruments and does not use derivative instruments for trading purposes. ProAssurance utilizes an interest rate cap agreement with the objective of reducing the Company's exposure to interest rate risk related to its variable-rate Mortgage Loans. Additional information regarding the Company's Mortgage Loans is provided in Note 8 . Under the terms of the interest rate cap agreement, ProAssurance paid a premium of $2 million in the fourth quarter of 2017 for the right to receive cash payments based upon a notional amount of $35 million if and when the three-month LIBOR rises above 2.35% . The Company's variable-rate Mortgage Loans bear an interest rate of three-month LIBOR plus 1.325% . Therefore, this derivative instrument is effectively ensuring the interest rate related to the Mortgage Loans is capped at a maximum of 3.675% until expiration of the interest rate cap agreement in October 2027 . ProAssurance has designated the interest rate cap as an economic hedge (non-hedging instrument) of interest rate exposure and any change in fair value of the derivative is immediately recognized in earnings during the period of change. The following table provides a summary of the volume and fair value position of the interest rate cap as well as the reporting location in the Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 . ($ in thousands) June 30, 2018 December 31, 2017 Derivatives Not Designated as Hedging Instruments Location in the Condensed Consolidated Balance Sheets Number of Instruments Notional Amount (1) Estimated Fair Value (2) Number of Instruments Notional Amount (1) Estimated Fair Value (2) Interest Rate Cap Other assets 1 $ 35,000 $ 2,588 1 $ 35,000 $ 1,731 (1) Volume is represented by the derivative instrument's notional amount. (2) Additional information regarding the fair value of the Company's interest rate cap is provided in Note 2. The following table presents the pre-tax impact of the change in the fair value of the interest rate cap and the reporting location in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 and 2017 . Gains (Losses) Recognized in Income on Derivatives (In thousands) Three Months Ended June 30 Six Months Ended June 30 Derivatives Not Designated as Hedging Instruments Location in the Condensed Consolidated Statements of Income and Comprehensive Income 2018 2017 2018 2017 Interest Rate Cap Interest expense $ 282 $ — $ 857 $ — As a result of this derivative instrument, 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 June 30, 2018 , the counterparty had an investment grade rating of BBB- and has performed in accordance with their contractual obligations. |
Shareholders' Equity
Shareholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity At June 30, 2018 and December 31, 2017 , 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. To date, the Board has not approved the issuance of preferred stock. ProAssurance declared cash dividends of $0.31 per share during each of the first two quarters of both 2018 and 2017 , totaling $34.2 million and $33.0 million , for each respective six-month period. At June 30, 2018 , Board authorizations for the repurchase of common shares or the retirement of outstanding debt of $109.6 million remained available for use. ProAssurance did no t repurchase any common shares during the six months ended June 30, 2018 and 2017 . Share-based compensation expense and related tax benefits were as follows: Three Months Ended June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Share-based compensation expense $ 1,615 $ 2,746 $ 2,517 $ 6,092 Related tax benefits $ 339 $ 961 $ 529 $ 2,132 ProAssurance awarded approximately 85,800 restricted share units and 27,200 base performance share units to employees in February 2018 . The fair value of each unit awarded was estimated at $44.73 , equal to the market value of a ProAssurance common share on the date of grant less the estimated present value of dividends during the vesting period. The majority of awards are charged to expense as an increase to additional paid-in capital over the service period (generally the vesting period) associated with the award. However, a nominal amount of awards are recorded as a liability as they are structured to be settled in cash. Restricted share units and performance share units vest in their entirety at the end of a three -year period following the grant date based on a continuous service requirement and, for performance share units, achievement of a performance objective. Partial vesting is permitted for retirees. For equity classified awards, a ProAssurance common share is issued for each unit once vesting requirements are met, except that units sufficient to satisfy required tax withholdings are paid in cash. The number of common shares issued for performance share units varies from 50% to 200% of base awards depending upon the degree to which stated performance objectives are achieved. ProAssurance issued approximately 52,800 and 80,600 common shares to employees in February 2018 related to restricted share units and performance share units, respectively, granted in 2015. Performance share units for the 2015 award were issued at a level of 125% . Liability classified awards, which are nominal in amount, are settled in cash at the end of the vesting period. ProAssurance issued approximately 2,500 common shares to employees in February 2018 as bonus compensation, as approved by the Compensation Committee of the Board. The shares issued were valued at fair value (the market price of a ProAssurance common share on the date of award). Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) For the three and six months ended June 30, 2018 and 2017 , OCI was almost entirely comprised of unrealized gains and losses, including non-credit impairment losses, arising during the period related to fixed maturity available-for-sale securities, less reclassification adjustments, as shown in the table that follows, net of tax. For the three and six months ended June 30, 2018 and 2017 , OCI included changes related to the reestimation of the defined benefit plan liability assumed in the Eastern acquisition which were nominal in amount. The defined benefit plan is frozen as to the earnings of additional benefits and the benefit plan liability is reestimated annually. At June 30, 2018 and December 31, 2017 , AOCI was almost entirely comprised of accumulated unrealized gains and losses from fixed maturity available-for-sale securities, including accumulated non-credit impairments recognized through OCI of $0.6 million and $0.5 million , respectively, net of tax. At June 30, 2018 and December 31, 2017 , accumulated changes in the defined benefit plan liability not yet recognized in earnings were nominal in amount. Due to the adoption of accounting guidance in the first quarter of 2018 related to certain impacts of the TCJA , ProAssurance increased AOCI by approximately $3.4 million with a corresponding decrease to retained earnings of the same amount as of the beginning of 2018. See Note 1 for additional information on accounting guidance adopted during the period. At June 30, 2018 and December 31, 2017 , tax effects were computed using the enacted federal corporate tax rate of 21% and 35% , respectively, with the exception of unrealized gains and losses on available-for-sale securities held at our U.K. and Cayman Islands entities which in both periods were immaterial in amount. Amounts reclassified from AOCI to net income and the amounts of deferred tax expense (benefit) included in OCI were as follows: Three Months Ended June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Reclassifications from AOCI to net income: Realized investment gains (losses) $ (1,691 ) $ (653 ) $ 726 $ 963 Non-credit impairment losses reclassified to earnings, due to sale of securities or reclassification as a credit loss — (3 ) — (3 ) Total gains (losses) reclassified, before tax effect (1,691 ) (656 ) 726 960 Tax effect* 355 230 (153 ) (336 ) Net reclassification adjustments $ (1,336 ) $ (426 ) $ 573 $ 624 Deferred tax expense (benefit) included in OCI $ (2,185 ) $ 2,983 $ (9,245 ) $ 4,464 * Tax effects were computed using a 21% and 35% rate for the three and six months ended June 30, 2018 and 2017, respectively. |
Variable Interest Entities
Variable Interest Entities | 6 Months Ended |
Jun. 30, 2018 | |
Variable Interest Entities [Abstract] | |
Variable Interest Entities | Variable Interest Entities ProAssurance holds passive interests in a number of entities that are considered to be VIE s under GAAP guidance. ProAssurance's VIE interests principally consist of interests in LP s/ LLC s formed for the purpose of achieving diversified equity and debt returns. At June 30, 2018 , ProAssurance's VIE interests totaled $304.3 million carried as a part of investment in unconsolidated subsidiaries. ProAssurance does not have power over the activities that most significantly impact the economic performance of these VIE s and thus is not the primary beneficiary. Therefore, ProAssurance has not consolidated these VIE s. ProAssurance’s involvement with each VIE is limited to its direct ownership interest in the VIE . Except for the funding commitments disclosed in Note 7 , ProAssurance has no arrangements with any of the VIE s to provide other financial support to or on behalf of the VIE . At June 30, 2018 , ProAssurance’s maximum loss exposure relative to these investments was limited to the carrying value of ProAssurance’s investment in the VIE . |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings 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, performance share units and purchase match units have vested. The following table provides the weighted average number of common shares outstanding used in the calculation of the Company's basic and diluted earnings per share: (In thousands, except per share data) Three Months Ended June 30 Six Months Ended June 30 2018 2017 2018 2017 Weighted average number of common shares outstanding, basic 53,610 53,402 53,567 53,359 Dilutive effect of securities: Restricted Share Units 69 77 75 77 Performance Share Units 42 105 54 113 Purchase Match Units 20 23 20 22 Weighted average number of common shares outstanding, diluted 53,741 53,607 53,716 53,571 Effect of dilutive shares on earnings per share $ — $ (0.01 ) $ — $ — All dilutive common share equivalents are reflected in the earnings per share calculation while antidilutive common share equivalents are not reflected in the earnings per share calculation. The diluted weighted average number of common shares outstanding for the three and six months ended June 30, 2018 excludes approximately 8,000 common share equivalents issuable under the Company's stock compensation plans, as their effect would be antidilutive. There were no common share equivalents that were antidilutive for the three and six months ended June 30, 2017 . |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information ProAssurance operates in four segments that are organized around the nature of the products and services provided: Specialty P&C , Workers' Compensation, Lloyd's Syndicates and Corporate. A description of each segment follows. Specialty P&C is primarily focused on professional liability insurance and medical technology liability insurance. Professional liability insurance is primarily offered to healthcare providers and institutions and to attorneys and their firms. Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials. Prior to 2018, the Specialty P&C segment ceded certain premium to the Lloyd's Syndicates segment under a quota share agreement with Syndicate 1729 ; however, this agreement was not renewed on January 1, 2018. As discussed below, the Lloyd's Syndicates segment results are typically reported on a quarter delay. For consistency purposes, results from this ceding arrangement, other than cash receipts or disbursements, have been reported within the Specialty P&C segment on the same one-quarter delay. Workers' Compensation provides workers' compensation products primarily to employers with 1,000 or fewer employees. The segment also offers alternative market solutions whereby policies written are 100% ceded either to captive insurers unaffiliated with ProAssurance or to SPC s operated by wholly owned subsidiaries of ProAssurance. Each SPC is owned, fully or in part, by an agency, group or association. Operating results (underwriting profit or loss, plus investment results reported in the Corporate segment) of the SPC s are due to the owners of that cell. During the first quarter of 2018, ProAssurance reorganized its Cayman Islands SPC operations. Beginning in 2018, all new and renewing alternative market business previously ceded to the SPCs at Eastern Re , with the exception of one program, is now ceded to SPC s operated by a newly formed wholly owned Cayman Islands subsidiary, Inova Re . As part of the reorganization, all SPC s previously operated by Eastern Re , with the exception of one program, ceased assuming new and renewing business on or after January 1, 2018. The external cell owners' cumulative undistributed earnings and the results of all SPCs for the current period due to external cell owners continue to be reported as SPC dividends payable and SPC dividend expense, respectively. Lloyd's Syndicates includes operating results from ProAssurance's participation in Lloyd's of London Syndicate 1729 and Syndicate 6131 , which is a newly formed SPA operating within Syndicate 1729 . The results of this segment are normally reported on a quarter delay, except when information is available that is material to the current period. Furthermore, investment results associated with the majority of investment assets solely allocated to Lloyd's Syndicate operations and certain U.S. paid administrative expenses are reported concurrently as that information is available on an earlier time frame. Beginning in 2018, ProAssurance increased its participation in the operating results of Syndicate 1729 from 58% to 62% and began its 100% participation in the operating results of Syndicate 6131 which began active operations effective January 1, 2018; however, due to the quarter delay these changes were not reflected in the Lloyd's Syndicates segment results until the second quarter of 2018. Syndicate 1729 underwrites risks over a wide range of property and casualty insurance and reinsurance lines in both the U.S. and international markets. Syndicate 6131 focuses on contingency and specialty property business. Corporate includes ProAssurance's investment operations, interest expense and U.S. income taxes, all of which are managed at the corporate level with the exception of investment assets solely allocated to Lloyd's Syndicate operations as discussed above. The segment also includes non-premium revenues generated outside of the Company's insurance entities and corporate expenses. The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2017 report on Form 10-K and Note 1 of the Notes to Condensed Consolidated Financial Statements. ProAssurance evaluates performance of its Specialty P&C and Workers' Compensation segments based on before tax underwriting profit or loss, which excludes investment performance. Performance of the Lloyd's Syndicates segment is evaluated based on underwriting profit or loss, plus investment results of investment assets solely allocated to Lloyd's Syndicate operations, net of U.K. income tax expense. 