Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 03, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2021 | |
Document Transition Report | false | |
Entity File Number | 0-16533 | |
Entity Registrant Name | ProAssurance Corporation | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 63-1261433 | |
Entity Address, Address Line One | 100 Brookwood Place, | |
Entity Address, City or Town | Birmingham, | |
Entity Address, State or Province | AL | |
Entity Address, Postal Zip Code | 35209 | |
City Area Code | (205) | |
Local Phone Number | 877-4400 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | PRA | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 53,983,561 | |
Entity Central Index Key | 0001127703 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Investments | ||
Fixed maturities, available-for-sale, at fair value (amortized cost, $3,850,889 and $2,361,575, respectively; allowance for expected credit losses, none as of September 30, 2021 and $552 as of December 31, 2020) | $ 3,904,136 | $ 2,457,531 |
Fixed maturities, trading, at fair value (cost, $45,307 and $47,907, respectively) | 45,049 | 48,456 |
Equity investments, at fair value (cost, $210,320 and $113,709, respectively) | 214,530 | 120,101 |
Short-term investments | 151,708 | 337,813 |
Business owned life insurance | 80,821 | 67,847 |
Investment in unconsolidated subsidiaries | 317,869 | 310,529 |
Other investments (at fair value, $106,842 and $44,116, respectively, otherwise at cost or amortized cost) | 110,012 | 47,068 |
Total Investments | 4,824,125 | 3,389,345 |
Cash and cash equivalents | 202,953 | 215,782 |
Premiums receivable, net | 288,819 | 201,395 |
Receivable from reinsurers on paid losses and loss adjustment expenses | 17,872 | 14,370 |
Receivable from reinsurers on unpaid losses and loss adjustment expenses | 476,315 | 385,087 |
Prepaid reinsurance premiums | 32,275 | 35,885 |
Deferred policy acquisition costs | 57,929 | 47,196 |
Deferred tax asset, net | 117,940 | 57,105 |
Real estate, net | 30,547 | 30,529 |
Operating lease ROU assets | 20,253 | 19,013 |
Intangible assets, net | 74,955 | 65,720 |
Goodwill | 49,610 | 49,610 |
Other assets | 133,675 | 143,766 |
Total Assets | 6,327,268 | 4,654,803 |
Policy liabilities and accruals | ||
Reserve for losses and loss adjustment expenses | 3,632,686 | 2,417,179 |
Unearned premiums | 509,317 | 361,547 |
Reinsurance premiums payable | 36,459 | 39,998 |
Total Policy Liabilities | 4,178,462 | 2,818,725 |
Operating lease liabilities | 21,670 | 20,116 |
Other liabilities | 279,276 | 182,039 |
Debt less unamortized debt issuance costs | 424,758 | 284,713 |
Total Liabilities | 4,904,166 | 3,305,593 |
Shareholders' Equity | ||
Common shares (par value $0.01 per share, 100,000,000 shares authorized, 63,308,434 and 63,217,708 shares issued, respectively) | 633 | 632 |
Additional paid-in capital | 391,875 | 388,150 |
Accumulated other comprehensive income (loss) (net of deferred tax expense (benefit) of $11,100 and $19,386, respectively) | 41,507 | 75,227 |
Retained earnings | 1,405,049 | 1,301,163 |
Treasury shares, at cost (9,325,180 shares as of each respective period end) | (415,962) | (415,962) |
Total Shareholders' Equity | 1,423,102 | 1,349,210 |
Total Liabilities and Shareholders' Equity | $ 6,327,268 | $ 4,654,803 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Available for sale securities, amortized cost | $ 3,850,889 | $ 2,361,575 |
Allowance for expected credit losses | 0 | 552 |
Trading securities, cost | 45,307 | 47,907 |
Equity investments at fair value, cost | 210,320 | 113,709 |
Other investments, portion carried at fair value | $ 106,842 | $ 44,116 |
Common shares, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common shares, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common shares, shares issued (in shares) | 63,308,434 | 63,217,708 |
Deferred tax expense (benefit) on accumulated other comprehensive income (loss) | $ 11,100 | $ 19,386 |
Treasury shares, number of shares (in shares) | 9,325,180 | 9,325,180 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Changes in Capital (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2019 | |
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | $ 1,424,040 | $ 1,474,390 | $ 1,349,210 | $ 1,511,913 | |
Common shares issued for compensation and effect of shares reissued to stock purchase plan | 7 | 8 | 693 | 683 | |
Share-based compensation | 1,132 | 1,017 | 3,309 | 3,061 | |
Net effect of restricted and performance shares issued | (12) | (4) | (276) | (908) | |
Dividends to shareholders | (2,700) | (2,694) | (8,098) | (22,078) | |
Other comprehensive income (loss) | (11,565) | 7,155 | (33,720) | 31,330 | |
Net income (loss) | 12,200 | (149,979) | 111,984 | (190,032) | |
Ending balance | 1,423,102 | 1,329,893 | 1,423,102 | 1,329,893 | $ 1,511,913 |
Accounting standards update [extensible list] | Accounting Standards Update 2016-13 [Member] | ||||
Cumulative-effect adjustment | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | (4,076) | ||||
Ending balance | $ (4,076) | ||||
Common Stock | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | 633 | 632 | 632 | 631 | |
Net effect of restricted and performance shares issued | 1 | 1 | |||
Ending balance | 633 | 632 | 633 | 632 | 631 |
Additional Paid-in Capital | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | 390,748 | 386,365 | 388,150 | 384,551 | |
Common shares issued for compensation and effect of shares reissued to stock purchase plan | 7 | 8 | 693 | 683 | |
Share-based compensation | 1,132 | 1,017 | 3,309 | 3,061 | |
Net effect of restricted and performance shares issued | (12) | (4) | (277) | (909) | |
Ending balance | 391,875 | 387,386 | 391,875 | 387,386 | 384,551 |
Accumulated Other Comprehensive Income (Loss) | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | 53,072 | 61,130 | 75,227 | 36,955 | |
Other comprehensive income (loss) | (11,565) | 7,155 | (33,720) | 31,330 | |
Ending balance | 41,507 | 68,285 | 41,507 | 68,285 | 36,955 |
Retained Earnings | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | 1,395,549 | 1,442,225 | 1,301,163 | 1,505,738 | |
Dividends to shareholders | (2,700) | (2,694) | (8,098) | (22,078) | |
Net income (loss) | 12,200 | (149,979) | 111,984 | (190,032) | |
Ending balance | 1,405,049 | 1,289,552 | 1,405,049 | 1,289,552 | 1,505,738 |
Retained Earnings | Cumulative-effect adjustment | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | (4,076) | ||||
Ending balance | (4,076) | ||||
Treasury Stock | |||||
Increase (Decrease) in Stockholders' Equity: | |||||
Beginning balance | (415,962) | (415,962) | (415,962) | (415,962) | |
Ending balance | $ (415,962) | $ (415,962) | $ (415,962) | $ (415,962) | $ (415,962) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenues | ||||
Net premiums earned | $ 272,248,000 | $ 194,559,000 | $ 698,598,000 | $ 605,708,000 |
Net investment income | 19,278,000 | 16,924,000 | 51,713,000 | 55,877,000 |
Equity in earnings (loss) of unconsolidated subsidiaries | 15,244,000 | 4,853,000 | 33,959,000 | (22,065,000) |
Net realized investment gains (losses): | ||||
Impairment losses | 0 | 0 | 0 | (1,745,000) |
Portion of impairment losses recognized in other comprehensive income (loss) before taxes | 0 | 0 | 0 | 237,000 |
Net impairment losses recognized in earnings | 0 | 0 | 0 | (1,508,000) |
Other net realized investment gains (losses) | 530,000 | 8,838,000 | 20,212,000 | 1,658,000 |
Total net realized investment gains (losses) | 530,000 | 8,838,000 | 20,212,000 | 150,000 |
Other income | 2,400,000 | 1,723,000 | 6,862,000 | 5,668,000 |
Total revenues | 309,700,000 | 226,897,000 | 811,344,000 | 645,338,000 |
Expenses | ||||
Net losses and loss adjustment expenses | 223,393,000 | 145,581,000 | 555,030,000 | 521,412,000 |
Underwriting, policy acquisition and operating expenses: | ||||
Operating expense | 38,659,000 | 32,419,000 | 120,721,000 | 96,650,000 |
DPAC amortization | 28,153,000 | 27,014,000 | 79,729,000 | 83,528,000 |
SPC U.S. federal income tax expense | 431,000 | 871,000 | 1,291,000 | 1,573,000 |
SPC dividend expense (income) | 1,320,000 | 3,854,000 | 5,926,000 | 7,988,000 |
Interest expense | 5,814,000 | 3,881,000 | 14,203,000 | 11,725,000 |
Goodwill impairment | 0 | 161,115,000 | 0 | 161,115,000 |
Total expenses | 297,770,000 | 374,735,000 | 776,900,000 | 883,991,000 |
Gain on bargain purchase | 0 | 0 | 74,408,000 | 0 |
Income (loss) before income taxes | 11,930,000 | (147,838,000) | 108,852,000 | (238,653,000) |
Provision for income taxes: | ||||
Current expense (benefit) | 3,692,000 | 11,314,000 | 2,643,000 | (26,621,000) |
Deferred expense (benefit) | (3,962,000) | (9,173,000) | (5,775,000) | (22,000,000) |
Total income tax expense (benefit) | (270,000) | 2,141,000 | (3,132,000) | (48,621,000) |
Net income (loss) | 12,200,000 | (149,979,000) | 111,984,000 | (190,032,000) |
Other comprehensive income (loss), after tax, net of reclassification adjustments | (11,565,000) | 7,155,000 | (33,720,000) | 31,330,000 |
Comprehensive income (loss) | $ 635,000 | $ (142,824,000) | $ 78,264,000 | $ (158,702,000) |
Earnings (loss) per share | ||||
Basic (in usd per share) | $ 0.23 | $ (2.78) | $ 2.08 | $ (3.53) |
Diluted (in usd per share) | $ 0.23 | $ (2.78) | $ 2.07 | $ (3.53) |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 53,982 | 53,889 | 53,955 | 53,854 |
Diluted (in shares) | 54,078 | 53,918 | 54,042 | 53,896 |
Cash dividends declared per common share (in usd per share) | $ 0.05 | $ 0.05 | $ 0.15 | $ 0.41 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Operating Activities | |||||
Net income (loss) | $ 12,200 | $ (149,979) | $ 111,984 | $ (190,032) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||
Goodwill impairment | 0 | 161,115 | 0 | 161,115 | $ 161,115 |
Gain on bargain purchase | 0 | 0 | (74,408) | 0 | |
Depreciation and amortization, net of accretion | 10,246 | 6,345 | 26,566 | 16,168 | |
(Increase) decrease in cash surrender value of BOLI | (393) | (1,281) | |||
Net realized investment (gains) losses | (530) | (8,838) | (20,212) | (150) | |
Share-based compensation | 3,318 | 3,052 | |||
Deferred income tax expense (benefit) | (3,962) | (9,173) | (5,775) | (22,000) | |
Policy acquisition costs, net of amortization (net deferral) | (10,733) | 2,529 | |||
Equity in (earnings) loss of unconsolidated subsidiaries | (15,244) | (4,853) | (33,959) | 22,065 | |
Distributed earnings from unconsolidated subsidiaries | 20,921 | 29,844 | |||
Other | (194) | 2,605 | |||
Other changes in assets and liabilities: | |||||
Premiums receivable | 23,482 | 6,486 | |||
Reinsurance related assets and liabilities | (4,791) | (11,079) | |||
Other assets | 21,358 | (13,297) | |||
Reserve for losses and loss adjustment expenses | 33,062 | 60,962 | |||
Unearned premiums | (30,630) | 2,098 | |||
Other liabilities | 9,767 | 4,088 | |||
Net cash provided (used) by operating activities | 69,363 | 73,173 | |||
Purchases of: | |||||
Fixed maturities, available-for-sale | (404,100) | (317,500) | (1,169,582) | (689,429) | |
Equity investments | (140,550) | (63,386) | |||
Other investments | (61,104) | (26,432) | |||
Investment in unconsolidated subsidiaries | (15,316) | (32,768) | |||
Proceeds from sales or maturities of: | |||||
Fixed maturities, available-for-sale | 777,783 | 635,392 | |||
Equity investments | 425,039 | 174,130 | |||
Other investments | 35,087 | 27,279 | |||
Net sales or (purchases) of fixed maturities, trading | 2,935 | (4,893) | |||
Return of invested capital from unconsolidated subsidiaries | 47,963 | 26,831 | |||
Net sales or maturities (purchases) of short-term investments | 247,085 | (37,549) | |||
Unsettled security transactions, net change | 49,905 | 21,498 | |||
Purchases of capital assets | (3,200) | (6,665) | |||
Purchases of intangible assets | 0 | (1,198) | |||
Cash paid for acquisitions, net of cash acquired | (221,576) | 0 | |||
Other | 0 | (811) | |||
Net cash provided (used) by investing activities | (25,531) | 21,999 | |||
Financing Activities | |||||
Repayments of Mortgage Loans | (36,113) | (1,127) | |||
Dividends to shareholders | (8,067) | (35,978) | |||
Capital contribution received from (return of capital to) external segregated portfolio cell participants | (9,114) | (581) | |||