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 and other assets are not managed at the segment level. Financial results by segment were as follows: Three Months Ended June 30, 2018 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 143,847 $ 62,254 $ 17,490 $ — $ — $ 223,591 Net investment income — — 836 21,548 — 22,384 Equity in earnings (loss) of unconsolidated subsidiaries — — — 5,380 — 5,380 Net realized gains (losses) — — (252 ) 3,047 — 2,795 Other income (expense) 1,262 212 (436 ) 1,095 (89 ) 2,044 Net losses and loss adjustment expenses (111,838 ) (37,385 ) (12,505 ) — — (161,728 ) Underwriting, policy acquisition and operating expenses (28,050 ) (17,969 ) (8,060 ) (5,621 ) 89 (59,611 ) Segregated portfolio cells dividend (expense) income (118 ) (2,751 ) — 84 — (2,785 ) Interest expense — — — (3,958 ) — (3,958 ) Income tax benefit (expense) — — — 311 — 311 Segment operating results $ 5,103 $ 4,361 $ (2,927 ) $ 21,886 $ — $ 28,423 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,761 $ 958 $ (2 ) $ 2,240 $ — $ 4,957 Six Months Ended June 30, 2018 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 260,125 $ 120,660 $ 29,965 $ — $ — $ 410,750 Net investment income — — 1,587 42,824 — 44,411 Equity in earnings (loss) of unconsolidated subsidiaries — — — 7,019 — 7,019 Net realized gains (losses) — — (306 ) (9,416 ) — (9,722 ) Other income (expense) 2,519 578 (105 ) 2,037 (262 ) 4,767 Net losses and loss adjustment expenses (196,425 ) (74,099 ) (20,991 ) — — (291,515 ) Underwriting, policy acquisition and operating expenses (56,327 ) (35,301 ) (15,306 ) (10,297 ) 262 (116,969 ) Segregated portfolio cells dividend (expense) income (88 ) (4,645 ) — 201 — (4,532 ) Interest expense — — — (7,663 ) — (7,663 ) Income tax benefit (expense) — — (6 ) 3,739 — 3,733 Segment operating results $ 9,804 $ 7,193 $ (5,162 ) $ 28,444 $ — $ 40,279 Significant non-cash items: Depreciation and amortization, net of accretion $ 3,628 $ 1,914 $ (3 ) $ 5,497 $ — $ 11,036 Three Months Ended June 30, 2017 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 109,005 $ 56,854 $ 14,494 $ — $ — $ 180,353 Net investment income — — 410 22,267 — 22,677 Equity in earnings (loss) of unconsolidated subsidiaries — — — 2,516 — 2,516 Net realized gains (losses) — — 47 (2,266 ) — (2,219 ) Other income (expense) 1,469 209 (151 ) 778 (55 ) 2,250 Net losses and loss adjustment expenses (71,296 ) (33,486 ) (10,768 ) — — (115,550 ) Underwriting, policy acquisition and operating expenses (26,239 ) (17,093 ) (6,851 ) (7,757 ) 55 (57,885 ) Segregated portfolio cells dividend (expense) income (1) (5,119 ) (2,698 ) — (994 ) — (8,811 ) Interest expense — — — (4,145 ) — (4,145 ) Income tax benefit (expense) (1) — — 548 (216 ) — 332 Segment operating results $ 7,820 $ 3,786 $ (2,271 ) $ 10,183 $ — $ 19,518 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,506 $ 831 $ (5 ) $ 3,814 $ — $ 6,146 Six Months Ended June 30, 2017 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 222,063 $ 112,137 $ 29,056 $ — $ — $ 363,256 Net investment income — — 782 45,081 — 45,863 Equity in earnings (loss) of unconsolidated subsidiaries — — — 4,324 — 4,324 Net realized gains (losses) — — 74 10,987 — 11,061 Other income (expense) 2,668 354 240 951 (142 ) 4,071 Net losses and loss adjustment expenses (146,291 ) (68,136 ) (20,274 ) — — (234,701 ) Underwriting, policy acquisition and operating expenses (52,217 ) (33,784 ) (13,062 ) (16,073 ) 142 (114,994 ) Segregated portfolio cells dividend (expense) income (1) (5,091 ) (3,872 ) — (2,223 ) — (11,186 ) Interest expense — — — (8,278 ) — (8,278 ) Income tax benefit (expense) (1) — — 555 1,002 — 1,557 Segment operating results $ 21,132 $ 6,699 $ (2,629 ) $ 35,771 $ — $ 60,973 Significant non-cash items: Depreciation and amortization, net of accretion $ 3,417 $ 1,668 $ (8 ) $ 8,872 $ — $ 13,949 (1) During the second quarter of 2017, ProAssurance recognized a $5.2 million pre-tax expense related to previously unrecognized SPC dividend expense for the cumulative earnings of unrelated parties that have owned segregated portfolio cells at various periods since 2003 in a Bermuda captive insurance operation managed by the Company's HCPL line of business within the Specialty P&C segment. The expense recorded in the second quarter of 2017 related to periods prior to the then current period and was unrelated to the captive operations of the Company's Eastern Re subsidiary. The $1.8 million tax impact of the expense recognized in the second quarter of 2017 was included in the Corporate segment's income tax benefit (expense). 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 June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Specialty P&C Segment Gross premiums earned: Healthcare professional liability $ 146,208 $ 115,781 $ 264,892 $ 232,832 Legal professional liability 6,489 6,417 12,880 12,734 Medical technology liability 8,780 8,389 17,292 16,701 Other 119 101 230 203 Ceded premiums earned (17,749 ) (21,683 ) (35,169 ) (40,407 ) Segment net premiums earned 143,847 109,005 260,125 222,063 Workers' Compensation Segment Gross premiums earned: Traditional business 48,632 42,501 94,662 84,269 Alternative market business 20,648 20,209 40,029 39,655 Ceded premiums earned (7,026 ) (5,856 ) (14,031 ) (11,787 ) Segment net premiums earned 62,254 56,854 120,660 112,137 Lloyd's Syndicates Segment Gross premiums earned: Property and casualty* 19,273 16,960 37,240 34,145 Ceded premiums earned (1,783 ) (2,466 ) (7,275 ) (5,089 ) Segment net premiums earned 17,490 14,494 29,965 29,056 Consolidated net premiums earned $ 223,591 $ 180,353 $ 410,750 $ 363,256 *Includes premium assumed from the Specialty P&C segment of $1.4 million and $3.3 million for the three and six months ended June 30, 2018 , respectively, and $3.1 million and $6.6 million for the same respective periods of 2017 . |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
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 and its consolidated subsidiaries (ProAssurance, PRA or the Company). 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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2017 report on Form 10-K. In connection with its preparation of the Condensed Consolidated Financial Statements, ProAssurance evaluated events that occurred subsequent to June 30, 2018 for recognition or disclosure in its financial statements and notes to financial statements. ProAssurance operates in four reportable segments as follows: Specialty P&C , Workers' Compensation, Lloyd's Syndicates and Corporate. For more information on the nature of products and services provided and for financial information by segment, refer to Note 13 . |
Reclassifications | Reclassifications Certain insignificant prior period amounts have been reclassified to conform to the current period presentation. |
Retroactive Insurance Contracts | Retroactive Insurance Contracts In certain instances, ProAssurance’s insurance contracts cover losses both on a prospective basis and retroactive basis and, accordingly, ProAssurance bifurcates the prospective and retroactive provisions of these contracts and accounts for each component separately, where practicable. The prospective provisions of a contract are accounted for consistently with the Company’s other insurance contracts as discussed in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2017 report on Form 10-K. Under the retroactive provisions of a contract, all premiums received and losses assumed are recognized immediately in earnings at the inception of the contract as all of the underlying loss events occurred in the past. If the estimated losses assumed differ from the premium received related to the retroactive provision of a contract, the resulting difference is deferred and recognized over the estimated claim payment period with the periodic amortization reflected in earnings as a component of net losses and loss adjustment expenses. Deferred gains are included as a component of the reserve for losses and loss adjustment expenses and deferred losses are included as a component of other assets on the Condensed Consolidated Balance Sheet. Subsequent changes to the estimated timing or amount of future loss payments in relation to the losses assumed under retroactive provisions also produce changes in deferred balances. Changes in such estimates are applied retrospectively and the resulting changes in deferred balances, together with periodic amortization, are included in earnings in the period of change. |
Accounting Changes Adopted and Not Yet Adopted | Accounting Changes Adopted Restricted Cash ( ASU 2016-18) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance related to the classification of restricted cash presented in the statement of cash flows with the objective of reducing diversity in practice. Under the new guidance, entities are required to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts as presented on the statement of cash flows. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Intra-Entity Transfers of Assets Other than Inventory ( ASU 2016-16) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting standards related to the income tax consequences of intra-entity transfers of assets other than inventory between tax-paying components. A tax-paying component is an individual entity or group of entities that is consolidated for tax purposes. Under the new guidance, entities are required to recognize income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs instead of delaying recognition until the asset has been sold to an outside party. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Classification of Certain Cash Receipts and Cash Payments ( ASU 2016-15) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance related to the classification of certain cash receipts and cash payments presented in the statement of cash flows with the objective of reducing diversity in practice. ProAssurance adopted the guidance as of January 1, 2018 and elected to use the cumulative earnings approach for presenting distributions from equity method investees. Adoption of the guidance had no material effect on ProAssurance’s results of operations or financial position; however, ProAssurance reclassified approximately $12.9 million in distributions from unconsolidated subsidiaries from investing activities to operating activities in the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2017 . Revenue from Contracts with Customers ( ASU 2014-09) Effective for fiscal years beginning after December 15, 2017 the FASB issued guidance related to revenue from contracts with customers. The core principle of the new guidance is that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ProAssurance adopted the guidance as of January 1, 2018 under the modified retrospective method. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Recognition and Measurement of Financial Assets and Financial Liabilities ( ASU 2016-01) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance that requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The new guidance also specifies that an entity use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and present financial assets and liabilities by measurement category and form of financial asset. Other provisions of the new guidance include: revised disclosure requirements related to the presentation in comprehensive income of changes in the fair value of liabilities; elimination, for public companies, of disclosure requirements relative to the methods and significant assumptions underlying fair values disclosed for financial instruments measured at amortized cost; and simplified impairment assessments for equity investments without readily determinable fair values. ProAssurance adopted the guidance as of January 1, 2018 using a modified retrospective application and recorded a cumulative-effect after-tax adjustment of approximately $8.3 million to beginning retained earnings in the Condensed Consolidated Statement of Changes in Capital for the six months ended June 30, 2018 . LP s/ LLC s previously reported using the cost method are now reported at fair value with increases in fair value of approximately $3.6 million and $5.9 million recognized as a component of equity in earnings (loss) of unconsolidated subsidiaries on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 , respectively. Modification Accounting for Employee Share-Based Payment Awards ( ASU 2017-09) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting standards when there is a change in the terms or conditions of a share-based payment award. The new guidance clarifies that an entity should apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ProAssurance adopted the guidance as of January 1, 2018. Adoption of the guidance had no material effect on ProAssurance’s results of operations, financial position or cash flows. Reclassification of Certain Tax Effects from AOCI ( ASU 2018-02) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted, the FASB issued guidance which permits a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate tax rate from the TCJA . The amount of the reclassification from AOCI to retained earnings will be the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate on deferred tax items originally established through OCI and not net income. The guidance allows entities to adopt in any interim or annual period for which financial statements have not yet been issued and apply the guidance either (1) in the period of adoption or (2) retrospectively to each period in which the effect of the change in the tax rate is recognized. ProAssurance adopted this guidance as of January 1, 2018 and elected to apply this guidance in the period of adoption using the specific identification method. Using a modified retrospective application, ProAssurance recorded a cumulative-effect adjustment which increased beginning AOCI by approximately $3.4 million and decreased beginning retained earnings by the same amount in the Condensed Consolidated Statement of Changes in Capital for the six months ended June 30, 2018 . Adoption of this guidance had no material effect on ProAssurance's financial position, results of operations or cash flows. Accounting Changes Not Yet Adopted Technical Corrections and Improvements to Financial Instruments - Overall ( ASU 2018-03) Effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years beginning after June 15, 2018, the FASB amended the new standard on recognizing and measuring financial assets and financial liabilities to clarify certain aspects of the guidance. Under the amended guidance, an entity that uses the measurement alternative for equity investments without readily determinable fair values can change its measurement approach to a fair value method through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Also, entities are required to use the prospective transition approach only for equity investments they elect to measure using the new measurement alternative. Additionally, the guidance clarifies how to apply the measurement alternative and presentation requirements for financial liabilities measured under the fair value option. ProAssurance plans to adopt the guidance beginning July 1, 2018. As of June 30, 2018 , ProAssurance does not have any equity investments without readily determinable fair values or financial liabilities measured under the fair value option; therefore, adoption of the guidance is not expected to have a material effect on ProAssurance’s financial position, results of operations or cash flows. Leases ( ASU 2016-02) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance that requires a lessee to recognize for all leases (with the exception of short-term leases) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ProAssurance plans to adopt the guidance beginning January 1, 2019 using a modified retrospective application and plans to elect the transition option provided that allows companies to continue to apply legacy GAAP in comparative periods. As of June 30, 2018 , ProAssurance is currently in the process of evaluating all of its leases. As the majority of ProAssurance's leases are real estate operating leases and are not considered to be material, adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. In addition, ProAssurance's Revolving Credit Agreement contains a financial covenant regarding permitted leverage ratios based upon Consolidated Funded Indebtedness to Consolidated Total Capitalization; however, ProAssurance does not anticipate that the adoption of this guidance would have a material impact on the covenant. ProAssurance’s Mortgage Loans also contain a financial covenant regarding permitted leverage ratios, principally based upon SAP Consolidated Net Worth; however, as the NAIC is not anticipated to adopt the principles in the FASB guidance around capitalizing operating leases, adoption of the guidance would have no impact on the covenant. Premium Amortization on Purchased Callable Debt Securities ( ASU 2017-08) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance that will require the premium for certain callable debt securities to be amortized over a shorter period than is currently required. Currently amortization is permitted over the contractual life of the instrument and the guidance shortens the amortization to the earliest call date. The purpose of the guidance is to more closely align the amortization period of premiums to expectations incorporated in market pricing on the underlying securities. ProAssurance plans to adopt the guidance beginning January 1, 2019. As ProAssurance amortizes premium on callable debt securities to the earliest call date, adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. Derivatives and Hedging ( ASU 2017-12) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance to improve financial reporting of hedging relationships to better portray the entity's risk management activities in the consolidated financial statements. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. ProAssurance plans to adopt the guidance beginning January 1, 2019. ProAssurance's derivative instrument at June 30, 2018 is not designated as a hedging instrument; therefore, adoption is not expected to have a material effect on ProAssurance's results of operations, financial position or cash flows. Improvements to Nonemployee Share-Based Payment Accounting ( ASU 2018-07) Effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, the FASB issued guidance which reduces the complexity in accounting for nonemployee share-based payment awards. The new guidance substantially aligns the accounting for nonemployee share-based payment awards with the accounting guidance for employee share-based payment awards with certain exceptions, including the inputs used in estimating the fair value of the nonemployee awards and the period of time and pattern of expense recognition. ProAssurance plans to adopt the guidance as of January 1, 2019. Adoption of the guidance is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. Improvements to Financial Instruments - Credit Losses ( ASU 2016-13) Effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, the FASB issued guidance that replaces the incurred loss impairment methodology, which delays recognition of credit losses until a probable loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the new guidance, credit losses are required to be recorded through an allowance for credit losses account and the income statement reflects the measurement for newly recognized financial assets, as well as increases or decreases of expected credit losses that have taken place during the period. Credit losses on available-for-sale fixed maturity securities will be measured in a manner similar to current GAAP, although the new guidance requires that credit losses be presented as an allowance, rather than as a write-down of the asset, limited to the amount by which the fair value is below amortized cost. In addition, this guidance could impact ProAssurance's receivables from reinsurers; however, ProAssurance has not historically experienced material credit losses due to the financial condition of a reinsurer. ProAssurance plans to adopt the guidance beginning January 1, 2020 and is in the process of evaluating the effect the new guidance would have on its results of operations and financial position. Simplifying the Test for Goodwill Impairment ( ASU 2017-04) Effective for the fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, the FASB issued guidance that simplifies the requirements to test goodwill for impairment for business entities that have goodwill reported in their financial statements. The guidance eliminates the second step of the impairment test which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount. In addition, the guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. ProAssurance plans to adopt the guidance beginning January 1, 2020. Adoption is not expected to have a material effect on ProAssurance’s results of operations, financial position or cash flows. |
Fair Value Policy | The fair values for securities included in the Level 2 category, with the few exceptions described below, were developed by one of several third party, nationally recognized pricing services, including services that price only certain types of securities. Each service uses complex methodologies to determine values for securities and subject the values they develop to quality control reviews. Management selected a primary source for each type of security in the portfolio and reviewed the values provided for reasonableness by comparing data to alternate pricing services and to available market and trade data. Values that appeared inconsistent were further reviewed for appropriateness. Any value that did not appear reasonable was discussed with the service that provided the value and adjusted, if necessary. There were no material changes to the values supplied by the pricing services during the three and six months ended June 30, 2018 and 2017 . Level 2 Valuations Below is a summary description of the valuation methodologies primarily used by the pricing services for securities in the Level 2 category, by security type: U.S. Treasury obligations were valued based on quoted prices for identical assets, or, in markets that are not active, quotes for similar assets, taking into consideration adjustments for variations in contractual cash flows and yields to maturity. U.S. Government-sponsored enterprise obligations were valued using pricing models that consider current and historical market data, normal trading conventions, credit ratings, and the particular structure and characteristics of the security being valued, such as yield to maturity, redemption options, and contractual cash flows. Adjustments to model inputs or model results were included in the valuation process when necessary to reflect recent regulatory, government or corporate actions or significant economic, industry or geographic events affecting the security’s fair value. State and municipal bonds were valued using a series of matrices that considered credit ratings, the structure of the security, the sector in which the security falls, yields, and contractual cash flows. Valuations were further adjusted, when necessary, to reflect the expected effect on fair value of recent significant economic or geographic events or ratings changes. Corporate debt, multiple observable inputs consisted primarily of corporate bonds, but also included a small number of bank loans. The methodology used to value Level 2 corporate bonds was the same as the methodology previously described for U.S. Government-sponsored enterprise obligations. Bank loans were valued based on an average of broker quotes for the loans in question, if available. If quotes were not available, the loans were valued based on quoted prices for comparable loans or, if the loan was newly issued, by comparison to similar seasoned issues. Broker quotes were compared to actual trade prices to permit assessment of the reliability of the quotes; unreliable quotes were not considered in quoted averages. Residential and commercial mortgage-backed securities were valued using a pricing matrix which considers the issuer type, coupon rate and longest cash flows outstanding. The matrix used was based on the most recently available market information. Agency and non-agency collateralized mortgage obligations were both valued using models that consider the structure of the security, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Other asset-backed securities were valued using models that consider the structure of the security, monthly payment information, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Spreads and prepayment speeds consider collateral type. Short-term investments were securities maturing within one year, carried at fair value which approximated the cost of the securities due to their short-term nature. Other investments consisted primarily of convertible bonds valued using a pricing model that incorporated selected dealer quotes as well as current market data regarding equity prices and risk free rates. If dealer quotes were unavailable for the security being valued, quotes for securities with similar terms and credit status were used in the pricing model. Dealer quotes selected for use were those considered most accurate based on parameters such as underwriter status and historical reliability. Other assets consisted of an interest rate cap derivative instrument valued using a model which considers the volatilities from other instruments with similar maturities, strike prices, durations and forward yield curves. Level 3 Valuations Below is a summary description of the valuation processes and methodologies used as well as quantitative information regarding securities in the Level 3 category. Level 3 Valuation Processes • Level 3 securities are priced by the Chief Investment Officer. • Level 3 valuations are computed quarterly. Prices are evaluated quarterly against prior period prices and the expected change in prices. • ProAssurance's Level 3 securities are primarily NRSRO rated debt instruments for which comparable market inputs are commonly available for evaluating the securities in question. Valuation of these debt instruments is not overly sensitive to changes in the unobservable inputs used. Level 3 Valuation Methodologies Corporate debt, limited observable inputs consisted of corporate bonds valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At June 30, 2018 , 76% of the securities were rated and the average rating was BBB+ . At December 31, 2017 , 84% of the securities were rated and the average rating was BBB+ . Residential mortgage-backed and other asset-backed securities consisted of securitizations of receivables valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At June 30, 2018 , 70% of the securities were rated and the average rating was AAA . At December 31, 2017 , 21% of the securities were rated and the average rating was AAA . Other investments consisted of convertible securities for which limited observable inputs were available at June 30, 2018 and December 31, 2017 . The securities were valued internally based on expected cash flows, including the expected final recovery, discounted at a yield that considered the lack of liquidity and the financial status of the issuer. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Other Liabilities | Other liabilities consisted of the following: (In thousands) June 30, 2018 December 31, 2017 SPC dividends payable $ 48,439 $ 46,925 Unpaid dividends 17,630 267,292 All other 103,057 123,383 Total other liabilities $ 169,126 $ 437,600 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured at fair value | Fair values of assets measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 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. June 30, 2018 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 $ — $ 146,457 $ — $ 146,457 U.S. Government-sponsored enterprise obligations — 31,702 — 31,702 State and municipal bonds — 331,100 — 331,100 Corporate debt, multiple observable inputs 2,262 1,184,985 — 1,187,247 Corporate debt, limited observable inputs — — 8,380 8,380 Residential mortgage-backed securities — 204,236 — 204,236 Agency commercial mortgage-backed securities — 13,812 — 13,812 Other commercial mortgage-backed securities — 32,715 — 32,715 Other asset-backed securities — 160,852 9,420 170,272 Fixed maturities, trading Corporate debt — 29,772 — 29,772 Equity investments Financial 74,656 — — 74,656 Utilities/Energy 57,936 — — 57,936 Consumer oriented 55,459 — — 55,459 Industrial 46,285 — — 46,285 Bond funds 146,795 — — 146,795 All other 94,638 — — 94,638 Short-term investments 200,366 12,579 — 212,945 Other investments — 33,015 5 33,020 Other assets — 2,588 — 2,588 Total assets categorized within the fair value hierarchy $ 678,397 $ 2,183,813 $ 17,805 2,880,015 Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: Equity investments 20,257 Investment in unconsolidated subsidiaries 277,505 Total assets at fair value $ 3,177,777 December 31, 2017 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 $ — $ 133,627 $ — $ 133,627 U.S. Government-sponsored enterprise obligations — 20,956 — 20,956 State and municipal bonds — 632,243 — 632,243 Corporate debt, multiple observable inputs 2,371 1,151,084 — 1,153,455 Corporate debt, limited observable inputs — — 13,703 13,703 Residential mortgage-backed securities — 196,789 1,055 197,844 Agency commercial mortgage-backed securities — 10,742 — 10,742 Other commercial mortgage-backed securities — 15,961 — 15,961 Other asset-backed securities — 97,780 3,931 101,711 Equity investments Financial 76,051 — — 76,051 Utilities/Energy 54,388 — — 54,388 Consumer oriented 54,529 — — 54,529 Industrial 53,936 — — 53,936 Bond funds 156,563 — — 156,563 All other 75,142 — — 75,142 Short-term investments 404,204 27,922 — 432,126 Other investments 607 31,155 409 32,171 Other assets — 1,731 — 1,731 Total assets categorized within the fair value hierarchy $ 877,791 $ 2,319,990 $ 19,098 3,216,879 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 210,759 Other investments 20,130 Total assets at fair value $ 3,447,768 |
Summary of quantitative information about Level 3 fair value measurements | Quantitative Information Regarding Level 3 Valuations Fair Value at (In thousands) June 30, 2018 December 31, 2017 Valuation Technique Unobservable Input Range Assets: Corporate debt, limited observable inputs $8,380 $13,703 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Residential mortgage-backed and other asset-backed securities $9,420 $4,986 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Other investments $5 $409 Discounted Cash Flows Comparability Adjustment 0% - 10% (5%) |
Summary of changes in the fair value of assets measured at fair value | The following tables (the Level 3 Tables) present summary information regarding changes in the fair value of assets measured at fair value using Level 3 inputs. June 30, 2018 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance March 31, 2018 $ 15,097 $ 17,323 $ 365 $ 32,785 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (36 ) 1 — (35 ) Net realized investment gains (losses) (8 ) — 6 (2 ) Included in other comprehensive income (90 ) (111 ) — (201 ) Purchases — 3,225 — 3,225 Sales (1,644 ) (158 ) (366 ) (2,168 ) Transfers in 558 — — 558 Transfers out (5,497 ) (10,860 ) — (16,357 ) Balance June 30, 2018 $ 8,380 $ 9,420 $ 5 $ 17,805 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2018 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance December 31, 2017 $ 13,703 $ 4,986 $ 409 $ 19,098 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (74 ) 1 — (73 ) Net realized investment gains (losses) (8 ) — (38 ) (46 ) Included in other comprehensive income (128 ) (141 ) — (269 ) Purchases 6,005 16,678 — 22,683 Sales (4,549 ) (185 ) (366 ) (5,100 ) Transfers in 2,627 — — 2,627 Transfers out (9,196 ) (11,919 ) — (21,115 ) Balance June 30, 2018 $ 8,380 $ 9,420 $ 5 $ 17,805 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2017 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance March 31, 2017 $ 18,914 $ 3,002 $ 903 $ 22,819 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (34 ) — — (34 ) Net realized investment gains (losses) — — (124 ) (124 ) Included in other comprehensive income (70 ) 3 138 71 Purchases 4,841 — — 4,841 Sales (1,848 ) — (912 ) (2,760 ) Transfers in 10 — — 10 Transfers out (3,964 ) — — (3,964 ) Balance June 30, 2017 $ 17,849 $ 3,005 $ 5 $ 20,859 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — June 30, 2017 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other investments Total Balance December 31, 2016 $ 14,810 $ 3,007 $ 3 $ 17,820 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income (73 ) — — (73 ) Net realized investment gains (losses) 13 — (124 ) (111 ) Included in other comprehensive income (278 ) (2 ) 140 (140 ) Purchases 11,889 — — 11,889 Sales (3,560 ) — (912 ) (4,472 ) Transfers in 10 — 898 908 Transfers out (4,962 ) — — (4,962 ) Balance June 30, 2017 $ 17,849 $ 3,005 $ 5 $ 20,859 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ — $ — |
Investments in Limited liability companies and limited partnerships | At June 30, 2018 and December 31, 2017 , certain LP s/ LLC s 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 commitments related to these investments as of June 30, 2018 and fair values of these investments as of June 30, 2018 and December 31, 2017 was as follows: Unfunded Fair Value (In thousands) June 30, June 30, December 31, Equity investments: Mortgage fund (1)* None $ 20,257 $ — Investment in unconsolidated subsidiaries: Private debt funds (2) $4,945 26,174 42,206 Long equity fund (3) None 7,712 7,847 Long/short equity funds (4) None 32,134 31,352 Non-public equity funds (5) $78,693 109,337 100,062 Multi-strategy fund of funds (6) None 9,357 9,100 Credit funds (7) None 18,075 6,561 Long/short commodities fund (8) None 13,380 13,025 Strategy focused funds (9) $19,247 61,336 606 277,505 210,759 Other investments: Mortgage fund (1)* See above — 20,130 Total investments carried at NAV $ 297,762 $ 230,889 * In the first quarter of 2018, ProAssurance began presenting this investment previously reported as a part of other investments as a part of equity investments on the Condensed Consolidated Balance Sheet. Prior year amounts have not been reclassified. Below is additional information regarding each of the investments listed in the table above as of June 30, 2018 . (1) This investment fund is focused on the structured mortgage market. The fund will primarily invest in U.S. Agency mortgage-backed securities. Redemptions are allowed at the end of any calendar quarter with a prior notice requirement of 65 days and are paid within 45 days at the end of the redemption dealing day. (2) The 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; the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP s over an anticipated time frame that spans from three to eight years. (3) The fund is a LP that holds long equities of public international companies. Redemptions are allowed at the end of any calendar month with a prior notice requirement of 15 days and are paid within 10 days of the end of the calendar month of the redemption request. (4) The investment is comprised of interests in multiple unrelated LP funds. The funds hold primarily long and short North American equities and target absolute returns using strategies designed to take advantage of market opportunities. The funds generally permit quarterly or semi-annual capital redemptions subject to notice requirements of 30 to 90 days . For some funds, redemptions above specified thresholds (lowest threshold is 90% ) may be only partially payable until after a fund audit is completed and are then payable within 30 days . (5) The 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 and other private equity-oriented LP s. Two of the LP s 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 nine years. (6) This fund is a LLC structured to build and manage low volatility, multi-manager portfolios that have little or no correlation to the broader fixed income and equity security markets. Redemptions are not permitted but offers to repurchase units of the LLC may be extended periodically. (7) The investment is comprised of two unrelated LP funds. One fund seeks to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The second fund seeks event driven opportunities across the corporate credit spectrum. For both funds, redemptions are allowed at any quarter-end with a prior notice requirement of 90 days . (8) This fund is a LLC invested across a broad range of commodities and focuses primarily on market neutral, relative value strategies, seeking to generate absolute returns with low correlation to broad commodity, equity and fixed income markets. Following an initial one-year lock-up period, redemptions are allowed with a prior notice requirement of 30 days and are payable within 30 days . (9) The investment is comprised of multiple unrelated LP s/ LLC s funds. One fund is a LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. Redemptions are not permitted. Another fund is a LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LP s, one of which allows for redemption with prior notice. |
Financial instruments not measured at fair value | The following table provides the estimated fair value of our financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. All fair values provided primarily fall within the Level 3 fair value category. June 30, 2018 December 31, 2017 (In thousands) Carrying Fair Carrying Fair Financial assets: BOLI $ 63,017 $ 63,017 $ 62,113 $ 62,113 Other investments $ 2,889 $ 2,889 $ 58,546 $ 69,095 Other assets $ 37,745 $ 37,411 $ 34,020 $ 33,742 Financial liabilities: Senior notes due 2023* $ 250,000 $ 263,943 $ 250,000 $ 273,153 Revolving Credit Agreement* $ — $ — $ 123,000 $ 123,000 Mortgage loans* $ 39,762 $ 39,762 $ 40,460 $ 40,460 Other liabilities $ 22,303 $ 22,303 $ 21,154 $ 21,154 * Carrying value excludes debt issuance costs. |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Amortized cost and estimated fair value of available-for-sale fixed maturities and equity securities | Available-for-sale fixed maturities at June 30, 2018 and December 31, 2017 included the following: June 30, 2018 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available for sale U.S. Treasury obligations $ 148,588 $ 249 $ 2,380 $ 146,457 U.S. Government-sponsored enterprise obligations 32,331 21 650 31,702 State and municipal bonds 326,705 5,488 1,093 331,100 Corporate debt 1,213,362 4,655 22,390 1,195,627 Residential mortgage-backed securities 208,052 1,150 4,966 204,236 Agency commercial mortgage-backed securities 14,080 — 268 13,812 Other commercial mortgage-backed securities 33,105 47 437 32,715 Other asset-backed securities 171,917 20 1,665 170,272 $ 2,148,140 $ 11,630 $ 33,849 $ 2,125,921 December 31, 2017 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available for sale U.S. Treasury obligations $ 134,323 $ 485 $ 1,181 $ 133,627 U.S. Government-sponsored enterprise obligations 21,089 73 206 20,956 State and municipal bonds 618,414 14,248 419 632,243 Corporate debt 1,157,660 15,205 5,707 1,167,158 Residential mortgage-backed securities 196,741 2,438 1,335 197,844 Agency commercial mortgage-backed securities 10,827 23 108 10,742 Other commercial mortgage-backed securities 16,004 91 134 15,961 Other asset-backed securities 102,130 47 466 101,711 $ 2,257,188 $ 32,610 $ 9,556 $ 2,280,242 |
Schedule of available for sale securities by contractual maturity | The recorded cost basis and estimated fair value of available-for-sale fixed maturities at June 30, 2018 , 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. (In thousands) Amortized Due in one Due after Due after Due after Total Fair Fixed maturities, available for sale U.S. Treasury obligations $ 148,588 $ 37,731 $ 84,483 $ 21,407 $ 2,836 $ 146,457 U.S. Government-sponsored enterprise obligations 32,331 206 11,647 19,715 134 31,702 State and municipal bonds 326,705 25,562 126,115 140,281 39,142 331,100 Corporate debt 1,213,362 116,559 666,434 374,029 38,605 1,195,627 Residential mortgage-backed securities 208,052 204,236 Agency commercial mortgage-backed securities 14,080 13,812 Other commercial mortgage-backed securities 33,105 32,715 Other asset-backed securities 171,917 170,272 $ 2,148,140 $ 2,125,921 |
Investments held in an unrealized loss position | The following tables provide summarized information with respect to investments held in an unrealized loss position at June 30, 2018 and December 31, 2017 , including the length of time the investment had been held in a continuous unrealized loss position. June 30, 2018 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 $ 128,506 $ 2,380 $ 96,926 $ 1,589 $ 31,580 $ 791 U.S. Government-sponsored enterprise obligations 30,769 650 23,960 397 6,809 253 State and municipal bonds 100,622 1,093 98,073 1,035 2,549 58 Corporate debt 919,141 22,390 801,410 17,525 117,731 4,865 Residential mortgage-backed securities 173,133 4,966 131,124 2,839 42,009 2,127 Agency commercial mortgage-backed securities 13,812 268 11,929 135 1,883 133 Other commercial mortgage-backed securities 26,251 437 24,311 390 1,940 47 Other asset-backed securities 155,165 1,665 141,632 1,474 13,533 191 $ 1,547,399 $ 33,849 $ 1,329,365 $ 25,384 $ 218,034 $ 8,465 December 31, 2017 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 $ 110,788 $ 1,181 $ 67,135 $ 554 $ 43,653 $ 627 U.S. Government-sponsored enterprise obligations 17,032 206 10,182 64 6,850 142 State and municipal bonds 23,122 419 15,168 102 7,954 317 Corporate debt 487,578 5,707 365,541 2,730 122,037 2,977 Residential mortgage-backed securities 109,659 1,335 64,121 402 45,538 933 Agency commercial mortgage-backed securities 4,423 108 2,458 34 1,965 74 Other commercial mortgage-backed securities 12,878 134 7,939 82 4,939 52 Other asset-backed securities 85,358 466 70,924 346 14,434 120 $ 850,838 $ 9,556 $ 603,468 $ 4,314 $ 247,370 $ 5,242 |
Information regarding sales and purchases of available-for-sale securities | Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows: Three Months Ended June 30 Six Months Ended June 30 (In millions) 2018 2017 2018 2017 Proceeds from sales (exclusive of maturities and paydowns) $ 115.8 $ 156.3 $ 495.0 $ 235.5 Purchases $ 184.6 $ 198.7 $ 552.5 $ 359.1 |
Net Investment Income | Net investment income by investment category was as follows: Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Fixed maturities $ 17,506 $ 18,841 $ 34,586 $ 38,962 Equities 4,998 4,298 9,865 7,942 Short-term investments, including Other 1,332 978 2,639 1,778 BOLI 455 442 904 897 Investment fees and expenses (1,907 ) (1,882 ) (3,583 ) (3,716 ) Net investment income $ 22,384 $ 22,677 $ 44,411 $ 45,863 |
Investments in unconsolidated subsidiaries | ProAssurance's investment in unconsolidated subsidiaries were as follows: June 30, 2018 Carrying Value (In thousands) Percentage June 30, December 31, Qualified affordable housing project tax credit partnerships See below $ 74,895 $ 84,607 Other tax credit partnerships See below 4,980 6,118 All other investments, primarily investment fund LPs/LLCs See below 310,339 239,866 $ 390,214 $ 330,591 |
Equity in Earnings (Loss) of Unconsolidated Subsidiaries [Table Text Block] | Losses recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows: Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Qualified affordable housing project tax credit partnerships Losses recorded $ 5,612 $ 3,964 $ 9,712 $ 7,272 Tax credits recognized $ 4,624 $ 4,612 $ 9,237 $ 9,225 Historic tax credit partnerships Losses recorded $ 1,506 $ 2,350 $ 3,382 $ 2,766 Tax credits recognized $ 693 $ 820 $ 1,355 $ 2,624 |
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 realized investment gains (losses): Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Total OTTI losses: Corporate debt $ (404 ) $ — $ (404 ) $ (419 ) Portion of OTTI losses recognized in other comprehensive income before taxes: Corporate debt — — — 248 Net impairment losses recognized in earnings (404 ) — (404 ) (171 ) Gross realized gains, available-for-sale fixed maturities 438 746 4,902 2,599 Gross realized (losses), available-for-sale fixed maturities (1,725 ) (1,401 ) (3,772 ) (1,468 ) Net realized gains (losses), trading fixed maturities (73 ) — (73 ) — Net realized gains (losses), equity investments 3,488 794 12,706 7,356 Net realized gains (losses), other investments 402 546 1,090 1,719 Change in unrealized holding gains (losses), trading fixed maturities (170 ) — (219 ) — Change in unrealized holding gains (losses), equity investments 745 (3,191 ) (23,099 ) 424 Change in unrealized holding gains (losses), convertible securities, carried at fair value 90 285 (864 ) 598 Other 4 2 11 4 Net realized investment gains (losses) $ 2,795 $ (2,219 ) $ (9,722 ) $ 11,061 |
Other than temporary impairment, credit losses recognized in earnings | 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 OTTI was recorded in OCI . Three Months Ended Six Months Ended (In thousands) 2018 2017 2018 2017 Balance beginning of period $ 1,313 $ 1,329 $ 1,313 $ 1,158 Additional credit losses recognized during the period, related to securities for which: No OTTI has been previously recognized — — — 171 Reductions due to: Securities sold during the period (realized) — (16 ) — (16 ) Balance June 30 $ 1,313 $ 1,313 $ 1,313 $ 1,313 |
Reserve for Losses and Loss A24
Reserve for Losses and Loss Adjustment Expenses (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Insurance [Abstract] | |
Summary of reserve for losses and loss adjustment expenses | Activity in the reserve for losses and loss adjustment expenses is summarized as follows: (In thousands) Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 Year Ended December 31, 2017 Balance, beginning of year $ 2,048,381 $ 1,993,428 $ 1,993,428 Less reinsurance recoverables on unpaid losses and loss adjustment expenses 335,585 273,475 273,475 Net balance, beginning of year 1,712,796 1,719,953 1,719,953 Net losses: Current year* 337,116 292,489 603,518 Favorable development of reserves established in prior years, net (45,601 ) (57,788 ) (134,360 ) Total 291,515 234,701 469,158 Paid related to: Current year (34,174 ) (33,115 ) (106,633 ) Prior years (215,488 ) (210,006 ) (369,682 ) Total paid (249,662 ) (243,121 ) (476,315 ) Net balance, end of period 1,754,649 1,711,533 1,712,796 Plus reinsurance recoverables on unpaid losses and loss adjustment expenses 324,168 280,332 335,585 Balance, end of period $ 2,078,817 $ 1,991,865 $ 2,048,381 * Current year net losses during the 2018 six-month period included incurred losses of $25.4 million related to a loss portfolio transfer entered into during the second quarter of 2018 (see Note 4). |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | ProAssurance’s outstanding debt consisted of the following: (In thousands) June 30, December 31, Senior Notes due 2023, unsecured, interest at 5.3% annually $ 250,000 $ 250,000 Revolving Credit Agreement, outstanding borrowings were fully secured and carried at a weighted average interest rate of 1.91%. Outstanding borrowings are not permitted to exceed $250 million aggregately; Revolving Credit Agreement expires in 2020. The interest rate on borrowings is set at the time the respective borrowing is initiated or renewed. — 123,000 Mortgage Loans, outstanding borrowings are secured by first priority liens on two office buildings, and bear an interest rate of three-month LIBOR plus 1.325% (3.65% and 2.86%, respectively) determined on a quarterly basis. 39,762 40,460 Total principal 289,762 413,460 Less debt issuance costs 1,491 1,649 Debt less debt issuance costs $ 288,271 $ 411,811 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of interest rate caps | The following table provides a summary of the volume and fair value position of the interest rate cap as well as the reporting location in the Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 . ($ in thousands) June 30, 2018 December 31, 2017 Derivatives Not Designated as Hedging Instruments Location in the Condensed Consolidated Balance Sheets Number of Instruments Notional Amount (1) Estimated Fair Value (2) Number of Instruments Notional Amount (1) Estimated Fair Value (2) Interest Rate Cap Other assets 1 $ 35,000 $ 2,588 1 $ 35,000 $ 1,731 (1) Volume is represented by the derivative instrument's notional amount. (2) Additional information regarding the fair value of the Company's interest rate cap is provided in Note 2. The following table presents the pre-tax impact of the change in the fair value of the interest rate cap and the reporting location in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 and 2017 . Gains (Losses) Recognized in Income on Derivatives (In thousands) Three Months Ended June 30 Six Months Ended June 30 Derivatives Not Designated as Hedging Instruments Location in the Condensed Consolidated Statements of Income and Comprehensive Income 2018 2017 2018 2017 Interest Rate Cap Interest expense $ 282 $ — $ 857 $ — |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Share-based compensation expense and related tax benefits | Share-based compensation expense and related tax benefits were as follows: Three Months Ended June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Share-based compensation expense $ 1,615 $ 2,746 $ 2,517 $ 6,092 Related tax benefits $ 339 $ 961 $ 529 $ 2,132 |
Reclassification adjustments related to available-for-sale securities | Amounts reclassified from AOCI to net income and the amounts of deferred tax expense (benefit) included in OCI were as follows: Three Months Ended June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Reclassifications from AOCI to net income: Realized investment gains (losses) $ (1,691 ) $ (653 ) $ 726 $ 963 Non-credit impairment losses reclassified to earnings, due to sale of securities or reclassification as a credit loss — (3 ) — (3 ) Total gains (losses) reclassified, before tax effect (1,691 ) (656 ) 726 960 Tax effect* 355 230 (153 ) (336 ) Net reclassification adjustments $ (1,336 ) $ (426 ) $ 573 $ 624 Deferred tax expense (benefit) included in OCI $ (2,185 ) $ 2,983 $ (9,245 ) $ 4,464 * Tax effects were computed using a 21% and 35% rate for the three and six months ended June 30, 2018 and 2017, respectively. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table provides the weighted average number of common shares outstanding used in the calculation of the Company's basic and diluted earnings per share: (In thousands, except per share data) Three Months Ended June 30 Six Months Ended June 30 2018 2017 2018 2017 Weighted average number of common shares outstanding, basic 53,610 53,402 53,567 53,359 Dilutive effect of securities: Restricted Share Units 69 77 75 77 Performance Share Units 42 105 54 113 Purchase Match Units 20 23 20 22 Weighted average number of common shares outstanding, diluted 53,741 53,607 53,716 53,571 Effect of dilutive shares on earnings per share $ — $ (0.01 ) $ — $ — |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Financial results by segment were as follows: Three Months Ended June 30, 2018 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 143,847 $ 62,254 $ 17,490 $ — $ — $ 223,591 Net investment income — — 836 21,548 — 22,384 Equity in earnings (loss) of unconsolidated subsidiaries — — — 5,380 — 5,380 Net realized gains (losses) — — (252 ) 3,047 — 2,795 Other income (expense) 1,262 212 (436 ) 1,095 (89 ) 2,044 Net losses and loss adjustment expenses (111,838 ) (37,385 ) (12,505 ) — — (161,728 ) Underwriting, policy acquisition and operating expenses (28,050 ) (17,969 ) (8,060 ) (5,621 ) 89 (59,611 ) Segregated portfolio cells dividend (expense) income (118 ) (2,751 ) — 84 — (2,785 ) Interest expense — — — (3,958 ) — (3,958 ) Income tax benefit (expense) — — — 311 — 311 Segment operating results $ 5,103 $ 4,361 $ (2,927 ) $ 21,886 $ — $ 28,423 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,761 $ 958 $ (2 ) $ 2,240 $ — $ 4,957 Six Months Ended June 30, 2018 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 260,125 $ 120,660 $ 29,965 $ — $ — $ 410,750 Net investment income — — 1,587 42,824 — 44,411 Equity in earnings (loss) of unconsolidated subsidiaries — — — 7,019 — 7,019 Net realized gains (losses) — — (306 ) (9,416 ) — (9,722 ) Other income (expense) 2,519 578 (105 ) 2,037 (262 ) 4,767 Net losses and loss adjustment expenses (196,425 ) (74,099 ) (20,991 ) — — (291,515 ) Underwriting, policy acquisition and operating expenses (56,327 ) (35,301 ) (15,306 ) (10,297 ) 262 (116,969 ) Segregated portfolio cells dividend (expense) income (88 ) (4,645 ) — 201 — (4,532 ) Interest expense — — — (7,663 ) — (7,663 ) Income tax benefit (expense) — — (6 ) 3,739 — 3,733 Segment operating results $ 9,804 $ 7,193 $ (5,162 ) $ 28,444 $ — $ 40,279 Significant non-cash items: Depreciation and amortization, net of accretion $ 3,628 $ 1,914 $ (3 ) $ 5,497 $ — $ 11,036 Three Months Ended June 30, 2017 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 109,005 $ 56,854 $ 14,494 $ — $ — $ 180,353 Net investment income — — 410 22,267 — 22,677 Equity in earnings (loss) of unconsolidated subsidiaries — — — 2,516 — 2,516 Net realized gains (losses) — — 47 (2,266 ) — (2,219 ) Other income (expense) 1,469 209 (151 ) 778 (55 ) 2,250 Net losses and loss adjustment expenses (71,296 ) (33,486 ) (10,768 ) — — (115,550 ) Underwriting, policy acquisition and operating expenses (26,239 ) (17,093 ) (6,851 ) (7,757 ) 55 (57,885 ) Segregated portfolio cells dividend (expense) income (1) (5,119 ) (2,698 ) — (994 ) — (8,811 ) Interest expense — — — (4,145 ) — (4,145 ) Income tax benefit (expense) (1) — — 548 (216 ) — 332 Segment operating results $ 7,820 $ 3,786 $ (2,271 ) $ 10,183 $ — $ 19,518 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,506 $ 831 $ (5 ) $ 3,814 $ — $ 6,146 Six Months Ended June 30, 2017 (In thousands) Specialty P&C Workers' Compensation Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 222,063 $ 112,137 $ 29,056 $ — $ — $ 363,256 Net investment income — — 782 45,081 — 45,863 Equity in earnings (loss) of unconsolidated subsidiaries — — — 4,324 — 4,324 Net realized gains (losses) — — 74 10,987 — 11,061 Other income (expense) 2,668 354 240 951 (142 ) 4,071 Net losses and loss adjustment expenses (146,291 ) (68,136 ) (20,274 ) — — (234,701 ) Underwriting, policy acquisition and operating expenses (52,217 ) (33,784 ) (13,062 ) (16,073 ) 142 (114,994 ) Segregated portfolio cells dividend (expense) income (1) (5,091 ) (3,872 ) — (2,223 ) — (11,186 ) Interest expense — — — (8,278 ) — (8,278 ) Income tax benefit (expense) (1) — — 555 1,002 — 1,557 Segment operating results $ 21,132 $ 6,699 $ (2,629 ) $ 35,771 $ — $ 60,973 Significant non-cash items: Depreciation and amortization, net of accretion $ 3,417 $ 1,668 $ (8 ) $ 8,872 $ — $ 13,949 (1) During the second quarter of 2017, ProAssurance recognized a $5.2 million pre-tax expense related to previously unrecognized SPC dividend expense for the cumulative earnings of unrelated parties that have owned segregated portfolio cells at various periods since 2003 in a Bermuda captive insurance operation managed by the Company's HCPL line of business within the Specialty P&C segment. The expense recorded in the second quarter of 2017 related to periods prior to the then current period and was unrelated to the captive operations of the Company's Eastern Re subsidiary. The $1.8 million tax impact of the expense recognized in the second quarter of 2017 was included in the Corporate segment's income tax benefit (expense). |
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. Three Months Ended June 30 Six Months Ended June 30 (In thousands) 2018 2017 2018 2017 Specialty P&C Segment Gross premiums earned: Healthcare professional liability $ 146,208 $ 115,781 $ 264,892 $ 232,832 Legal professional liability 6,489 6,417 12,880 12,734 Medical technology liability 8,780 8,389 17,292 16,701 Other 119 101 230 203 Ceded premiums earned (17,749 ) (21,683 ) (35,169 ) (40,407 ) Segment net premiums earned 143,847 109,005 260,125 222,063 Workers' Compensation Segment Gross premiums earned: Traditional business 48,632 42,501 94,662 84,269 Alternative market business 20,648 20,209 40,029 39,655 Ceded premiums earned (7,026 ) (5,856 ) (14,031 ) (11,787 ) Segment net premiums earned 62,254 56,854 120,660 112,137 Lloyd's Syndicates Segment Gross premiums earned: Property and casualty* 19,273 16,960 37,240 34,145 Ceded premiums earned (1,783 ) (2,466 ) (7,275 ) (5,089 ) Segment net premiums earned 17,490 14,494 29,965 29,056 Consolidated net premiums earned $ 223,591 $ 180,353 $ 410,750 $ 363,256 *Includes premium assumed from the Specialty P&C segment of $1.4 million and $3.3 million for the three and six months ended June 30, 2018 , respectively, and $3.1 million and $6.6 million for the same respective periods of 2017 . |
Basis of Presentation (Narrativ
Basis of Presentation (Narrative) (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2018USD ($)segment | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Number of reportable segments | segment | 4 | ||||
Distributed earnings from unconsolidated subsidiaries | $ 4,595 | $ 12,894 | |||
Changes in fair value of investments previously reported as cost method investments | $ 3,600 | 5,900 | |||
Retained Earnings | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Reclassification from AOCI to retained earnings for stranded tax effects | (3,400) | ||||
Accumulated Other Comprehensive Income (Loss) | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Reclassification from AOCI to retained earnings for stranded tax effects | $ 3,400 | ||||
Accounting Standards Update 2016-15 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Distributions from unconsolidated subsidiaries, investing activities | (12,900) | ||||
Distributed earnings from unconsolidated subsidiaries | $ 12,900 | ||||
Accounting Standards Update 2016-01 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect adjustment adoption of ASU | [1] | $ 8,334 | |||
Accounting Standards Update 2016-01 | Retained Earnings | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect adjustment adoption of ASU | [1] | $ 8,334 | |||
[1] | See Note 1 for discussion of accounting guidance adopted during the period. |
Basis of Presentation (Other Li
Basis of Presentation (Other Liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
SPC dividends payable | $ 48,439 | $ 46,925 | |
Unpaid dividends | 17,630 | 267,292 | $ 16,524 |
All other | 103,057 | 123,383 | |
Total other liabilities | $ 169,126 | $ 437,600 |
Fair Value Measurement (Assets
Fair Value Measurement (Assets and Liabilities Measured at Fair Value) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Assets: | ||
Fixed maturities, available for sale | $ 2,125,921 | $ 2,280,242 |
Equity investments | 496,026 | 470,609 |
Fair Value | 297,762 | 230,889 |
Investment in unconsolidated subsidiaries | ||
Assets: | ||
Fair Value | 277,505 | 210,759 |
Level 3 | Corporate debt, limited observable inputs | ||
Assets: | ||
Total assets categorized within the fair value hierarchy | 8,380 | 13,703 |
Level 3 | Other investments | ||
Assets: | ||
Total assets categorized within the fair value hierarchy | 5 | 409 |
Recurring | ||
Assets: | ||
Other assets | 2,588 | 1,731 |
Total assets categorized within the fair value hierarchy | 2,880,015 | 3,216,879 |
Total assets at fair value | 3,177,777 | 3,447,768 |
Recurring | U.S. Treasury obligations | ||
Assets: | ||
Fixed maturities, available for sale | 146,457 | 133,627 |
Recurring | U.S. Government-sponsored enterprise obligations | ||
Assets: | ||
Fixed maturities, available for sale | 31,702 | 20,956 |
Recurring | State and municipal bonds | ||
Assets: | ||
Fixed maturities, available for sale | 331,100 | 632,243 |
Recurring | Corporate debt, multiple observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 1,187,247 | 1,153,455 |
Recurring | Corporate debt, limited observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 8,380 | 13,703 |
Recurring | Residential mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 204,236 | 197,844 |
Recurring | Agency commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 13,812 | 10,742 |
Recurring | Other commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 32,715 | 15,961 |
Recurring | Other asset-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 170,272 | 101,711 |
Recurring | Corporate Debt | ||
Assets: | ||
Trading Securities | 29,772 | |
Recurring | Financial | ||
Assets: | ||
Equity investments | 74,656 | 76,051 |
Recurring | Utilities/Energy | ||
Assets: | ||
Equity investments | 57,936 | 54,388 |
Recurring | Consumer oriented | ||
Assets: | ||
Equity investments | 55,459 | 54,529 |
Recurring | Industrial | ||
Assets: | ||
Equity investments | 46,285 | 53,936 |
Recurring | Bond funds | ||
Assets: | ||
Equity investments | 146,795 | 156,563 |
Recurring | All other | ||
Assets: | ||
Equity investments | 94,638 | 75,142 |
Recurring | Short-term investments | ||
Assets: | ||
Short-term and other investments | 212,945 | 432,126 |
Recurring | Other investments | ||
Assets: | ||
Short-term and other investments | 33,020 | 32,171 |
Fair Value | 20,130 | |
Recurring | Investment in unconsolidated subsidiaries | ||
Assets: | ||
Fair Value | 210,759 | |
Recurring | Level 1 | ||
Assets: | ||
Other assets | 0 | 0 |
Total assets categorized within the fair value hierarchy | 678,397 | 877,791 |
Recurring | Level 1 | U.S. Treasury obligations | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | U.S. Government-sponsored enterprise obligations | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | State and municipal bonds | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Corporate debt, multiple observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 2,262 | 2,371 |
Recurring | Level 1 | Corporate debt, limited observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Residential mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Agency commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Other commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Other asset-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 1 | Corporate Debt | ||
Assets: | ||
Trading Securities | 0 | |
Recurring | Level 1 | Financial | ||
Assets: | ||
Equity investments | 74,656 | 76,051 |
Recurring | Level 1 | Utilities/Energy | ||
Assets: | ||
Equity investments | 57,936 | 54,388 |
Recurring | Level 1 | Consumer oriented | ||
Assets: | ||
Equity investments | 55,459 | 54,529 |
Recurring | Level 1 | Industrial | ||
Assets: | ||
Equity investments | 46,285 | 53,936 |
Recurring | Level 1 | Bond funds | ||
Assets: | ||
Equity investments | 146,795 | 156,563 |
Recurring | Level 1 | All other | ||
Assets: | ||
Equity investments | 94,638 | 75,142 |
Recurring | Level 1 | Short-term investments | ||
Assets: | ||
Short-term and other investments | 200,366 | 404,204 |
Recurring | Level 1 | Other investments | ||
Assets: | ||
Short-term and other investments | 0 | 607 |
Recurring | Level 2 | ||
Assets: | ||
Other assets | 2,588 | 1,731 |
Total assets categorized within the fair value hierarchy | 2,183,813 | 2,319,990 |
Recurring | Level 2 | U.S. Treasury obligations | ||
Assets: | ||
Fixed maturities, available for sale | 146,457 | 133,627 |
Recurring | Level 2 | U.S. Government-sponsored enterprise obligations | ||
Assets: | ||
Fixed maturities, available for sale | 31,702 | 20,956 |
Recurring | Level 2 | State and municipal bonds | ||
Assets: | ||
Fixed maturities, available for sale | 331,100 | 632,243 |
Recurring | Level 2 | Corporate debt, multiple observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 1,184,985 | 1,151,084 |