Purchase of non-controlling interest | (3,089) | 0 | |||
Other | (278) | (907) | |||
Net cash provided (used) by financing activities | (56,661) | (38,593) | |||
Increase (decrease) in cash and cash equivalents | (12,829) | 56,579 | |||
Cash and cash equivalents at beginning of period | 215,782 | 175,369 | 175,369 | ||
Cash and cash equivalents at end of period | 202,953 | 231,948 | 202,953 | 231,948 | 215,782 |
Significant Non-Cash Transactions | |||||
Dividends declared and not yet paid | 2,700 | 2,694 | 2,700 | 2,694 | 2,694 |
Operating ROU assets obtained in exchange for operating lease liabilities | 5,275 | 478 | |||
Fair value of Contribution Certificates issued in NORCAL acquisition | 174,999 | 0 | |||
Fair value of contingent consideration in NORCAL acquisition | $ 24,000 | $ 0 | $ 24,000 | $ 0 | $ 0 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of ProAssurance Corporation, its wholly owned subsidiaries and VIEs in which ProAssurance is the primary beneficiary (ProAssurance, PRA or the Company). See Note 13 for more information on ProAssurance's VIE interests. The financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. ProAssurance’s results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2020 report on Form 10-K. ProAssurance operates in five reportable segments as follows: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, Lloyd's Syndicates and Corporate. For more information on the Company's segment reporting, including the nature of products and services provided and financial information by segment, refer to Note 15. Certain insignificant prior period amounts have been reclassified to conform to the current period presentation. Accounting Policies The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosures related to these amounts at the date of the financial statements. The Company evaluates these estimates and assumptions on an ongoing basis based on current and historical developments, market conditions, industry trends and other information that the Company believes to be reasonable under the circumstances, including the potential impacts of the COVID-19 pandemic (see "Item 1A, Risk Factors" in ProAssurance's December 31, 2020 report on Form 10-K for additional information). The Company can make no assurance that actual results will conform to its estimates and assumptions; reported results of operations may be materially affected by changes in these estimates and assumptions. Except as described 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, 2020 report on Form 10-K. Business Combinations The Company accounted for its acquisition of NORCAL in accordance with GAAP relating to business combinations which required management to make certain estimates and assumptions including determining the fair value of the non-cash components of the acquisition consideration and the acquisition date fair values of the acquired tangible and identifiable intangible assets and assumed liabilities of NORCAL. Subsequent to the preliminary valuation of the non-cash components of the purchase consideration and net assets acquired, any adjustment identified associated with the purchase price allocation will be evaluated to determine whether the adjustment represents a measurement period adjustment in accordance with GAAP. If the adjustment is deemed to be a measurement period adjustment and is identified within one year of the acquisition, then the measurement period adjustment will be recorded in the current reporting period with a corresponding adjustment to the gain on bargain purchase. Contingent Consideration Contingent consideration in a business combination that is classified as a liability is measured at fair value on the date of acquisition and remeasured to fair value each subsequent reporting period with changes in the fair value recognized in earnings. VOBA VOBA is based on actuarially determined projections and reflects the estimated fair value of in-force contracts acquired in a business combination. VOBA is recorded as an asset when the in-force contracts acquired are expected to generate underwriting income and is recorded as a liability when the in-force contracts acquired are expected to generate an underwriting loss. VOBA liabilities (negative VOBA) are recorded as a component of the reserve for losses and loss adjustment expenses on the Condensed Consolidated Balance Sheets. To the extent negative VOBA relates to unearned premium, it is amortized over a period in proportion to the earn-out of the premium as a reduction to current accident year net losses and loss adjustment expenses. To the extent negative VOBA relates to the DDR reserve, it is amortized over a period in proportion to the approximate consumption of losses as a reduction to prior accident year net losses and loss adjustment expenses. See Note 2 for more information. Accounting Policies Acquired The significant accounting policies adopted as a result of the acquisition of NORCAL on May 5, 2021 and followed by ProAssurance in making estimates that materially affect financial reporting are summarized below. Other Assets and Liabilities Other assets include the acquired NORCAL investments in a deferred compensation rabbi trust which are carried at fair value. These rabbi trust assets are related to other liabilities associated with funded deferred compensation agreements with NORCAL employees and previous members of NORCAL's Board of Directors. Other liabilities include the assumed NORCAL liability for deferred compensation balances associated with the rabbi trust assets and the reported balance is determined based on the amount of elective deferrals and employer contributions adjusted for periodic changes in fair value of the participant balances based on the performance of the funds selected by the participants. ProAssurance recognizes the net change in the fair value of the rabbi trust assets and associated deferred compensation liabilities as a component of net investment income during the period of change. Pension As a result of the NORCAL acquisition, the Company sponsors a frozen defined benefit pension plan which covers substantially all NORCAL employees (except those that were previous employees of Medicus Insurance Company and FD Insurance Company, employees of PPM RRG as well as new hires after December 31, 2013). Accounting for pension benefits requires the use of assumptions for the valuation of the PBO and the expected performance of the plan assets. The Company uses December 31 as the measurement date for calculating its obligation related to this defined benefit pension plan. The PBO for pension benefits represents the present value of all future benefits earned as of the measurement date for vested and non-vested employees. At each measurement date, the Company reviews the various assumptions impacting the amounts recorded for the pension plan including the discount rates, which impacts the recorded value of the PBO and interest costs, and the expected return on plan assets. To estimate the discount rate at the measurement date, the Company uses a bond yield curve model, developed based on pricing and yield information for high quality corporate bonds. The assumption for the expected return on plan assets is based on the anticipated returns that will be earned by the portfolio over the long term. The expected return is influenced, but not determined, by historical portfolio performance. Accounting standards provide for the delayed recognition of differences between actual results and expected or estimated results. This delayed recognition of the differences is amortized into earnings over time. The differences between actual results and expected or estimated results are recognized in full in AOCI. Amounts recognized in AOCI are reclassified to earnings in a systematic manner over the average future service period of participants. Due to the acquisition of NORCAL and the application of GAAP purchase accounting, there were no amounts recorded in AOCI as of September 30, 2021 as the plan assets and benefit obligation are not remeasured on a quarterly basis. Accounting Changes Adopted Clarifying the Interactions between Investments - Equity Securities, Investments - Equity Method and Joint Ventures, and Derivatives and Hedging (ASU 2020-01) Effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, the FASB amended guidance that clarifies the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ProAssurance adopted the guidance beginning January 1, 2021, and adoption had no material effect on ProAssurance's results of operations, financial position or cash flows. Accounting Changes Not Yet Adopted ProAssurance is not aware of any accounting changes not yet adopted as of September 30, 2021 that could have a material impact on its results of operations, financial position or cash flows. Credit Losses ProAssurance's premiums receivable and reinsurance receivables are exposed to credit losses but to-date have not experienced any significant amount of credit losses. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for further information on how the Company estimates and measures expected credit losses on its premiums receivable and reinsurance receivables. ProAssurance's available-for-sale fixed maturity investments are also exposed to credit losses. See Note 4 for information on ProAssurance's allowance for expected credit losses on its available-for-sale fixed maturities. ProAssurance’s premiums receivable on its Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 is reported net of the related allowance for expected credit losses of $7.7 million and $6.1 million, respectively. The following tables present a roll forward of the allowance for expected credit losses related to the Company's premiums receivable for the three and nine months ended September 30, 2021 and 2020. (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, July 1, 2021 $ 288,589 $ 7,729 Provision for expected credit losses 48 Write offs charged against the allowance (125) Recoveries of amounts previously written off 24 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, December 31, 2020 $ 201,395 $ 6,131 Initial allowance recognized in the period for NORCAL premiums receivable (1) 2,137 Provision for expected credit losses 505 Write offs charged against the allowance (1,243) Recoveries of amounts previously written off 146 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Allowance for Expected Credit Losses Balance, July 1, 2020 $ 234,840 $ 6,627 Provision for expected credit losses 123 Write offs charged against the allowance (404) Recoveries of amounts previously written off 270 Balance, September 30, 2020 $ 237,894 $ 6,616 (In thousands) Premiums Allowance for Expected Credit Losses Balance, December 31, 2019 $ 249,540 $ 1,590 Cumulative-effect adjustment, before tax (2) 5,160 Provision for expected credit losses 616 Write offs charged against the allowance (1,078) Recoveries of amounts previously written off 328 Balance, September 30, 2020 $ 237,894 $ 6,616 (1) Represents an initial allowance for expected credit losses recognized during the second quarter of 2021 for NORCAL's premiums receivable to conform NORCAL to ProAssurance's accounting policies. See Note 2 for more information. (2) Due to the adoption of ASU 2016-13, ProAssurance recorded a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020 to increase its consolidated allowance for expected credit losses related to its premiums receivable. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K. ProAssurance’s expected credit losses associated with its reinsurance receivables (related to both paid and unpaid losses) were nominal in amount as of September 30, 2021 and December 31, 2020. ProAssurance has other financial assets and off-balance sheet commitments that are exposed to credit losses; however, expected credit losses associated with these assets and commitments were nominal in amount as of September 30, 2021 and December 31, 2020. Other Liabilities Other liabilities consisted of the following: (In thousands) September 30, 2021 December 31, 2020 SPC dividends payable $ 64,472 $ 68,865 Unpaid shareholder dividends 2,700 2,694 Deferred compensation liabilities 51,456 30,334 Contingent consideration 24,000 — All other 136,648 80,146 Total other liabilities $ 279,276 $ 182,039 SPC dividends payable represents the undistributed equity contractually payable to the external cell participants of SPCs operated by ProAssurance's Cayman Islands subsidiaries, Inova Re and Eastern Re. Unpaid shareholder dividends represent common stock dividends declared by ProAssurance's Board that had not yet been paid as of September 30, 2021. Deferred compensation liabilities represent the amount of elective deferrals and employer contributions adjusted for periodic changes in the fair value of the participant balances based on the performance of the funds selected by the participants. See additional information on the deferred compensation liabilities in Note 3. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Combination | Business Combination On May 5, 2021, ProAssurance completed its acquisition of NORCAL by purchasing 98.8% of its stock in exchange for total consideration transferred of $448.8 million. On September 16, 2021, ProAssurance acquired the remaining 1.2% interest in NORCAL for $3.1 million of cash. The NORCAL transaction provides strategic and financial benefits including additional scale and geographic diversification in the physician professional liability market. On May 5, 2021, ProAssurance funded the acquisition with $248.0 million of cash on hand, and NORCAL paid $1.8 million to policyholders who elected to receive a discounted cash option for their allocated share of the converted company's equity. Additional consideration transferred, with a principal amount of $191.0 million and a fair value of $175.0 million, is in the form of Contribution Certificates issued to certain NORCAL policyholders in the conversion, and those instruments are an obligation of NORCAL Insurance Company, the successor of NORCAL Mutual Insurance Company (see Note 11 for further discussion of the terms of the Contribution Certificates). Policyholders who tendered NORCAL stock to ProAssurance are also eligible for a share of contingent consideration in an amount of up to approximately $84.0 million depending upon the after-tax development of NORCAL's ultimate net losses between December 31, 2020 and December 31, 2023. The estimated fair value of this contingent consideration was $24.0 million as of May 5, 2021 and September 30, 2021. ProAssurance's results for the three and nine months ended September 30, 2021 included NORCAL's results since the date of acquisition (revenue of $87.8 million and $141.1 million, respectively, and net income of $1.7 million and a net loss of $3.3 million, respectively). ProAssurance incurred expenses related to the acquisition of approximately $2.3 million and $23.5 million during the three and nine months ended September 30, 2021, respectively, and approximately $0.5 million and $1.6 million during the three and nine months ended September 30, 2020, respectively. These expenses were included as a component of operating expenses in the periods incurred in ProAssurance's Condensed Consolidated Statements of Income and Comprehensive Income. ProAssurance accounted for its acquisition of NORCAL in accordance with GAAP relating to business combinations. The total acquisition consideration was allocated to the acquired tangible and identifiable intangible assets and assumed liabilities of NORCAL based on their preliminary estimated fair values on the acquisition date, as shown in the following table. The amounts reflect preliminary allocation of assets acquired and liabilities assumed. The acquisition date fair value of certain assets acquired and liabilities assumed, including intangible assets, deferred income tax assets and liabilities, and reserves for losses and loss adjustment expenses are preliminary estimates and are subject to revisions within one year of acquisition date. Subsequent to the preliminary valuation of net assets acquired, any adjustment identified associated with the purchase price allocation will be evaluated to determine whether the adjustment represents a measurement period adjustment in accordance with GAAP. If the adjustment is deemed to be a measurement period adjustment and is identified within one year of the acquisition, then the measurement period adjustment will be recorded in the current reporting period with a corresponding adjustment to the gain on bargain purchase. A $74.4 million gain on bargain purchase was recognized on the date of the acquisition as the fair value of the consideration transferred was less than the fair value of the net assets acquired. This gain is presented as a separate line item in ProAssurance's Condensed Consolidated Statements of Income and Comprehensive Income for the nine months ended September 30, 2021. ProAssurance believes it was able to acquire NORCAL for less than the fair value of its net assets due to several contributing factors including the soft medical professional liability market at the time the transaction was initially announced and the value attributed to certain assets. Before the acquisition, NORCAL had recorded a valuation allowance against the full value of its net deferred tax assets. In conjunction with acquisition accounting, ProAssurance recorded $46.8 million of net deferred tax assets reflecting the remeasurement of NORCAL's historical net deferred tax assets, as such deferred taxes were subject to recalculation following application of all purchase accounting adjustments, and its assessment of the realizability of NORCAL's historical deferred tax assets. Based upon the assessment of the realizability of NORCAL's historical deferred tax assets, ProAssurance management concluded that these deferred tax assets are now realizable, which increased the net assets acquired. In addition, based upon the historical performance of NORCAL, ProAssurance did not attribute any value to intangible assets in determining the initial base consideration of $450.0 million per the acquisition agreement, whereas ProAssurance identified $14.0 million of intangible assets as a part of its estimated allocation of final acquisition consideration. Other changes in the fair values of NORCAL's assets and liabilities from the time ProAssurance entered into the definitive acquisition agreement in February 2020 to the close of the transaction in May 2021 also contributed to the increase in net assets acquired and gain on bargain purchase. The preliminary allocation of acquisition consideration is shown in the table below. (In thousands) Fixed maturities, available for sale $ 1,100,058 Equity investments, available for sale 374,484 Short-term investments 61,289 Business owned life insurance 12,581 Investment in unconsolidated subsidiaries 26,948 Other investments 32,461 Cash and cash equivalents 28,233 Premiums receivable 110,905 Receivable from reinsurers on paid losses and loss adjustment expenses 266 Receivable from reinsurers on unpaid losses and loss adjustment expenses 93,342 Prepaid reinsurance premiums 9,238 Deferred tax asset, net 46,759 Operating lease ROU assets 4,385 Intangible assets 14,000 Other assets 38,648 Reserve for losses and loss adjustment expenses (1,182,445) Unearned premiums (178,400) Reinsurance premiums payable (12,981) Operating lease liabilities (5,275) Other liabilities (51,279) Total identifiable net assets acquired $ 523,217 Gain on bargain purchase (74,408) Total acquisition consideration $ 448,809 The estimated fair values of intangible assets were determined based on 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. Intangible assets were identified that met either the separability criterion or the contractual-legal criterion under the acquisition method of accounting. Intangible assets acquired included the following: (In thousands) Estimated Fair Value on Acquisition Date Estimated Useful Life Trade name $ 1,000 3 Licenses 13,000 Indefinite Total $ 14,000 The estimated fair value of the reserve for losses and loss adjustment expenses and related reinsurance recoverables was based on three components: an actuarial estimate of the expected future net cash flows, a reduction to those cash flows for the time value of money determined utilizing the U.S. Treasury Yield Curve and a risk margin adjustment to reflect the net present value of profit that an investor would demand in return for the assumption of the development risk associated with the reserve. The fair value of the net reserve, including the risk margin adjustment and related reinsurance receivables, exceeded the actuarial estimate of NORCAL’s undiscounted loss reserve as of May 5, 2021. On May 5, 2021, the fair value adjustment on the gross reserve of approximately $42.2 million was recorded to the reserve for losses and loss adjustment expenses and the fair value adjustment on the related reinsurance recoverables of approximately $3.5 million was recorded to the receivable from reinsurers on unpaid losses and loss adjustment expenses on the Condensed Consolidated Balance Sheets. These net fair value adjustments of $38.7 million will be amortized over a period utilizing loss payment patterns as a net reduction to prior accident year net losses and loss adjustment expenses. The estimated fair value of VOBA was determined based on 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 estimated using the income approach. The estimated negative VOBA recorded on the assumed unearned premium of $12.4 million was recorded to the reserve for losses and loss adjustment expenses and the fair value adjustment on the related reinsurance recoverables of $0.7 million was recorded to receivable from reinsurers on unpaid losses and loss adjustment expenses on the Condensed Consolidated Balance Sheets. The net VOBA on unearned premium of $11.7 million will be amortized over a period in proportion to the earn-out of the premium as a reduction to current accident year net losses and loss adjustment expenses. The estimated negative VOBA recorded on the assumed DDR reserve totaling $3.5 million was also recorded to the reserve for losses and loss adjustment expenses on the Condensed Consolidated Balance Sheets and will be amortized over a period in proportion to the approximate consumption of losses as a reduction to prior accident year net losses and loss adjustment expenses. The following table reflects the fair value adjustment on the net reserve for losses and loss adjustment expenses, the negative net VOBA recorded on the assumed unearned premium and negative VOBA recorded on the DDR reserve, as well as the expected amortization of each for the five years following the acquisition. (In thousands) Amount at May 5, 2021 Estimated amortization period (years) Expected pre-tax amortization for year following the acquisition 2021 2022 2023 2024 2025 Thereafter Fair value adjustment on reserves, net (1) $ 38,701 7 $ 7,768 $ 10,595 $ 8,090 $ 5,083 $ 3,107 $ 4,058 Unearned premium VOBA, net (2) 11,676 1 6,737 4,939 — — — — DDR reserve VOBA (1) 3,467 15 139 224 243 243 243 2,375 Total $ 53,844 $ 14,644 $ 15,758 $ 8,333 $ 5,326 $ 3,350 $ 6,433 (1) Amortization will be recorded as a reduction to prior accident year net losses and loss adjustment expenses. (2) Amortization will be recorded as a reduction to current accident year net losses and loss adjustment expenses Unaudited Supplemental Pro Forma Information The following table provides Pro Forma Consolidated Results and Actual Consolidated Results for the three and nine months ended September 30, 2021 and 2020 as if the NORCAL transaction had occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the operating results that may have actually occurred had the acquisition of NORCAL been completed on January 1, 2020. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred to integrate the assets and operations of NORCAL. Three Months Ended September 30 Nine Months Ended September 30 (In thousands) 2021 2020 2021 2020 Revenue: ProAssurance Pro Forma Consolidated Results $ 305,927 $ 340,428 $ 930,350 $ 943,268 ProAssurance Actual Consolidated Results $ 309,700 $ 226,897 $ 811,344 $ 645,338 Net income (loss): ProAssurance Pro Forma Consolidated Results $ 13,366 $ (158,620) $ 58,692 $ (117,906) ProAssurance Actual Consolidated Results $ 12,200 $ (149,979) $ 111,984 $ (190,032) The ProAssurance Pro Forma Consolidated Results reflect pro forma adjustments, net of related tax effects, to give effect to certain events that are directly attributable to the acquisition. These pro forma adjustments primarily include: • The addition of NORCAL's operating results prior to the acquisition to ProAssurance's Actual Consolidated Results in all periods shown. • A reduction in expenses for the three and nine months ended September 30, 2021 and the three months ended September 30, 2020 and a corresponding increase for the nine months ended September 30, 2020 for transaction-related costs, including other costs associated with the acquisition such as compensation costs related to change in control payments. • The effect of the amortization of intangible assets, VOBA and the fair value adjustment on the reserve. See previous amortization schedules for reference. • The non-taxable gain on bargain purchase of $74.4 million that was included in ProAssurance's Actual Consolidated Results for the nine months ended September 30, 2021 has been reported in the Pro Forma Consolidated Results as being recognized during the nine months ended September 30, 2020. • An adjustment to net investment income for the amortization of the fair value adjustment to NORCAL's investments. • An increase to interest expense for the interest on the Contribution Certificates (see Note 11 for further discussion of the terms of the Contribution Certificates). |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2021 | |