Recurring | Level 2 | Corporate debt, limited observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 2 | Residential mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 204,236 | 196,789 |
Recurring | Level 2 | Agency commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 13,812 | 10,742 |
Recurring | Level 2 | Other commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 32,715 | 15,961 |
Recurring | Level 2 | Other asset-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 160,852 | 97,780 |
Recurring | Level 2 | Corporate Debt | ||
Assets: | ||
Trading Securities | 29,772 | |
Recurring | Level 2 | Financial | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | Utilities/Energy | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | Consumer oriented | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | Industrial | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | Bond funds | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | All other | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 2 | Short-term investments | ||
Assets: | ||
Short-term and other investments | 12,579 | 27,922 |
Recurring | Level 2 | Other investments | ||
Assets: | ||
Short-term and other investments | 33,015 | 31,155 |
Recurring | Level 3 | ||
Assets: | ||
Other assets | 0 | 0 |
Total assets categorized within the fair value hierarchy | 17,805 | 19,098 |
Recurring | Level 3 | U.S. Treasury obligations | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | U.S. Government-sponsored enterprise obligations | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | State and municipal bonds | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | Corporate debt, multiple observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | Corporate debt, limited observable inputs | ||
Assets: | ||
Fixed maturities, available for sale | 8,380 | 13,703 |
Recurring | Level 3 | Residential mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 1,055 |
Recurring | Level 3 | Agency commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | Other commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 0 | 0 |
Recurring | Level 3 | Other asset-backed securities | ||
Assets: | ||
Fixed maturities, available for sale | 9,420 | 3,931 |
Recurring | Level 3 | Corporate Debt | ||
Assets: | ||
Trading Securities | 0 | |
Recurring | Level 3 | Financial | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | Utilities/Energy | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | Consumer oriented | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | Industrial | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | Bond funds | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | All other | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Level 3 | Short-term investments | ||
Assets: | ||
Short-term and other investments | 0 | 0 |
Recurring | Level 3 | Other investments | ||
Assets: | ||
Short-term and other investments | 5 | 409 |
Mortgage fund | Other investments | ||
Assets: | ||
Fair Value | 0 | 20,130 |
Mortgage fund | Equities | ||
Assets: | ||
Fair Value | $ 20,257 | $ 0 |
Fair Value Measurement (Narrati
Fair Value Measurement (Narrative) (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018USD ($)Agreement | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Agreement | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Credit Derivatives [Line Items] | |||||
Transfer of equity securities from Level 2 to Level 1 | $ 0 | $ 35,400,000 | $ 0 | $ 35,400,000 | |
Net impairment losses recognized in earnings | 404,000 | $ 0 | 404,000 | $ 171,000 | |
Fair value of funded deferred compensation assets | $ 22,300,000 | $ 22,300,000 | $ 20,200,000 | ||
Number of line of credit agreement | Agreement | 2 | 2 | |||
Corporate debt, limited observable inputs | NRSRO | NRSRO, Rating BBB | |||||
Credit Derivatives [Line Items] | |||||
Credit rating | 76.00% | ||||
Corporate debt, limited observable inputs | NRSRO | NRSRO, Rating BBBplus | |||||
Credit Derivatives [Line Items] | |||||
Credit rating | 84.00% | ||||
Residential mortgage-backed and other asset-backed securities | NRSRO | NRSRO, Rating AAA | |||||
Credit Derivatives [Line Items] | |||||
Credit rating | 70.00% | 21.00% | |||
Early Stage Business Development | Investment in unconsolidated subsidiaries | |||||
Credit Derivatives [Line Items] | |||||
Net impairment losses recognized in earnings | $ 8,500,000 | ||||
Fair Value, Measurements, Nonrecurring | |||||
Credit Derivatives [Line Items] | |||||
Fair value, net asset (liability) | $ 0 | $ 0 | $ 1,200,000 |
Fair Value Measurement (Quantit
Fair Value Measurement (Quantitative Information Regarding Level 3 Valuations) (Details) - Level 3 - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Corporate debt, limited observable inputs | ||
Assets: | ||
Fair Value at | $ 8,380 | $ 13,703 |
Corporate debt, limited observable inputs | Market Comparable Securities | Minimum | ||
Assets: | ||
Comparability Adjustment | 0.00% | |
Corporate debt, limited observable inputs | Market Comparable Securities | Maximum | ||
Assets: | ||
Comparability Adjustment | 5.00% | |
Corporate debt, limited observable inputs | Market Comparable Securities | Weighted Average | ||
Assets: | ||
Comparability Adjustment | 2.50% | |
Corporate debt, limited observable inputs | Discounted Cash Flows | Minimum | ||
Assets: | ||
Comparability Adjustment | 0.00% | |
Corporate debt, limited observable inputs | Discounted Cash Flows | Maximum | ||
Assets: | ||
Comparability Adjustment | 5.00% | |
Corporate debt, limited observable inputs | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Comparability Adjustment | 2.50% | |
Residential mortgage-backed and other asset-backed securities | ||
Assets: | ||
Fair Value at | $ 9,420 | 4,986 |
Residential mortgage-backed and other asset-backed securities | Market Comparable Securities | Minimum | ||
Assets: | ||
Comparability Adjustment | 0.00% | |
Residential mortgage-backed and other asset-backed securities | Market Comparable Securities | Maximum | ||
Assets: | ||
Comparability Adjustment | 5.00% | |
Residential mortgage-backed and other asset-backed securities | Market Comparable Securities | Weighted Average | ||
Assets: | ||
Comparability Adjustment | 2.50% | |
Residential mortgage-backed and other asset-backed securities | Discounted Cash Flows | Minimum | ||
Assets: | ||
Comparability Adjustment | 0.00% | |
Residential mortgage-backed and other asset-backed securities | Discounted Cash Flows | Maximum | ||
Assets: | ||
Comparability Adjustment | 5.00% | |
Residential mortgage-backed and other asset-backed securities | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Comparability Adjustment | 2.50% | |
Other investments | ||
Assets: | ||
Fair Value at | $ 5 | $ 409 |
Other investments | Discounted Cash Flows | Minimum | ||
Assets: | ||
Comparability Adjustment | 0.00% | |
Other investments | Discounted Cash Flows | Maximum | ||
Assets: | ||
Comparability Adjustment | 10.00% | |
Other investments | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Comparability Adjustment | 5.00% |
Fair Value Measurement (Level 3
Fair Value Measurement (Level 3 Assets) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation: | ||||
Beginning Balance | $ 32,785 | $ 22,819 | $ 19,098 | $ 17,820 |
Included in earnings, as a part of: | ||||
Included in other comprehensive income | (201) | 71 | (269) | (140) |
Purchases | 3,225 | 4,841 | 22,683 | 11,889 |
Sales | (2,168) | (2,760) | (5,100) | (4,472) |
Transfers in | 558 | 10 | 2,627 | 908 |
Transfers out | (16,357) | (3,964) | (21,115) | (4,962) |
Ending Balance | 17,805 | 20,859 | 17,805 | 20,859 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | 0 | 0 | 0 | 0 |
Net investment income | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | (35) | (34) | (73) | (73) |
Net realized investment gains (losses) | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | (2) | (124) | (46) | (111) |
Corporate Debt | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation: | ||||
Beginning Balance | 15,097 | 18,914 | 13,703 | 14,810 |
Included in earnings, as a part of: | ||||
Included in other comprehensive income | (90) | (70) | (128) | (278) |
Purchases | 0 | 4,841 | 6,005 | 11,889 |
Sales | (1,644) | (1,848) | (4,549) | (3,560) |
Transfers in | 558 | 10 | 2,627 | 10 |
Transfers out | (5,497) | (3,964) | (9,196) | (4,962) |
Ending Balance | 8,380 | 17,849 | 8,380 | 17,849 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | 0 | 0 | 0 | 0 |
Corporate Debt | Net investment income | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | (36) | (34) | (74) | (73) |
Corporate Debt | Net realized investment gains (losses) | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | (8) | 0 | (8) | 13 |
Asset-backed Securities | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation: | ||||
Beginning Balance | 17,323 | 3,002 | 4,986 | 3,007 |
Included in earnings, as a part of: | ||||
Included in other comprehensive income | (111) | 3 | (141) | (2) |
Purchases | 3,225 | 0 | 16,678 | 0 |
Sales | (158) | 0 | (185) | 0 |
Transfers in | 0 | 0 | 0 | 0 |
Transfers out | (10,860) | 0 | (11,919) | 0 |
Ending Balance | 9,420 | 3,005 | 9,420 | 3,005 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | 0 | 0 | 0 | 0 |
Asset-backed Securities | Net investment income | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | 1 | 0 | 1 | 0 |
Asset-backed Securities | Net realized investment gains (losses) | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | 0 | 0 | 0 |
Other investments | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation: | ||||
Beginning Balance | 365 | 903 | 409 | 3 |
Included in earnings, as a part of: | ||||
Included in other comprehensive income | 0 | 138 | 0 | 140 |
Purchases | 0 | 0 | 0 | 0 |
Sales | (366) | (912) | (366) | (912) |
Transfers in | 0 | 0 | 0 | 898 |
Transfers out | 0 | 0 | 0 | 0 |
Ending Balance | 5 | 5 | 5 | 5 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | 0 | 0 | 0 | 0 |
Other investments | Net investment income | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | 0 | 0 | 0 |
Other investments | Net realized investment gains (losses) | ||||
Included in earnings, as a part of: | ||||
Total gains (losses) realized and unrealized, included in earnings | $ 6 | $ (124) | $ (38) | $ (124) |
Fair Value Measurement (Investm
Fair Value Measurement (Investments in LLCs and Limited Partnerships) (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Fair Value | $ 297,762,000 | $ 230,889,000 |
Equities | Mortgage fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 20,257,000 | 0 |
Investment in unconsolidated subsidiaries | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Fair Value | 277,505,000 | 210,759,000 |
Investment in unconsolidated subsidiaries | Private debt funds | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 4,945,000 | |
Fair Value | 26,174,000 | 42,206,000 |
Investment in unconsolidated subsidiaries | Long equity fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 7,712,000 | 7,847,000 |
Investment in unconsolidated subsidiaries | Long/short equity funds | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 32,134,000 | 31,352,000 |
Investment in unconsolidated subsidiaries | Non-public equity funds | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 78,693,000 | |
Fair Value | 109,337,000 | 100,062,000 |
Investment in unconsolidated subsidiaries | Multi-strategy fund of funds | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 9,357,000 | 9,100,000 |
Investment in unconsolidated subsidiaries | Credit fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 18,075,000 | 6,561,000 |
Investment in unconsolidated subsidiaries | Long/short commodities fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 13,380,000 | 13,025,000 |
Investment in unconsolidated subsidiaries | Strategy focused fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 19,247,000 | |
Fair Value | 61,336,000 | 606,000 |
Other investments | Mortgage fund | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Fair Value | $ 0 | $ 20,130,000 |
Fair Value Measurement (Inves37
Fair Value Measurement (Investments in LLCs and Limited Partnerships Footnote) (Details) | 6 Months Ended |
Jun. 30, 2018 | |
Mortgage fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 65 days |
Payment period for redemption of LP valued at NAV | 45 days |
Long equity fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 15 days |
Payment period for redemption of LP valued at NAV | 10 days |
Long/short equity funds | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Payment period for redemption of LP valued at NAV | 30 days |
Redemption percentage of LP at NAV for which initial payment is limited | 90.00% |
Non-public equity funds | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Liquidating investments remaining period | 9 years |
Credit fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 90 days |
Long/short commodities fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 30 days |
Minimum | Secured debt fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Liquidating investments remaining period | 3 years |
Minimum | Long/short equity funds | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 30 days |
Maximum | Secured debt fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Liquidating investments remaining period | 8 years |
Maximum | Long/short equity funds | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 90 days |
Maximum | Long/short commodities fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Payment period for redemption of LP valued at NAV | 30 days |
Fair Value Measurement (Methodo
Fair Value Measurement (Methodologies Other Than Fair Value) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Financial assets: | ||
BOLI | $ 63,017 | $ 62,113 |
Other investments | 35,909 | 110,847 |
Other assets | 106,325 | 101,428 |
Financial liabilities: | ||
Other liabilities | 169,126 | 437,600 |
Not Measured At Fair Value | Carrying Value | ||
Financial assets: | ||
BOLI | 63,017 | 62,113 |
Other investments | 2,889 | 58,546 |
Other assets | 37,745 | 34,020 |
Financial liabilities: | ||
Other liabilities | 22,303 | 21,154 |
Not Measured At Fair Value | Carrying Value | Senior Notes | ||
Financial liabilities: | ||
Debt | 250,000 | 250,000 |
Not Measured At Fair Value | Carrying Value | Mortgage Loans | ||
Financial liabilities: | ||
Debt | 39,762 | 40,460 |
Not Measured At Fair Value | Carrying Value | Line of Credit | ||
Financial liabilities: | ||
Debt | 0 | 123,000 |
Not Measured At Fair Value | Level 3 | Fair Value | ||
Financial assets: | ||
BOLI | 63,017 | 62,113 |
Other investments | 2,889 | 69,095 |
Other assets | 37,411 | 33,742 |
Financial liabilities: | ||
Other liabilities | 22,303 | 21,154 |
Not Measured At Fair Value | Level 3 | Fair Value | Senior Notes | ||
Financial liabilities: | ||
Debt | 263,943 | 273,153 |
Not Measured At Fair Value | Level 3 | Fair Value | Mortgage Loans | ||
Financial liabilities: | ||
Debt | 39,762 | 40,460 |
Not Measured At Fair Value | Level 3 | Fair Value | Line of Credit | ||
Financial liabilities: | ||
Debt | $ 0 | $ 123,000 |
Investments (Available-For-Sale
Investments (Available-For-Sale Securities) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fixed maturities, available for sale | ||
Amortized Cost | $ 2,148,140 | $ 2,257,188 |
Gross Unrealized Gains | 11,630 | 32,610 |
Gross Unrealized Losses | 33,849 | 9,556 |
Estimated Fair Value | 2,125,921 | 2,280,242 |
U.S. Treasury obligations | ||
Fixed maturities, available for sale | ||
Amortized Cost | 148,588 | 134,323 |
Gross Unrealized Gains | 249 | 485 |
Gross Unrealized Losses | 2,380 | 1,181 |
Estimated Fair Value | 146,457 | 133,627 |
U.S. Government-sponsored enterprise obligations | ||
Fixed maturities, available for sale | ||
Amortized Cost | 32,331 | 21,089 |
Gross Unrealized Gains | 21 | 73 |