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 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 September 30, 2021 and December 31, 2020 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. September 30, 2021 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 $ — $ 242,705 $ — $ 242,705 U.S. Government-sponsored enterprise obligations — 20,468 — 20,468 State and municipal bonds — 522,707 — 522,707 Corporate debt, multiple observable inputs — 1,943,401 — 1,943,401 Corporate debt, limited observable inputs — — 19,712 19,712 Residential mortgage-backed securities — 473,674 4,235 477,909 Agency commercial mortgage-backed securities — 14,942 — 14,942 Other commercial mortgage-backed securities — 219,024 — 219,024 Other asset-backed securities — 432,261 11,007 443,268 Fixed maturities, trading — 45,049 — 45,049 Equity investments Financial — 868 — 868 Utilities/Energy — — 69 69 Industrial — — 2,500 2,500 Bond funds 191,834 — — 191,834 All other 19,259 — — 19,259 Short-term investments 112,706 39,002 — 151,708 Other investments 1,864 104,978 — 106,842 Other assets — 601 — 601 Total assets categorized within the fair value hierarchy $ 325,663 $ 4,059,680 $ 37,523 4,422,866 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 251,675 Total assets at fair value $ 4,674,541 Liabilities: Other liabilities $ — $ — $ 24,000 $ 24,000 Total liabilities categorized within the fair value hierarchy $ — $ — $ 24,000 $ 24,000 December 31, 2020 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 $ — $ 107,059 $ — $ 107,059 U.S. Government-sponsored enterprise obligations — 12,261 — 12,261 State and municipal bonds — 332,920 — 332,920 Corporate debt, multiple observable inputs — 1,326,077 — 1,326,077 Corporate debt, limited observable inputs — — 3,265 3,265 Residential mortgage-backed securities — 274,509 2,032 276,541 Agency commercial mortgage-backed securities — 13,310 — 13,310 Other commercial mortgage-backed securities — 113,092 — 113,092 Other asset-backed securities — 266,345 6,661 273,006 Fixed maturities, trading — 48,456 — 48,456 Equity investments Financial 13,810 — — 13,810 Utilities/Energy 564 — — 564 Consumer oriented 1,262 — — 1,262 Industrial 2,240 — — 2,240 Bond funds 69,475 — — 69,475 All other 20,202 — — 20,202 Short-term investments 307,695 30,118 — 337,813 Other investments 1,509 42,607 — 44,116 Other assets — 329 — 329 Total assets categorized within the fair value hierarchy $ 416,757 $ 2,567,083 $ 11,958 2,995,798 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 12,548 Investment in unconsolidated subsidiaries 233,711 Total assets at fair value $ 3,242,057 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 as of September 30, 2021 and December 31, 2020. 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. Fixed maturities, trading are held by the Lloyd's Syndicates segment and include U.S. Treasury obligations, corporate debt with multiple observable inputs and other asset-backed securities. These securities were valued using the respective valuation methodologies discussed above for each security type. Equity investments were securities not traded on an exchange on the valuation date. The securities were valued using the most recently available quotes for the securities. 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. Under the terms of the interest rate cap agreement, ProAssurance paid a premium of $2 million 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%. Level 3 Valuations Below is a summary description of the valuation methodologies used as well as quantitative information regarding securities in the Level 3 category, by security type: 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 determined by management if not available. At September 30, 2021, 100% of the securities were rated and the average rating was BBB. At December 31, 2020, 100% of the securities were rated and the average rating was BB+. 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 September 30, 2021, 95% of the securities were rated and the average rating was A. At December 31, 2020, 51% of the securities were rated and the average rating was AA-. Equity Securities consisted of a preferred stock and a mutual fund for which limited observable inputs were available at September 30, 2021. The equity securities were primarily priced using broker/dealer quotes and internal models with some inputs that are unobservable. Other liabilities consisted of the contingent consideration which is a portion of the purchase price for the NORCAL acquisition and is recorded at fair value each reporting period. The ultimate payout under the contingent consideration is dependent on the after-tax development of NORCAL's ultimate net losses over a three-year period beginning December 31, 2020 and may total up to $84 million. See further discussion around the contingent consideration in Note 2 and Note 9. Quantitative Information Regarding Level 3 Valuations Fair Value at ($ in thousands) September 30, 2021 December 31, 2020 Valuation Technique Unobservable Input Range Assets: Corporate debt, limited observable inputs $19,712 $3,265 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Residential mortgage-backed securities $4,235 $2,032 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Other asset-backed securities $11,007 $6,661 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Equity securities $2,569 $— Discounted Cash Flows Comparability Adjustment 0% - 10% (5%) Liabilities: Other liabilities $24,000 $— Stochastic Model/Discounted Cash Flows N/A 0% - 10% (8%) 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 present summary information regarding changes in the fair value of assets measured using Level 3 inputs. September 30, 2021 Level 3 Fair Value Measurements - Assets (In thousands) Corporate Debt Asset-backed Securities Equity Securities Other Investments Total Balance, June 30, 2021 $ 15,065 $ 9,857 $ 852 $ 2,222 $ 27,996 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net realized investment gains (losses) — — (2) (639) (641) Included in other comprehensive income 49 (74) 18 — (7) Purchases 10,881 12,666 2,500 — 26,047 Sales (284) (17) — — (301) Transfers in — — 69 — 69 Transfers out (5,999) (7,190) (868) (1,583) (15,640) Balance, September 30, 2021 $ 19,712 $ 15,242 $ 2,569 $ — $ 37,523 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ (1) $ (639) $ (640) September 30, 2021 Level 3 Fair Value Measurements - Assets (In thousands) Corporate Debt Asset-backed Securities Equity Securities Other Investments Total Balance, December 31, 2020 $ 3,265 $ 8,693 $ — $ — $ 11,958 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income 1 (2) — — (1) Net realized investment gains (losses) — (11) (1) (774) (786) Included in other comprehensive income 82 (171) 16 — (73) Purchases 24,971 28,026 9,083 205 62,285 Sales (461) (506) (5,730) — (6,697) Transfers in 858 — 69 2,152 3,079 Transfers out (9,004) (20,787) (868) (1,583) (32,242) Balance, September 30, 2021 $ 19,712 $ 15,242 $ 2,569 $ — $ 37,523 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ (1) $ (774) $ (775) September 30, 2020 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other Investments Total Balance, June 30, 2020 $ 3,117 $ 5,978 $ 1,568 $ 10,663 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net realized investment gains (losses) — (2) 143 141 Included in other comprehensive income (6) (58) — (64) Purchases 900 8,513 — 9,413 Sales (16) (99) — (115) Transfers out — (1,378) (1,711) (3,089) Balance, September 30, 2020 $ 3,995 $ 12,954 $ — $ 16,949 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ 143 $ 143 September 30, 2020 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other Investments Total Balance, December 31, 2019 $ 5,079 $ 2,992 $ 3,086 $ 11,157 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income — (10) — (10) Net realized investment gains (losses) — (2) 151 149 Included in other comprehensive income 38 23 — 61 Purchases 900 13,341 — 14,241 Sales (2,173) (888) — (3,061) Transfers in 945 605 — 1,550 Transfers out (794) (3,107) (3,237) (7,138) Balance, September 30, 2020 $ 3,995 $ 12,954 $ — $ 16,949 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ 151 $ 151 Fair Value Measurements - Level 3 Liabilities There was no change in the fair value of the contingent consideration from the date of the NORCAL acquisition on May 5, 2021 to September 30, 2021. Transfers Transfers shown in the preceding Level 3 tables were as of the end of the period in which the transfer occurred. All transfers were to or from Level 2. All transfers in and out of Level 3 during the three and nine months ended September 30, 2021 and 2020 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 September 30, 2021 and December 31, 2020, certain LPs/LLCs and investment funds measure fund assets at fair value on a recurring basis and provide a NAV for ProAssurance's interest. The carrying value of these interests is based on the NAV provided and was considered to approximate the fair value of the interests. For investment in unconsolidated subsidiaries, ProAssurance recognizes any changes in the NAV of its interests in equity in earnings (loss) of unconsolidated subsidiaries during the period of change. In accordance with GAAP, the fair value of these investments was not classified within the fair value hierarchy. The amount of ProAssurance's unfunded commitments related to these investments as of September 30, 2021 and fair values of these investments as of September 30, 2021 and December 31, 2020 were as follows: Unfunded Fair Value (In thousands) September 30, September 30, December 31, Equity investments: Mortgage fund (1) None $ — $ 12,548 Investment in unconsolidated subsidiaries: Private debt funds (2) $8,929 18,523 16,387 Long/short equity funds (3) None 533 596 Non-public equity funds (4) $38,713 144,539 138,357 Credit funds (5) $41,123 43,125 34,848 Strategy focused funds (6) $34,988 44,955 43,523 251,675 233,711 Total investments carried at NAV $ 251,675 $ 246,259 Below is additional information regarding each of the investments listed in the table above as of September 30, 2021. (1) This investment fund was focused on the structured mortgage market. The fund primarily invested 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) This investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent, while the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from three (3) This investment holds primarily long and short North American equities and targets absolute returns using strategies designed to take advantage of market opportunities. Redemptions are permitted; however, 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. (4) This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years. (5) This investment is comprised of multiple unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The remaining funds focus on private middle market company mezzanine and senior secured loans, opportunities across the credit spectrum, mortgage backed-loans, as well as various types of loan-backed investments. Three of the funds allow redemptions at any quarter-end with prior notice requirements that vary from 90 to 180 days, while another fund allows for redemptions with consent of the General Partner. The remaining funds do not allow redemptions. For the funds that do not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames throughout the remaining life of the funds. (6) This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is an LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. For both funds, redemptions are not permitted. Another fund is an LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LPs, one of which allows for redemption with prior notice. ProAssurance may not sell, transfer or assign its interest in any of the above LPs/LLCs without special consent from the LPs/LLCs. Nonrecurring Fair Value Measurement During the third quarter of 2020, ProAssurance recognized a nonrecurring fair value measurement related to the goodwill in its Specialty P&C reporting unit with a carrying value of $161.1 million prior to the fair value measurement. This nonrecurring fair value measurement resulted in the goodwill being written down to its implied fair value of zero resulting in an impairment of goodwill of $161.1 million. The inputs used in the fair value measurement were non-observable and, as such, were categorized as a Level 3 valuation. ProAssurance did not have any other assets or liabilities that were measured at fair value on a nonrecurring basis at September 30, 2021 or December 31, 2020. Financial Instruments - Methodologies Other Than Fair Value The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category. September 30, 2021 December 31, 2020 (In thousands) Carrying Fair Carrying Fair Financial assets: BOLI $ 80,821 $ 80,821 $ 67,847 $ 67,847 Other investments $ 3,170 $ 3,170 $ 2,952 $ 2,952 Other assets $ 39,584 $ 39,593 $ 31,128 $ 31,141 Financial liabilities: Senior notes due 2023* $ 250,000 $ 267,988 $ 250,000 $ 269,160 Mortgage Loans* $ — $ — $ 36,113 $ 36,113 Contribution Certificates $ 175,766 $ 178,728 $ — $ — Other liabilities $ 51,456 $ 51,456 $ 30,334 $ 30,334 * Carrying value excludes unamortized 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. Three of ProAssurance's insurance subsidiaries are members of an FHLB. The estimated fair value of the FHLB common stock was based on the amount the subsidiaries would receive if their memberships were canceled, as the memberships cannot be sold. The fair value of the annuity represents the present value of the expected future cash flows discounted using a rate available in active markets for similarly structured instruments. Other assets and other liabilities primarily consisted of related investment assets and liabilities associated with funded deferred compensation agreements. The fair value of the funded deferred compensation assets was based upon quoted market prices, which is categorized as a Level 1 valuation, and had a fair value of $38.5 million and $30.6 million at September 30, 2021 and December 31, 2020, respectively. The fair value of the funded deferred compensation assets as of September 30, 2021 included rabbi trust assets acquired as a result of the NORCAL acquisition, which consists entirely of cash equivalents and mutual funds with a total fair value of $5.1 million (see Note 2 for additional information on NORCAL acquisition). Other assets also included an unsecured note receivable under a separate line of credit agreement. The fair value of the note receivable was based on the present value of expected cash flows from the note receivable, discounted at market rates on the valuation date for receivables with similar credit standings and similar payment structures. Other liabilities primarily consisted of liabilities associated with funded deferred compensation agreements. The reported balance is determined based on the amount of elective deferrals and employer contributions adjusted for periodic changes in the fair value of the participant balances based on the performance of the funds selected by the participants and had a fair value of $51.5 million and $30.3 million at September 30, 2021 and December 31, 2020, respectively. The fair value of the funded deferred compensation liabilities as of September 30, 2021 included liabilities assumed as a result of the NORCAL acquisition, with a total fair value of $18.0 million (see Note 2 for additional information). The fair value of the debt, excluding the Contribution Certificates, was estimated based on the present value of expected future cash outflows, discounted at rates available on the valuation date for similar debt issued by entities with a similar credit standing to ProAssurance. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments Available-for-sale fixed maturities at September 30, 2021 and December 31, 2020 included the following: September 30, 2021 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available-for-sale U.S. Treasury obligations $ 241,696 $ 1,681 $ 672 $ 242,705 U.S. Government-sponsored enterprise obligations 20,509 57 98 20,468 State and municipal bonds 513,111 11,155 1,559 522,707 Corporate debt 1,928,543 41,493 6,923 1,963,113 Residential mortgage-backed securities 475,368 5,513 2,972 477,909 Agency commercial mortgage-backed securities 14,531 460 49 14,942 Other commercial mortgage-backed securities 216,595 3,545 1,116 219,024 Other asset-backed securities 440,536 3,661 929 443,268 $ 3,850,889 $ 67,565 $ 14,318 $ 3,904,136 December 31, 2020 (In thousands) Amortized Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available-for-sale U.S. Treasury obligations $ 104,097 $ — $ 2,985 $ 23 $ 107,059 U.S. Government-sponsored enterprise obligations 12,103 — 158 — 12,261 State and municipal bonds 316,022 — 16,937 39 332,920 Corporate debt 1,267,992 552 63,204 1,302 1,329,342 Residential mortgage-backed securities 269,752 — 7,171 382 276,541 Agency commercial mortgage-backed securities 12,623 — 687 — 13,310 Other commercial mortgage-backed securities 109,244 — 4,788 940 113,092 Other asset-backed securities 269,742 — 4,006 742 273,006 $ 2,361,575 $ 552 $ 99,936 $ 3,428 $ 2,457,531 The recorded cost basis and estimated fair value of available-for-sale fixed maturities at September 30, 2021, 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 $ 241,696 $ 19,945 $ 133,884 $ 86,726 $ 2,150 $ 242,705 U.S. Government-sponsored enterprise obligations 20,509 3,826 11,363 5,134 145 20,468 State and municipal bonds 513,111 15,273 174,664 188,717 144,053 522,707 Corporate debt 1,928,543 119,700 927,016 809,889 106,508 1,963,113 Residential mortgage-backed securities 475,368 477,909 Agency commercial mortgage-backed securities 14,531 14,942 Other commercial mortgage-backed securities 216,595 219,024 Other asset-backed securities 440,536 443,268 $ 3,850,889 $ 3,904,136 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 September 30, 2021. Cash and securities with a carrying value of $54.8 million at September 30, 2021 were on deposit with various state insurance departments to meet regulatory requirements. As a member of Lloyd's, ProAssurance is required to maintain capital at Lloyd's, referred to as FAL, to support underwriting by Syndicate 1729 and Syndicate 6131. At September 30, 2021, ProAssurance's FAL investments were comprised of available-for-sale fixed maturities with a fair value of $64.3 million and cash and cash equivalents of $8.2 million on deposit with Lloyd's in order to satisfy these FAL requirements. During the second quarter of 2021, ProAssurance received a return of approximately $24.5 million of FAL given the reduction in the Company's participation in the results of Syndicate 1729, to 5% from 29%, and Syndicate 6131, to 50% from 100%, for the 2021 underwriting year. Investments Held in a Loss Position The following tables provide summarized information with respect to investments held in an unrealized loss position at September 30, 2021 and December 31, 2020, including the length of time the investment had been held in a continuous unrealized loss position. September 30, 2021 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 $ 162,063 $ 672 $ 157,445 $ 582 $ 4,618 $ 90 U.S. Government-sponsored enterprise obligations 14,422 98 14,422 98 — — State and municipal bonds 194,740 1,559 192,610 1,467 2,130 92 Corporate debt 637,694 6,923 607,003 6,134 30,691 789 Residential mortgage-backed securities 284,636 2,972 276,253 2,732 8,383 240 Agency commercial mortgage-backed securities 4,040 49 4,040 49 — — Other commercial mortgage-backed securities 77,254 1,116 72,541 783 4,713 333 Other asset-backed securities 166,667 929 162,161 867 4,506 62 $ 1,541,516 $ 14,318 $ 1,486,475 $ 12,712 $ 55,041 $ 1,606 December 31, 2020 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 $ 14,390 $ 23 $ 14,390 $ 23 $ — $ — State and municipal bonds 6,416 39 6,416 39 — — Corporate debt 94,695 1,302 79,436 1,020 15,259 282 Residential mortgage-backed securities 34,928 382 34,509 381 419 1 Other commercial mortgage-backed securities 18,766 940 18,480 935 286 5 Other asset-backed securities 43,739 742 37,850 701 5,889 41 $ 212,934 $ 3,428 $ 191,081 $ 3,099 $ 21,853 $ 329 As of September 30, 2021, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 1,246 debt securities (32.3% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 768 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.3 million and $0.2 million, respectively. The securities were evaluated for impairment as of September 30, 2021. As of December 31, 2020, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 292 debt securities (11.1% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 229 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.4 million and $0.2 million, respectively. The securities were evaluated for impairment as of December 31, 2020. Each quarter, ProAssurance performs a detailed analysis for the purpose of assessing whether any of the securities it holds in an unrealized loss position has suffered an impairment due to credit or non-credit factors. A detailed discussion of the factors considered in the assessment is included in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K. Fixed maturity securities held in an unrealized loss position at September 30, 2021, excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue. Expected future cash flows of asset-backed securities, excluding those issued by GNMA, FNMA and FHLMC, held in an unrealized loss position were estimated as part of the September 30, 2021 impairment evaluation using the most recently available six-month historical performance data for the collateral (loans) underlying the security or, if historical data was not available, sector based assumptions, and equaled or exceeded the current amortized cost basis of the security. The following tables present a roll forward of the allowance for expected credit losses on available-for-sale fixed maturities for the nine months ended September 30, 2021 and three and nine months ended September 30, 2020. There was no change in the allowance for expected credit losses for the three months ended September 30, 2021. Nine Months Ended September 30, 2021 (In thousands) Corporate Debt Total Balance, at December 31, 2020 $ 552 $ 552 Reductions related to: Securities sold during the period (552) (552) Balance, at September 30, 2021 $ — $ — Three Months Ended September 30, 2020 (In thousands) Corporate Debt Total Balance, at July 1, 2020 $ 1,408 $ 1,408 Reductions related to: Securities sold during the period (856) (856) Balance, at September 30, 2020 $ 552 $ 552 Nine Months Ended September 30, 2020 (In thousands) Corporate Debt Total Balance, at December 31, 2019 $ — $ — Additional credit losses related to securities for which: No allowance for credit losses has been previously