Gross Unrealized Losses | 650 | 206 |
Estimated Fair Value | 31,702 | 20,956 |
State and municipal bonds | ||
Fixed maturities, available for sale | ||
Amortized Cost | 326,705 | 618,414 |
Gross Unrealized Gains | 5,488 | 14,248 |
Gross Unrealized Losses | 1,093 | 419 |
Estimated Fair Value | 331,100 | 632,243 |
Corporate debt | ||
Fixed maturities, available for sale | ||
Amortized Cost | 1,213,362 | 1,157,660 |
Gross Unrealized Gains | 4,655 | 15,205 |
Gross Unrealized Losses | 22,390 | 5,707 |
Estimated Fair Value | 1,195,627 | 1,167,158 |
Residential mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 208,052 | 196,741 |
Gross Unrealized Gains | 1,150 | 2,438 |
Gross Unrealized Losses | 4,966 | 1,335 |
Estimated Fair Value | 204,236 | 197,844 |
Agency commercial mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 14,080 | 10,827 |
Gross Unrealized Gains | 0 | 23 |
Gross Unrealized Losses | 268 | 108 |
Estimated Fair Value | 13,812 | 10,742 |
Other commercial mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 33,105 | 16,004 |
Gross Unrealized Gains | 47 | 91 |
Gross Unrealized Losses | 437 | 134 |
Estimated Fair Value | 32,715 | 15,961 |
Other asset-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 171,917 | 102,130 |
Gross Unrealized Gains | 20 | 47 |
Gross Unrealized Losses | 1,665 | 466 |
Estimated Fair Value | $ 170,272 | $ 101,711 |
Investments (Available For Sale
Investments (Available For Sale Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fixed maturities, available for sale | ||
Amortized Cost | $ 2,148,140 | $ 2,257,188 |
Estimated Fair Value | 2,125,921 | 2,280,242 |
U.S. Treasury obligations | ||
Fixed maturities, available for sale | ||
Amortized Cost | 148,588 | 134,323 |
Due in one year or less | 37,731 | |
Due after one year through five years | 84,483 | |
Due after five years through ten years | 21,407 | |
Due after ten years | 2,836 | |
Estimated Fair Value | 146,457 | 133,627 |
U.S. Government-sponsored enterprise obligations | ||
Fixed maturities, available for sale | ||
Amortized Cost | 32,331 | 21,089 |
Due in one year or less | 206 | |
Due after one year through five years | 11,647 | |
Due after five years through ten years | 19,715 | |
Due after ten years | 134 | |
Estimated Fair Value | 31,702 | 20,956 |
State and municipal bonds | ||
Fixed maturities, available for sale | ||
Amortized Cost | 326,705 | 618,414 |
Due in one year or less | 25,562 | |
Due after one year through five years | 126,115 | |
Due after five years through ten years | 140,281 | |
Due after ten years | 39,142 | |
Estimated Fair Value | 331,100 | 632,243 |
Corporate debt | ||
Fixed maturities, available for sale | ||
Amortized Cost | 1,213,362 | 1,157,660 |
Due in one year or less | 116,559 | |
Due after one year through five years | 666,434 | |
Due after five years through ten years | 374,029 | |
Due after ten years | 38,605 | |
Estimated Fair Value | 1,195,627 | 1,167,158 |
Residential mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 208,052 | 196,741 |
Estimated Fair Value | 204,236 | 197,844 |
Agency commercial mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 14,080 | 10,827 |
Estimated Fair Value | 13,812 | 10,742 |
Other commercial mortgage-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 33,105 | 16,004 |
Estimated Fair Value | 32,715 | 15,961 |
Other asset-backed securities | ||
Fixed maturities, available for sale | ||
Amortized Cost | 171,917 | 102,130 |
Estimated Fair Value | $ 170,272 | $ 101,711 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($)BusinessIssuerinvestment_interestSecurity | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)BusinessIssuerinvestment_interestSecurity | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)IssuerSecurity | |
Reclassifications from AOCI to net income: | |||||
Number of Investment Affiliates Exceeding Shareholder's Equity Ten Percent Threshold Limit | investment_interest | 0 | 0 | |||
Threshold Limit Of Investments Based On Shareholders Equity | 10.00% | 10.00% | |||
Securities on deposit with state insurance departments | $ 45,700 | $ 45,700 | |||
Business owned life insurance cost | $ 33,000 | $ 33,000 | |||
Number of LPs / LLCs with investment ownership percent over 25% | Business | 3 | 3 | |||
Investment in unconsolidated subsidiaries | $ 390,214 | $ 390,214 | $ 330,591 | ||
OTTI losses | (404) | $ 0 | (404) | $ (419) | |
Net impairment losses recognized in earnings | 404 | 0 | 404 | 171 | |
Portion of noncredit OTTI losses recognized in OCI | $ 0 | $ 0 | $ 0 | 248 | |
Tax Credit Partnerships Almost 100% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Number of tax credit partnerships almost 100% ownership percentage | investment_interest | 2 | 2 | |||
Investment in unconsolidated subsidiaries | $ 28,500 | $ 28,500 | 32,500 | ||
Tax Credit Partnerships Less Than 20% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Investment in unconsolidated subsidiaries | 46,400 | 46,400 | 52,100 | ||
Other Limited Partnerships and Limited Liability Company, Greater Than 25% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Investment in unconsolidated subsidiaries | 28,400 | 28,400 | 30,800 | ||
Other Limited Partnerships and Limited Liability Company Less than 25% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Investment in unconsolidated subsidiaries | $ 281,900 | $ 281,900 | $ 209,100 | ||
Maximum | Tax Credit Partnerships Almost 100% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Investment ownership percentage | 100.00% | 100.00% | |||
Maximum | Tax Credit Partnerships Less Than 20% Ownership | |||||
Reclassifications from AOCI to net income: | |||||
Investment ownership percentage | 20.00% | 20.00% | |||
Fixed maturities | |||||
Reclassifications from AOCI to net income: | |||||
Required FAL Deposit | $ 123,600 | $ 123,600 | |||
Short-term investments | |||||
Reclassifications from AOCI to net income: | |||||
Required FAL Deposit | $ 1,000 | $ 1,000 | |||
Non Government-Backed | |||||
Reclassifications from AOCI to net income: | |||||
Number of debt securities in unrealized loss position | Security | 1,024 | 1,024 | 629 | ||
Debt securities in unrealized loss position as percentage of total debt securities held | 50.00% | 50.00% | 26.50% | ||
Number of issuers in unrealized loss position | Issuer | 548 | 548 | 375 | ||
Single greatest unrealized loss position | $ 600 | $ 600 | $ 400 | ||
Second greatest unrealized loss position | $ 400 | $ 400 | $ 300 | ||
Corporate Bond Securities | |||||
Reclassifications from AOCI to net income: | |||||
Portion of noncredit OTTI losses recognized in OCI | $ 200 |
Investments (Investments Held i
Investments (Investments Held in a Loss Position) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value | ||
Fair Value | $ 1,547,399 | $ 850,838 |
Less than 12 months, Fair Value | 1,329,365 | 603,468 |
More than 12 months, Fair Value | 218,034 | 247,370 |
Unrealized Loss | ||
Unrealized Loss | 33,849 | 9,556 |
Less than 12 months, Unrealized Loss | 25,384 | 4,314 |
More than 12 months, Unrealized Loss | 8,465 | 5,242 |
U.S. Treasury obligations | ||
Fair Value | ||
Fair Value | 128,506 | 110,788 |
Less than 12 months, Fair Value | 96,926 | 67,135 |
More than 12 months, Fair Value | 31,580 | 43,653 |
Unrealized Loss | ||
Unrealized Loss | 2,380 | 1,181 |
Less than 12 months, Unrealized Loss | 1,589 | 554 |
More than 12 months, Unrealized Loss | 791 | 627 |
U.S. Government-sponsored enterprise obligations | ||
Fair Value | ||
Fair Value | 30,769 | 17,032 |
Less than 12 months, Fair Value | 23,960 | 10,182 |
More than 12 months, Fair Value | 6,809 | 6,850 |
Unrealized Loss | ||
Unrealized Loss | 650 | 206 |
Less than 12 months, Unrealized Loss | 397 | 64 |
More than 12 months, Unrealized Loss | 253 | 142 |
State and municipal bonds | ||
Fair Value | ||
Fair Value | 100,622 | 23,122 |
Less than 12 months, Fair Value | 98,073 | 15,168 |
More than 12 months, Fair Value | 2,549 | 7,954 |
Unrealized Loss | ||
Unrealized Loss | 1,093 | 419 |
Less than 12 months, Unrealized Loss | 1,035 | 102 |
More than 12 months, Unrealized Loss | 58 | 317 |
Corporate debt | ||
Fair Value | ||
Fair Value | 919,141 | 487,578 |
Less than 12 months, Fair Value | 801,410 | 365,541 |
More than 12 months, Fair Value | 117,731 | 122,037 |
Unrealized Loss | ||
Unrealized Loss | 22,390 | 5,707 |
Less than 12 months, Unrealized Loss | 17,525 | 2,730 |
More than 12 months, Unrealized Loss | 4,865 | 2,977 |
Residential mortgage-backed securities | ||
Fair Value | ||
Fair Value | 173,133 | 109,659 |
Less than 12 months, Fair Value | 131,124 | 64,121 |
More than 12 months, Fair Value | 42,009 | 45,538 |
Unrealized Loss | ||
Unrealized Loss | 4,966 | 1,335 |
Less than 12 months, Unrealized Loss | 2,839 | 402 |
More than 12 months, Unrealized Loss | 2,127 | 933 |
Agency commercial mortgage-backed securities | ||
Fair Value | ||
Fair Value | 13,812 | 4,423 |
Less than 12 months, Fair Value | 11,929 | 2,458 |
More than 12 months, Fair Value | 1,883 | 1,965 |
Unrealized Loss | ||
Unrealized Loss | 268 | 108 |
Less than 12 months, Unrealized Loss | 135 | 34 |
More than 12 months, Unrealized Loss | 133 | 74 |
Other commercial mortgage-backed securities | ||
Fair Value | ||
Fair Value | 26,251 | 12,878 |
Less than 12 months, Fair Value | 24,311 | 7,939 |
More than 12 months, Fair Value | 1,940 | 4,939 |
Unrealized Loss | ||
Unrealized Loss | 437 | 134 |
Less than 12 months, Unrealized Loss | 390 | 82 |
More than 12 months, Unrealized Loss | 47 | 52 |
Other asset-backed securities | ||
Fair Value | ||
Fair Value | 155,165 | 85,358 |
Less than 12 months, Fair Value | 141,632 | 70,924 |
More than 12 months, Fair Value | 13,533 | 14,434 |
Unrealized Loss | ||
Unrealized Loss | 1,665 | 466 |
Less than 12 months, Unrealized Loss | 1,474 | 346 |
More than 12 months, Unrealized Loss | $ 191 | $ 120 |
Investments (Sales and Purchase
Investments (Sales and Purchases of Available-for-Sale Securities) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Information regarding sales and purchases of available-for-sale securities | ||||
Proceeds from sales (exclusive of maturities and paydowns) | $ 115,800 | $ 156,300 | $ 495,000 | $ 235,500 |
Purchases | $ 184,600 | $ 198,700 | $ 552,451 | $ 359,080 |
Investments (Net Investment Inc
Investments (Net Investment Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net Investment Income | ||||
Investment fees and expenses | $ (1,907) | $ (1,882) | $ (3,583) | $ (3,716) |
Net investment income | 22,384 | 22,677 | 44,411 | 45,863 |
Fixed maturities | ||||
Net Investment Income | ||||
Investment Income | 17,506 | 18,841 | 34,586 | 38,962 |
Equities | ||||
Net Investment Income | ||||
Investment Income | 4,998 | 4,298 | 9,865 | 7,942 |
Short-term investments, including Other | ||||
Net Investment Income | ||||
Investment Income | 1,332 | 978 | 2,639 | 1,778 |
BOLI | ||||
Net Investment Income | ||||
Investment Income | $ 455 | $ 442 | $ 904 | $ 897 |
Investments (Unconsolidated Sub
Investments (Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | $ 390,214 | $ 330,591 |
Qualified affordable housing project tax credit partnerships | ||
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | 74,895 | 84,607 |
Other tax credit partnerships | ||
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | 4,980 | 6,118 |
All other investments, primarily investment fund LPs/LLCs | ||
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | $ 310,339 | $ 239,866 |
Investments Investments (Equity
Investments Investments (Equity in Earnings (Loss) of Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Losses recorded from affordable housing projects | $ 5,612 | $ 3,964 | $ 9,712 | $ 7,272 |
Tax credits recognized related to affordable housing projects | 4,624 | 4,612 | 9,237 | 9,225 |
Losses from historic tax credit investments | 1,506 | 2,350 | 3,382 | 2,766 |
Tax credits recognized related to historic tax credit investments | $ 693 | $ 820 | $ 1,355 | $ 2,624 |
Investments (Net Realized Inves
Investments (Net Realized Investment Gains (Losses)) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | ||||
OTTI losses | $ (404) | $ 0 | $ (404) | $ (419) |
Portion of OTTI losses recognized in other comprehensive income before taxes | 0 | 0 | 0 | 248 |
Net impairment losses recognized in earnings | (404) | 0 | (404) | (171) |
Gross realized gains, available-for-sale fixed maturities | 438 | 746 | 4,902 | 2,599 |
Gross realized (losses), available-for-sale fixed maturities | (1,725) | (1,401) | (3,772) | (1,468) |
Net realized gains (losses), trading fixed maturities | (73) | 0 | (73) | 0 |
Net realized gains (losses), equity investments | 3,488 | 794 | 12,706 | 7,356 |
Net realized gains (losses), other investments | 402 | 546 | 1,090 | 1,719 |
Change in unrealized holding gains (losses), trading fixed maturities | (170) | 0 | (219) | 0 |
Change in unrealized holding gains (losses), equity investments | 745 | (3,191) | (23,099) | 424 |
Change in unrealized holding gains (losses), convertible securities, carried at fair value | 90 | 285 | (864) | 598 |
Other | 4 | 2 | 11 | 4 |
Total net realized investment gains (losses) | $ 2,795 | $ (2,219) | $ (9,722) | $ 11,061 |
Investments (Credit Losses Reco
Investments (Credit Losses Recorded in Earnings) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Other than Temporary Impairment, Credit Losses Recognized in Earnings: | ||||
Balance beginning of period | $ 1,313 | $ 1,329 | $ 1,313 | $ 1,158 |
No OTTI has been previously recognized | 0 | 0 | 0 | 171 |
Securities sold during the period (realized) | 0 | 16 | 0 | 16 |
Balance ending of period | $ 1,313 | $ 1,313 | $ 1,313 | $ 1,313 |
Retroactive Insurance (Details)
Retroactive Insurance (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums earned | $ 223,591 | $ 180,353 | $ 410,750 | $ 363,256 | ||
Net losses and loss adjustment expenses | 161,728 | 115,550 | 291,515 | 234,701 | ||
Reserve for losses and loss adjustment expenses | 2,078,817 | $ 1,991,865 | 2,078,817 | $ 1,991,865 | $ 2,048,381 | $ 1,993,428 |
Retroactive Insurance Contract | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums earned | 26,600 | 26,600 | ||||
Net losses and loss adjustment expenses | 25,400 | 25,400 | ||||
Reserve for losses and loss adjustment expenses | 600 | 600 | ||||
Retroactive Insurance Contract, Prospective Coverage | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums earned | 7,900 | 7,900 | ||||
Retroactive Insurance Contract, Retroactive Coverage | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums earned | $ 18,700 | $ 18,700 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Income taxes liabilities | $ 4 | $ 8 |
Unrecognized tax benefits | 5.1 | 5.8 |
Accrued liability for interest related to unrecognized tax benefits | $ 0.6 | $ 0.5 |
Reserve for Losses and Loss A51
Reserve for Losses and Loss Adjustment Expenses (Details) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018USD ($)partition | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease) [Abstract] | |||
Minimum period for claims resolution (years) | 5 years | ||
Number of business partitions | partition | 200 | ||
Summary of reserve for losses and loss adjustment expenses | |||
Balance, beginning of year | $ 2,048,381 | $ 1,993,428 | $ 1,993,428 |
Less reinsurance recoverables on unpaid losses and loss adjustment expenses | 335,585 | 273,475 | 273,475 |
Net balance, beginning of year | 1,712,796 | 1,719,953 | 1,719,953 |
Net losses: | |||
Current year | 337,116 | 292,489 | 603,518 |
Favorable development of reserves established in prior years, net | (45,601) | (57,788) | (134,360) |
Total | 291,515 | 234,701 | 469,158 |
Paid related to: | |||
Current year | (34,174) | (33,115) | (106,633) |
Prior years | (215,488) | (210,006) | (369,682) |
Total paid | (249,662) | (243,121) | (476,315) |
Net balance, end of period | 1,754,649 | 1,711,533 | 1,712,796 |