recognized 1,508 1,508 Reductions related to: Securities sold during the period (956) (956) Balance, at September 30, 2020 $ 552 $ 552 Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows: Three Months Ended September 30 Nine Months Ended September 30 (In millions) 2021 2020 2021 2020 Proceeds from sales (exclusive of maturities and paydowns) $ 85.4 $ 86.9 $ 343.5 $ 304.6 Purchases $ 404.1 $ 317.5 $ 1,169.6 $ 689.4 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 Sheets as of September 30, 2021 and December 31, 2020 primarily included stocks, bond funds 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 $43 million), which includes the BOLI policies acquired from NORCAL (original cost $10 million). All insured individuals were members of ProAssurance or NORCAL 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 Nine Months Ended (In thousands) 2021 2020 2021 2020 Fixed maturities $ 20,121 $ 16,902 $ 53,969 $ 52,863 Equities 648 706 1,790 3,598 Short-term investments, including Other 587 405 1,539 2,386 BOLI 622 655 1,752 1,568 Investment fees and expenses (2,700) (1,744) (7,337) (4,538) Net investment income $ 19,278 $ 16,924 $ 51,713 $ 55,877 Investment in Unconsolidated Subsidiaries ProAssurance's investment in unconsolidated subsidiaries were as follows: September 30, 2021 Carrying Value (In thousands) Percentage September 30, December 31, Qualified affordable housing project tax credit partnerships See below $ 15,980 $ 27,719 All other investments, primarily investment fund LPs/LLCs See below 301,889 282,810 $ 317,869 $ 310,529 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 $4.9 million at September 30, 2021 and $9.4 million at December 31, 2020. ProAssurance's ownership percentage relative to the remaining tax credit partnership interests is less than 20%; these interests had a carrying value of $11.1 million at September 30, 2021 and $18.3 million at December 31, 2020. 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 13. ProAssurance holds interests in investment fund LPs/LLCs and other equity method investments and LPs/LLCs which are not considered to be investment funds. ProAssurance's ownership percentage relative to four of the LPs/LLCs is greater than 25%, which is expected to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $49.2 million at September 30, 2021 and $46.2 million at December 31, 2020. ProAssurance's ownership percentage relative to the remaining investments and LPs/LLCs is less than 25%; these interests had a carrying value of $252.7 million at September 30, 2021 and $236.6 million at December 31, 2020. ProAssurance does not have the ability to exert control over any of these funds. Equity in Earnings (Loss) of Unconsolidated Subsidiaries Equity in earnings (loss) of unconsolidated subsidiaries included losses from qualified affordable housing project tax credit partnerships and a historic tax credit partnership. Investment results recorded reflect ProAssurance's allocable portion of partnership operating results. Tax credits reduce income tax expense in the period they are recognized. The results recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows: Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Qualified affordable housing project tax credit partnerships Losses recorded $ 3,591 $ 4,798 $ 11,712 $ 14,152 Tax credits recognized $ 3,226 $ 4,369 $ 9,880 $ 13,106 Historic tax credit partnership* Losses (gains) recorded $ — $ (264) $ (182) $ 1,820 Tax credits recognized (reversed) $ (100) $ 103 $ — $ 309 * ProAssurance holds a historic tax credit partnership which was fully amortized in 2020. ProAssurance received a distribution associated with this investment during the first quarter of 2021 as a result of positive cash flows from a project recognizing an operating gain. See further discussion on this investment in Note 3 of the Notes to the Consolidated Financial Statements in ProAssurance’s December 31, 2020 report on Form 10-K. The tax credits generated from the Company's tax credit partnership investments of $3.1 million and $9.9 million for the three and nine months ended September 30, 2021, respectively, were deferred and are expected to be utilized in future periods. Tax credits provided by the underlying projects of the Company's historic tax credit partnership are typically available in the tax year in which the project is put into active service, whereas the tax credits provided by qualified affordable housing project tax credit partnerships are provided over approximately a ten year period. Net 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 Nine Months Ended (In thousands) 2021 2020 2021 2020 Total impairment losses: Corporate debt $ — $ — $ — $ (1,745) Portion of impairment losses recognized in other comprehensive income before taxes: Corporate debt — — — 237 Net impairment losses recognized in earnings — — — (1,508) Gross realized gains, available-for-sale fixed maturities 2,225 3,996 12,540 10,941 Gross realized (losses), available-for-sale fixed maturities (259) (396) (798) (2,266) Net realized gains (losses), trading fixed maturities (47) 116 17 268 Net realized gains (losses), equity investments 426 31 6,616 10,589 Net realized gains (losses), other investments 1,699 530 6,192 2,442 Change in unrealized holding gains (losses), trading fixed maturities (49) 373 (489) 637 Change in unrealized holding gains (losses), equity investments (945) 2,766 (2,182) (21,012) Change in unrealized holding gains (losses), convertible securities, carried at fair value (2,457) 1,170 (2,118) (190) Other (63) 252 434 249 Net realized investment gains (losses) $ 530 $ 8,838 $ 20,212 $ 150 ProAssurance did not recognize any credit-related impairment losses in earnings or non-credit impairment losses in OCI during the three and nine months ended September 30, 2021 or the three months ended September 30, 2020. ProAssurance recognized credit-related impairment losses in earnings of $1.5 million and a nominal amount of non-credit impairment losses in OCI for the nine months ended September 30, 2020. The credit-related impairment losses recognized during the 2020 nine-month period related to corporate bonds in the energy and consumer sectors. Additionally, the 2020 nine-month period included credit-related impairment losses related to four corporate bonds in various sectors, which were sold during 2020. The non-credit related impairment losses recognized during the 2020 nine-month period related to three corporate bonds in the energy and consumer sectors. ProAssurance recognized $0.5 million and $20.2 million of net realized investment gains during the three and nine months ended September 30, 2021, respectively, driven primarily by realized gains on the sale of certain available-for-sale fixed maturities and other investments, which were partially offset by unrealized holding losses resulting from changes in the fair value of our convertible securities. ProAssurance recognized $8.8 million and $0.2 million of net realized investment gains during the three and nine months ended September 30, 2020, respectively. Net realized investment gains during the 2020 three-month period were driven by gains in the Company's available-for-sale fixed maturities due to the sale of corporate bonds and, to a lesser extent, unrealized holding gains resulting from an increase in the fair value of the Company's equity portfolio and convertible securities. Net realized investment gains for the 2020 nine-month period were driven by realized gains on the sale of available-for-sale fixed maturities and equity investments and, to a lesser extent, unrealized holding gains on trading securities, which were almost entirely offset by unrealized holding losses resulting from decreases in the fair value of the Company's equity portfolio due to the volatility in the global financial markets related to COVID-19. The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the impairment was recorded in OCI. Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Balance, beginning of period $ — $ 1,322 $ 552 $ 470 Additional credit losses recognized during the period, related to securities for which: No impairment has been previously recognized — — — 1,064 Impairment has been previously recognized — — — 258 Reductions due to: Securities sold during the period (realized) — (770) (552) (1,240) Balance, September 30 $ — $ 552 $ — $ 552 |
Retroactive Insurance Contracts
Retroactive Insurance Contracts | 9 Months Ended |
Sep. 30, 2021 | |
Insurance [Abstract] | |
Retroactive Insurance Contracts | Retroactive Insurance ContractsProAssurance offers custom alternative risk solutions which include assumed reinsurance. In the first quarter of 2021, ProAssurance entered into an assumed reinsurance arrangement with a regional hospital group. As the contract included both prospective coverage and retroactive coverage, ProAssurance bifurcated the provisions of the contract and accounted for each component separately. In the first quarter of 2021, ProAssurance recognized total net premiums written of $4.5 million, comprised of $2.2 million of prospective coverage and $2.3 million of retroactive coverage, total net premiums earned of $3.0 million, comprised of $0.7 million of prospective coverage and $2.3 million of retroactive coverage and total net losses and loss adjustment expenses of $2.9 million in the Condensed Consolidated Statements of Income and Comprehensive Income. For additional information regarding ProAssurance's accounting policy for retroactive insurance contracts, see Note 1 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K.Reserve for Losses and Loss Adjustment Expenses The reserve for losses is established based on estimates of individual claims and actuarially determined estimates of future losses based on ProAssurance’s past loss experience, available industry data and projections as to future claims frequency, severity, inflationary trends and settlement patterns. Estimating the reserve, particularly the reserve appropriate for liability exposures, is a complex process. For a high proportion of the risks insured or reinsured by ProAssurance, claims may be resolved over an extended period of time, often five years or more, and may be subject to litigation. Estimating losses requires ProAssurance to make and revise judgments and assessments regarding multiple uncertainties over an extended period of time. As a result, the reserve estimate may vary considerably from the eventual outcome. The assumptions used in establishing ProAssurance’s reserve are regularly reviewed and updated by management as new data becomes available. Changes to estimates of previously established reserves are included in earnings in the period in which the estimate is changed. 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. 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 considers the views of the actuaries as well as other factors, such as premium rates, historical paid and incurred loss development trends, and an evaluation of the current loss environment including frequency, severity, expected effect of inflation, general economic and social trends, and the legal and political environment in establishing the amount of its reserve for losses. The Company expects there will be impacts to these factors as well as to the timing of loss emergence and ultimate loss ratios for certain coverages it underwrites as a result of COVID-19 and the related economic shutdown; however, the extent to which COVID-19 impacts these factors is highly uncertain and cannot be predicted (see "Item 1A, Risk Factors" and Note 8 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for additional information). The industry is experiencing new conditions, including the postponement of court cases, changes in settlement trends and a significant reduction in economic activity and insured exposure in some classes. ProAssurance's booked reserves as of September 30, 2021 include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in significant changes to the Company's reserve estimates in future periods. ProAssurance partitions its reserve by accident year, which is the year in which the claim becomes its liability. For claims-made policies, the insured event generally becomes a liability when the event is first reported to the Company. For occurrence policies, the insured event becomes a liability when the event takes place. For retroactive coverages, the insured event becomes a liability at inception of the underlying contract. 