Plus reinsurance recoverables on unpaid losses and loss adjustment expenses | 324,168 | 280,332 | 335,585 |
Balance, end of period | 2,078,817 | $ 1,991,865 | $ 2,048,381 |
Retroactive Insurance Contract | |||
Net losses: | |||
Current year | 25,400 | ||
Paid related to: | |||
Balance, end of period | $ 600 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Lloyd's Syndicates $ in Millions | Jun. 30, 2018USD ($) | Jun. 30, 2018GBP (£) | Feb. 28, 2018GBP (£) | Jan. 31, 2018GBP (£) |
Other Commitments [Line Items] | ||||
Required FAL Deposit | $ 124.6 | |||
Current lending capacity under revolving credit agreement | £ | £ 30,000,000 | £ 20,000,000 | ||
Interest rate on revolving credit agreement | 3.80% | 3.80% | ||
Unused commitments to extend credit | $ 5.4 | £ 4,100,000 | ||
Commitment to Provide Capital | ||||
Other Commitments [Line Items] | ||||
Commitments Total | $ 200 |
Debt (Details)
Debt (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | ||
Gross debt | $ 289,762,000 | $ 413,460,000 |
Less debt issuance costs | 1,491,000 | 1,649,000 |
Debt less debt issuance costs | 288,271,000 | 411,811,000 |
Senior Notes | Senior notes due 2023 | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 250,000,000 | $ 250,000,000 |
Stated interest rate on debt | 5.30% | 5.30% |
Line of Credit | Revolving Credit Agreement | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 0 | $ 123,000,000 |
Weighted average interest rate on debt | 1.91% | |
Line of credit maximum borrowing capacity | 250,000,000 | $ 250,000,000 |
Mortgage Loans | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 39,762,000 | $ 40,460,000 |
Stated interest rate on debt | 3.65% | 2.86% |
Mortgage Loans | LIBOR | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate for debt | 1.325% | 1.325% |
Derivatives (Narrative) (Detail
Derivatives (Narrative) (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Mortgage Loans | LIBOR | ||
Derivative [Line Items] | ||
Basis spread on variable rate for debt | 1.325% | 1.325% |
Interest Rate Cap | ||
Derivative [Line Items] | ||
Premium paid on derivative for right to receive cash payments | $ 2,000 | |
Floor interest rate on derivative | 2.35% | |
Cap interest rate on derivative | 3.675% | |
Interest Rate Cap | Other assets | ||
Derivative [Line Items] | ||
Derivative asset, notional amount | $ 35,000 | $ 35,000 |
Derivatives (Volume and Fair Va
Derivatives (Volume and Fair Value) (Details) - Interest Rate Cap - Other assets $ in Thousands | Jun. 30, 2018USD ($)derivative_instrument | Dec. 31, 2017USD ($)derivative_instrument |
Derivative [Line Items] | ||
Number of Instruments | derivative_instrument | 1 | 1 |
Notional Amount | $ 35,000 | $ 35,000 |
Estimated Fair Value | $ 2,588 | $ 1,731 |
Derivatives (Pre-tax Impact of
Derivatives (Pre-tax Impact of Change in Fair Value) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Interest Rate Cap | Interest expense | ||||
Derivative [Line Items] | ||||
Gains (Losses) Recognized in Income on Derivatives | $ 282 | $ 0 | $ 857 | $ 0 |
Shareholders' Equity (Narrative
Shareholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Feb. 28, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2015 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Authorized common stock (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | ||||||
Authorized preferred stock (in shares) | 50,000,000 | 50,000,000 | 50,000,000 | ||||||
Quarterly dividend declared, per share (USD per share) | $ 0.31 | $ 0.310 | $ 0.31 | $ 0.310 | $ 0.62 | $ 0.62 | |||
Dividend declared | $ 34.2 | $ 33 | |||||||
Total authorizations which remain available for use | $ 109.6 | $ 109.6 | |||||||
Common shares acquired (in shares) | 0 | 0 | |||||||
Bonus compensation shares issued (in shares) | 2,500 | ||||||||
Non-credit loss, net of tax | $ 0.6 | $ 0.6 | $ 0.5 | ||||||
Restricted Share Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Awards in period (in shares) | 85,800 | ||||||||
Fair value of each unit awarded (USD per share) | $ 44.73 | ||||||||
Award vesting period | 3 years | ||||||||
Shares issued in period for share-based compensation (in shares) | 52,800 | ||||||||
Performance Share Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Awards in period (in shares) | 27,200 | ||||||||
Shares issued in period for share-based compensation (in shares) | 80,600 | ||||||||
Performance Share Units | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award payout rate | 50.00% | ||||||||
Performance Share Units | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award payout rate | 200.00% | ||||||||
Performance Shares Granted in 2015 | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award payout rate | 125.00% | ||||||||
Accumulated Other Comprehensive Income (Loss) | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Reclassification from AOCI to retained earnings for stranded tax effects | $ 3.4 | ||||||||
Retained Earnings | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Reclassification from AOCI to retained earnings for stranded tax effects | $ (3.4) |
Shareholders' Equity (Share-bas
Shareholders' Equity (Share-based Compensation Expense and Related Tax Benefits) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Equity [Abstract] | ||||
Share-based compensation expense | $ 1,615 | $ 2,746 | $ 2,517 | $ 6,092 |
Related tax benefits | $ 339 | $ 961 | $ 529 | $ 2,132 |
Shareholders' Equity (AOCI Recl
Shareholders' Equity (AOCI Reclassification) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Reclassifications from AOCI to net income: | ||||
Realized investment gains (losses) | $ (1,691) | $ (656) | $ 726 | $ 960 |
Tax effect | 355 | 230 | (153) | (336) |
Net reclassification adjustments | (1,336) | (426) | 573 | 624 |
Deferred tax expense (benefit) included in OCI | (2,185) | 2,983 | (9,245) | 4,464 |
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | ||||
Reclassifications from AOCI to net income: | ||||
Realized investment gains (losses) | (1,691) | (653) | 726 | 963 |
Accumulated Other-than-Temporary Impairment Attributable to Parent [Member] | ||||
Reclassifications from AOCI to net income: | ||||
Realized investment gains (losses) | $ 0 | $ (3) | $ 0 | $ (3) |
Variable Interest Entities (Det
Variable Interest Entities (Details) $ in Millions | Jun. 30, 2018USD ($) |
Variable Interest Entity, Not Primary Beneficiary | Investment in unconsolidated subsidiaries | |
Variable Interest Entity [Line Items] | |
VIE interests carrying value | $ 304.3 |
Earnings Per Share (Details)
Earnings Per Share (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted average number of common shares outstanding, basic (in shares) | 53,610,000 | 53,402,000 | 53,567,000 | 53,359,000 |
Weighted average number of common shares outstanding, diluted (in shares) | 53,741,000 | 53,607,000 | 53,716,000 | 53,571,000 |
Effect of dilutive shares on earnings per share (usd per share) | $ 0 | $ (0.01) | $ 0 | $ 0 |
Antidilutive shares excluded from computation of earnings per share (in shares) | 8,000 | 0 | 8,000 | |
Restricted Share Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dilutive securities (in shares) | 69,000 | 77,000 | 75,000 | 77,000 |
Performance Share Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dilutive securities (in shares) | 42,000 | 105,000 | 54,000 | 113,000 |
Purchase Match Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dilutive securities (in shares) | 20,000 | 23,000 | 20,000 | 22,000 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) - segment | 6 Months Ended | ||
Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | |||
Number of operating segments | 4 | ||
Workers' Compensation | |||
Segment Reporting Information [Line Items] | |||
Worker's compensation SPC percentage ceded | 100.00% | ||
Syndicate 1,729 | |||
Segment Reporting Information [Line Items] | |||
Proportion of Capital Provided to support Lloyd's Syndicate 1729 | 62.00% | 58.00% | |
Syndicate 6,131 | |||
Segment Reporting Information [Line Items] | |||
Proportion of Capital Provided to support Lloyd's Syndicate 1729 | 100.00% |
Segment Information (Financial
Segment Information (Financial Data by Segment) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Net premiums earned | $ 223,591 | $ 180,353 | $ 410,750 | $ 363,256 |
Net investment income | 22,384 | 22,677 | 44,411 | 45,863 |
Equity in earnings (loss) of unconsolidated subsidiaries | 5,380 | 2,516 | 7,019 | 4,324 |
Net realized gains (losses) | 2,795 | (2,219) | (9,722) | 11,061 |
Other income (expense) | 2,044 | 2,250 | 4,767 | 4,071 |
Net losses and loss adjustment expenses | (161,728) | (115,550) | (291,515) | (234,701) |
Underwriting, policy acquisition and operating expenses | (59,611) | (57,885) | (116,969) | (114,994) |
Segregated portfolio cells dividend (expense) income | (2,785) | (8,811) | (4,532) | (11,186) |
Interest expense | (3,958) | (4,145) | (7,663) | (8,278) |
Income tax benefit (expense) | 311 | 332 | 3,733 | 1,557 |
Net income | 28,423 | 19,518 | 40,279 | 60,973 |
Depreciation and amortization, net of accretion | 4,957 | 6,146 | 11,036 | 13,949 |
Pre-tax expense | 28,112 | 19,186 | 36,546 | 59,416 |
Tax Impact | (311) | (332) | (3,733) | (1,557) |
Specialty P&C | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 143,847 | 109,005 | 260,125 | 222,063 |
Workers' Compensation | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 62,254 | 56,854 | 120,660 | 112,137 |
Lloyd's Syndicates | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 17,490 | 14,494 | 29,965 | 29,056 |
Operating Segments | Specialty P&C | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 143,847 | 109,005 | 260,125 | 222,063 |
Net investment income | 0 | 0 | 0 | 0 |
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 |
Net realized gains (losses) | 0 | 0 | 0 | 0 |
Other income (expense) | 1,262 | 1,469 | 2,519 | 2,668 |
Net losses and loss adjustment expenses | (111,838) | (71,296) | (196,425) | (146,291) |
Underwriting, policy acquisition and operating expenses | (28,050) | (26,239) | (56,327) | (52,217) |
Segregated portfolio cells dividend (expense) income | (118) | (5,119) | (88) | (5,091) |
Interest expense | 0 | 0 | 0 | |
Income tax benefit (expense) | 0 | 0 | 0 | |
Net income | 5,103 | 7,820 | 9,804 | 21,132 |
Depreciation and amortization, net of accretion | 1,761 | 1,506 | 3,628 | 3,417 |
Tax Impact | 0 | 0 | 0 | |
Operating Segments | Workers' Compensation | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 62,254 | 56,854 | 120,660 | 112,137 |
Net investment income | 0 | 0 | 0 | 0 |
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 |
Net realized gains (losses) | 0 | 0 | 0 | 0 |
Other income (expense) | 212 | 209 | 578 | 354 |
Net losses and loss adjustment expenses | (37,385) | (33,486) | (74,099) | (68,136) |
Underwriting, policy acquisition and operating expenses | (17,969) | (17,093) | (35,301) | (33,784) |
Segregated portfolio cells dividend (expense) income | (2,751) | (2,698) | (4,645) | (3,872) |
Interest expense | 0 | 0 | 0 | |
Income tax benefit (expense) | 0 | 0 | 0 | |
Net income | 4,361 | 3,786 | 7,193 | 6,699 |
Depreciation and amortization, net of accretion | 958 | 831 | 1,914 | 1,668 |
Tax Impact | 0 | 0 | 0 | |
Operating Segments | Lloyd's Syndicates | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 17,490 | 14,494 | 29,965 | 29,056 |
Net investment income | 836 | 410 | 1,587 | 782 |
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 |
Net realized gains (losses) | (252) | 47 | (306) | 74 |
Other income (expense) | (436) | (151) | (105) | 240 |
Net losses and loss adjustment expenses | (12,505) | (10,768) | (20,991) | (20,274) |
Underwriting, policy acquisition and operating expenses | (8,060) | (6,851) | (15,306) | (13,062) |
Segregated portfolio cells dividend (expense) income | 0 | 0 | 0 | 0 |
Interest expense | 0 | 0 | 0 | 0 |
Income tax benefit (expense) | 0 | 548 | (6) | 555 |
Net income | (2,927) | (2,271) | (5,162) | (2,629) |
Depreciation and amortization, net of accretion | (2) | (5) | (3) | (8) |
Tax Impact | 0 | (548) | 6 | (555) |
Operating Segments | Corporate | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 0 | 0 | 0 | 0 |
Net investment income | 21,548 | 22,267 | 42,824 | 45,081 |
Equity in earnings (loss) of unconsolidated subsidiaries | 5,380 | 2,516 | 7,019 | 4,324 |
Net realized gains (losses) | 3,047 | (2,266) | (9,416) | 10,987 |
Other income (expense) | 1,095 | 778 | 2,037 | 951 |
Net losses and loss adjustment expenses | 0 | 0 | 0 | 0 |
Underwriting, policy acquisition and operating expenses | (5,621) | (7,757) | (10,297) | (16,073) |
Segregated portfolio cells dividend (expense) income | 84 | (994) | 201 | (2,223) |
Interest expense | (3,958) | (4,145) | (7,663) | (8,278) |
Income tax benefit (expense) | 311 | (216) | 3,739 | 1,002 |
Net income | 21,886 | 10,183 | 28,444 | 35,771 |
Depreciation and amortization, net of accretion | 2,240 | 3,814 | 5,497 | 8,872 |
Tax Impact | (311) | 216 | (3,739) | (1,002) |
Inter-segment Eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 0 | 0 | 0 | 0 |
Net investment income | 0 | 0 | 0 | 0 |
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 |
Net realized gains (losses) | 0 | 0 | 0 | 0 |
Other income (expense) | (89) | (55) | (262) | (142) |
Net losses and loss adjustment expenses | 0 | 0 | 0 | 0 |
Underwriting, policy acquisition and operating expenses | 89 | 55 | 262 | 142 |
Segregated portfolio cells dividend (expense) income | 0 | 0 | 0 | 0 |
Interest expense | 0 | 0 | 0 | |
Income tax benefit (expense) | 0 | 0 | 0 | |
Net income | 0 | 0 | 0 | 0 |
Depreciation and amortization, net of accretion | 0 | 0 | 0 | 0 |
Tax Impact | $ 0 | 0 | $ 0 | |
Previously Unrecognized Segregated Portfolio Cells (SPC) Dividend Expense [Member] | Operating Segments | Specialty P&C | ||||
Segment Reporting Information [Line Items] | ||||
Pre-tax expense | 5,200 | 5,200 | ||
Previously Unrecognized Segregated Portfolio Cells (SPC) Dividend Expense [Member] | Operating Segments | Corporate | ||||
Segment Reporting Information [Line Items] | ||||
Income tax benefit (expense) | (1,800) | (1,800) | ||
Tax Impact | $ 1,800 | $ 1,800 |
Segment Information (Gross Prem
Segment Information (Gross Premiums Earned by Product and Reconciliation to Net Premiums) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Net premiums earned | $ 223,591 | $ 180,353 | $ 410,750 | $ 363,256 |
Specialty P&C | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (17,749) | (21,683) | (35,169) | (40,407) |
Net premiums earned | 143,847 | 109,005 | 260,125 | 222,063 |
Specialty P&C | Healthcare professional liability | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 146,208 | 115,781 | 264,892 | 232,832 |
Specialty P&C | Legal professional liability | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 6,489 | 6,417 | 12,880 | 12,734 |
Specialty P&C | Medical technology liability | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 8,780 | 8,389 | 17,292 | 16,701 |
Specialty P&C | Other | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 119 | 101 | 230 | 203 |
Workers' Compensation | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (7,026) | (5,856) | (14,031) | (11,787) |
Net premiums earned | 62,254 | 56,854 | 120,660 | 112,137 |
Workers' Compensation | Traditional business | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 48,632 | 42,501 | 94,662 | 84,269 |
Workers' Compensation | Alternative market business | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 20,648 | 20,209 | 40,029 | 39,655 |
Lloyd's Syndicates | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (1,783) | (2,466) | (7,275) | (5,089) |
Net premiums earned | 17,490 | 14,494 | 29,965 | 29,056 |
Premiums assumed under Quota Share Agreement | 1,400 | 3,100 | 3,300 | 6,600 |
Lloyd's Syndicates | Property and casualty | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | $ 19,273 | $ 16,960 | $ 37,240 | $ 34,145 |