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. Acquired Reserve The acquisition of NORCAL increased ProAssurance's net reserves by $1.1 billion which represented the fair value of NORCAL's reserve, net of related reinsurance recoverables, at the time of acquisition including a fair value adjustment on the reserve as well as negative VOBA recorded on NORCAL's unearned premium and DDR reserve. The reserve fair value adjustment will be amortized utilizing loss payment patterns and the negative VOBAs will be amortized over a period in proportion to the earn-out of the premium or in-line with the approximate consumption of losses. Such amortization is recorded as a reduction to net losses and loss adjustment expenses. See Note 2 for more information. 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. 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) Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Year Ended December 31, 2020 Balance, beginning of year $ 2,417,179 $ 2,346,526 $ 2,346,526 Less reinsurance recoverables on unpaid losses and loss adjustment expenses 385,087 390,708 390,708 Net balance, beginning of year 2,032,092 1,955,818 1,955,818 Net reserves acquired from NORCAL acquisition 1,089,103 — — Net losses: Current year (1)(2)(3) 582,235 555,969 711,846 Favorable development of reserves established in prior years, net (27,205) (34,557) (50,399) Total 555,030 521,412 661,447 Paid related to: Current year (62,276) (60,449) (83,204) Prior years (457,578) (400,930) (501,969) Total paid (519,854) (461,379) (585,173) Net balance, end of period 3,156,371 2,015,851 2,032,092 Plus reinsurance recoverables on unpaid losses and loss adjustment expenses 476,315 391,637 385,087 Balance, end of period $ 3,632,686 $ 2,407,488 $ 2,417,179 (1) Current year net losses for the nine months ended September 30, 2021 included $4.3 million of amortization of the negative VOBA associated with NORCAL's assumed unearned premium, which is being amortized over a period in proportion to the earn-out of the associated premium as a reduction to current accident year net losses (see Note 2). Additionally, current year net losses for the nine months ended September 30, 2021 included $5.1 million related to a Custom Physician tail policy in the Specialty P&C segment. (2) Current year net losses for the nine months ended September 30, 2021 included incurred losses of $2.9 million related to an assumed reinsurance arrangement entered into during the first quarter of 2021 in the Specialty P&C segment (see Note 5). (3) Current year net losses for the nine months ended September 30, 2020 and the year ended December 31, 2020 included the impact of a large national healthcare account in the Specialty P&C segment including losses of $60.0 million associated with a tail policy and $9.2 million of amortization of a related PDR. For additional information, see Note 7 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. Estimating liability reserves is complex and requires the use of many assumptions. As time passes and ultimate losses for prior years are either known or become subject to a more precise estimation, ProAssurance increases or decreases the reserve estimates established in prior periods. The consolidated net favorable loss development recognized in the nine months ended September 30, 2021 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2017 through 2020 accident years. The net favorable development recognized in the Specialty P&C segment also included $5.0 million related to the amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses (see Note 2). ProAssurance did not recognize any development related to NORCAL's prior accident year reserves since the date of acquisition. Net favorable prior accident year reserve development recognized in the Specialty P&C segment also included a $1.0 million reduction in our IBNR reserve for COVID-19. The net favorable development also reflected overall favorable trends in claim closing patterns in the Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance segments. The net favorable loss development recognized in the Workers' Compensation Insurance segment is primarily related to the 2017 accident year and prior and, to a lesser extent, the 2019 accident year. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment is primarily related to the 2019 accident year and prior and, to a lesser extent, the 2020 accident year. Consolidated net favorable loss development recognized in the nine months ended September 30, 2021 was partially offset by unfavorable reserve development recognized in the Lloyd's Syndicates segment driven by certain catastrophe related losses. The net favorable loss development recognized during the nine months ended September 30, 2020 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2014 through 2018 accident years. The net favorable development also reflected overall favorable trends in claim closing patterns in the Segregated Portfolio Cell Reinsurance and Workers' Compensation Insurance segments. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment primarily related to the 2016 through 2018 accident years and the net favorable loss development recognized in the Workers' Compensation Insurance segment primarily related to the 2013 through 2016 accident years and accident years prior to 2010. The net favorable loss development recognized for the year ended December 31, 2020 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2014 through 2017 accident years. The net favorable development also reflected overall favorable trends in claim closing patterns in the Segregated Portfolio Cell Reinsurance and Workers' Compensation Insurance segments. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment primarily related to the 2014 through 2019 accident years and the net favorable loss development recognized in the Workers' Compensation Insurance segment primarily related to the 2014 through 2017 accident years. For additional information regarding ProAssurance's reserve for losses, see Note 1 and Note 8 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For interim periods, ProAssurance generally utilizes the estimated annual effective tax rate method under which the Company determines its provision (benefit) for income taxes based on the current estimate of its annual effective tax rate. For the nine months ended September 30, 2021, ProAssurance utilized the discrete effective tax rate method to record its provision for income taxes after the estimated annual effective tax rate method produced an unreliable estimated annual tax rate. The discrete effective tax rate method is applied when the application of the estimated annual effective tax rate method is impractical because it is not possible to reliably estimate the annual effective tax rate. The Company believes the use of the discrete effective tax rate method is more appropriate for the current period than the annual effective tax rate method as minor changes in the Company's estimated ordinary income would result in sizable variations in the customary relationship between income tax expense (benefit) and pretax accounting income (loss). For the nine months ended September 30, 2021, 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 due to the gain on bargain purchase of $74.4 million as a result of the Company's acquisition of NORCAL, all of which was non-taxable. See further discussion on the gain on bargain purchase in Note 2. In addition, the provision for income taxes is also different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes because ProAssurance recognizes tax credit benefits transferred from tax credit partnership investments. In calculating the Company's year-to-date income tax expense (benefit), the Company includes the estimated benefit of tax credits for the year-to-date period based on the most recently available information provided by the tax credit partnerships; the actual amounts of credits provided by the tax credit partnerships may prove to be different than the Company's estimates. The effect of such a difference is recognized in the period identified. Furthermore, the Company's pre-tax loss for the nine months ended September 30, 2020 included a $161.1 million goodwill impairment recognized in relation to the Specialty P&C reporting unit during the third quarter of 2020 which was treated as a discrete item as the Company considered it to be an unusual and infrequent item. Of the $161.1 million goodwill impairment, $149.6 million was non-deductible for which no tax benefit was recognized while the remaining $11.5 million was deductible for which a 21% tax benefit was recognized. See further discussion on this goodwill impairment in Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. ProAssurance had a receivable for U.S. federal and U.K. income taxes carried as a part of other assets of $6.7 million at September 30, 2021 and $18.9 million at December 31, 2020. The liability for unrecognized tax benefits, which is included in the total receivable for U.S. federal and U.K. income taxes, was $5.8 million and $5.7 million at September 30, 2021 and December 31, 2020, respectively, which included an accrued liability for interest of approximately $0.6 million and $0.5 million, respectively. NORCAL Acquisition As a result of ProAssurance's acquisition of NORCAL, the Company recorded $46.8 million of net deferred tax assets reflecting the remeasurement of NORCAL's historical net deferred tax assets, as such deferred taxes were subject to recalculation following application of all purchase accounting adjustments, and management's assessment of the realizability of NORCAL's deferred tax assets. Also as a result of the NORCAL acquisition, ProAssurance has U.S. federal NOL carryforwards of approximately $68.0 million that will begin to expire in 2035. ProAssurance currently expects to utilize a portion of these NOLs in 2021. See Note 2 for more information. Coronavirus Aid, Relief and Economic Security Act In response to COVID-19, the CARES Act was signed into law on March 27, 2020 and contains several provisions for corporations and eases certain deduction limitations originally imposed by the TCJA. See further discussion in Note 5 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K. As a result of the CARES Act, ProAssurance now has the ability to carryback NOLs generated in tax years 2019 and 2020 for up to five years. The Company has an NOL of approximately $33.3 million from the 2020 tax year that will be carried back to the 2015 tax year and is expected to generate a tax refund of approximately $11.7 million. Additionally, the Company had an NOL of approximately $25.6 million from the 2019 tax year that was carried back to the 2014 tax year and generated a tax refund of approximately $9.0 million which the Company received in February 2021. American Rescue Plan Act of 2021 In response to economic concerns associated with COVID-19, the American Rescue Plan Act of 2021 was signed into law on March 11, 2021 and includes an expansion of the number of employees covered by the limitation on the deductibility of compensation in excess of $1 million. This provision is effective for tax years beginning after December 31, 2026. The Company has evaluated this provision as well as the other provisions of the American Rescue Plan Act of 2021 and concluded that they will not have a material impact on ProAssurance's financial position or results of operations as of September 30, 2021. |
Goodwill
Goodwill | 9 Months Ended |
Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill Goodwill is recognized in conjunction with business acquisitions as the excess of the purchase consideration for the business acquisition over the fair value of identifiable assets acquired and liabilities assumed. The fair value of identifiable assets acquired and liabilities assumed, and thus goodwill, is subject to redetermination within a measurement period of up to one year following completion of a business acquisition. Goodwill is tested for impairment annually or more frequently if circumstances indicate an impairment may have occurred. The date of the Company's annual goodwill impairment test is October 1. Impairment of goodwill is tested at the reporting unit level, which is consistent with the Company's reportable segments identified in Note 15. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for further information on how the Company tests goodwill for impairment. Of the Company's five reporting units, two have net goodwill: Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance. The table below presents the carrying amount of goodwill and accumulated impairment losses by reporting unit at September 30, 2021 and December 31, 2020: Reporting Unit (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Total Goodwill, gross as of January 1, 2020 $ 161,115 $ 44,110 $ 5,500 $ 210,725 Accumulated impairment losses* (161,115) — — (161,115) Goodwill, net as of December 31, 2020 — 44,110 5,500 49,610 Accumulated impairment losses — — — — Goodwill, net as of September 30, 2021 $ — $ 44,110 $ 5,500 $ 49,610 * Accumulated impairment losses in 2020 represent the pre-tax impairment loss of $161.1 million recognized during the third quarter of 2020 in relation to the Specialty P&C reporting unit. There were no other impairment losses taken prior to 2020. For additional information regarding ProAssurance's goodwill impairment in 2020, see Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Reserve for Losses and Loss Adj
Reserve for Losses and Loss Adjustment Expenses | 9 Months Ended |
Sep. 30, 2021 | |
Insurance [Abstract] | |
Reserve for Losses and Loss Adjustment Expenses | Retroactive Insurance ContractsProAssurance offers custom alternative risk solutions which include assumed reinsurance. In the first quarter of 2021, ProAssurance entered into an assumed reinsurance arrangement with a regional hospital group. As the contract included both prospective coverage and retroactive coverage, ProAssurance bifurcated the provisions of the contract and accounted for each component separately. In the first quarter of 2021, ProAssurance recognized total net premiums written of $4.5 million, comprised of $2.2 million of prospective coverage and $2.3 million of retroactive coverage, total net premiums earned of $3.0 million, comprised of $0.7 million of prospective coverage and $2.3 million of retroactive coverage and total net losses and loss adjustment expenses of $2.9 million in the Condensed Consolidated Statements of Income and Comprehensive Income. For additional information regarding ProAssurance's accounting policy for retroactive insurance contracts, see Note 1 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K.Reserve for Losses and Loss Adjustment Expenses The reserve for losses is established based on estimates of individual claims and actuarially determined estimates of future losses based on ProAssurance’s past loss experience, available industry data and projections as to future claims frequency, severity, inflationary trends and settlement patterns. Estimating the reserve, particularly the reserve appropriate for liability exposures, is a complex process. For a high proportion of the risks insured or reinsured by ProAssurance, claims may be resolved over an extended period of time, often five years or more, and may be subject to litigation. Estimating losses requires ProAssurance to make and revise judgments and assessments regarding multiple uncertainties over an extended period of time. As a result, the reserve estimate may vary considerably from the eventual outcome. The assumptions used in establishing ProAssurance’s reserve are regularly reviewed and updated by management as new data becomes available. Changes to estimates of previously established reserves are included in earnings in the period in which the estimate is changed. 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. 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 considers the views of the actuaries as well as other factors, such as premium rates, historical paid and incurred loss development trends, and an evaluation of the current loss environment including frequency, severity, expected effect of inflation, general economic and social trends, and the legal and political environment in establishing the amount of its reserve for losses. The Company expects there will be impacts to these factors as well as to the timing of loss emergence and ultimate loss ratios for certain coverages it underwrites as a result of COVID-19 and the related economic shutdown; however, the extent to which COVID-19 impacts these factors is highly uncertain and cannot be predicted (see "Item 1A, Risk Factors" and Note 8 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for additional information). The industry is experiencing new conditions, including the postponement of court cases, changes in settlement trends and a significant reduction in economic activity and insured exposure in some classes. ProAssurance's booked reserves as of September 30, 2021 include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in significant changes to the Company's reserve estimates in future periods. ProAssurance partitions its reserve by accident year, which is the year in which the claim becomes its liability. For claims-made policies, the insured event generally becomes a liability when the event is first reported to the Company. For occurrence policies, the insured event becomes a liability when the event takes place. For retroactive coverages, the insured event becomes a liability at inception of the underlying contract. 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. Acquired Reserve The acquisition of NORCAL increased ProAssurance's net reserves by $1.1 billion which represented the fair value of NORCAL's reserve, net of related reinsurance recoverables, at the time of acquisition including a fair value adjustment on the reserve as well as negative VOBA recorded on NORCAL's unearned premium and DDR reserve. The reserve fair value adjustment will be amortized utilizing loss payment patterns and the negative VOBAs will be amortized over a period in proportion to the earn-out of the premium or in-line with the approximate consumption of losses. Such amortization is recorded as a reduction to net losses and loss adjustment expenses. See Note 2 for more information. 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. 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) Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Year Ended December 31, 2020 Balance, beginning of year $ 2,417,179 $ 2,346,526 $ 2,346,526 Less reinsurance recoverables on unpaid losses and loss adjustment expenses 385,087 390,708 390,708 Net balance, beginning of year 2,032,092 1,955,818 1,955,818 Net reserves acquired from NORCAL acquisition 1,089,103 — — Net losses: Current year (1)(2)(3) 582,235 555,969 711,846 Favorable development of reserves established in prior years, net (27,205) (34,557) (50,399) Total 555,030 521,412 661,447 Paid related to: Current year (62,276) (60,449) (83,204) Prior years (457,578) (400,930) (501,969) Total paid (519,854) (461,379) (585,173) Net balance, end of period 3,156,371 2,015,851 2,032,092 Plus reinsurance recoverables on unpaid losses and loss adjustment expenses 476,315 391,637 385,087 Balance, end of period $ 3,632,686 $ 2,407,488 $ 2,417,179 (1) Current year net losses for the nine months ended September 30, 2021 included $4.3 million of amortization of the negative VOBA associated with NORCAL's assumed unearned premium, which is being amortized over a period in proportion to the earn-out of the associated premium as a reduction to current accident year net losses (see Note 2). Additionally, current year net losses for the nine months ended September 30, 2021 included $5.1 million related to a Custom Physician tail policy in the Specialty P&C segment. (2) Current year net losses for the nine months ended September 30, 2021 included incurred losses of $2.9 million related to an assumed reinsurance arrangement entered into during the first quarter of 2021 in the Specialty P&C segment (see Note 5). (3) Current year net losses for the nine months ended September 30, 2020 and the year ended December 31, 2020 included the impact of a large national healthcare account in the Specialty P&C segment including losses of $60.0 million associated with a tail policy and $9.2 million of amortization of a related PDR. For additional information, see Note 7 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. Estimating liability reserves is complex and requires the use of many assumptions. As time passes and ultimate losses for prior years are either known or become subject to a more precise estimation, ProAssurance increases or decreases the reserve estimates established in prior periods. The consolidated net favorable loss development recognized in the nine months ended September 30, 2021 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2017 through 2020 accident years. The net favorable development recognized in the Specialty P&C segment also included $5.0 million related to the amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses (see Note 2). ProAssurance did not recognize any development related to NORCAL's prior accident year reserves since the date of acquisition. Net favorable prior accident year reserve development recognized in the Specialty P&C segment also included a $1.0 million reduction in our IBNR reserve for COVID-19. The net favorable development also reflected overall favorable trends in claim closing patterns in the Workers' Compensation Insurance and Segregated Portfolio Cell Reinsurance segments. The net favorable loss development recognized in the Workers' Compensation Insurance segment is primarily related to the 2017 accident year and prior and, to a lesser extent, the 2019 accident year. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment is primarily related to the 2019 accident year and prior and, to a lesser extent, the 2020 accident year. Consolidated net favorable loss development recognized in the nine months ended September 30, 2021 was partially offset by unfavorable reserve development recognized in the Lloyd's Syndicates segment driven by certain catastrophe related losses. The net favorable loss development recognized during the nine months ended September 30, 2020 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2014 through 2018 accident years. The net favorable development also reflected overall favorable trends in claim closing patterns in the Segregated Portfolio Cell Reinsurance and Workers' Compensation Insurance segments. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment primarily related to the 2016 through 2018 accident years and the net favorable loss development recognized in the Workers' Compensation Insurance segment primarily related to the 2013 through 2016 accident years and accident years prior to 2010. The net favorable loss development recognized for the year ended December 31, 2020 primarily reflected a lower than anticipated claims severity trend (i.e., the average size of a claim) in the Specialty P&C segment, primarily related to the 2014 through 2017 accident years. The net favorable development also reflected overall favorable trends in claim closing patterns in the Segregated Portfolio Cell Reinsurance and Workers' Compensation Insurance segments. The net favorable loss development recognized in the Segregated Portfolio Cell Reinsurance segment primarily related to the 2014 through 2019 accident years and the net favorable loss development recognized in the Workers' Compensation Insurance segment primarily related to the 2014 through 2017 accident years. For additional information regarding ProAssurance's reserve for losses, see Note 1 and Note 8 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies ProAssurance is involved in various legal actions related to insurance policies and claims handling including, but not limited to, claims asserted by policyholders. These types of legal actions arise in the Company's ordinary course of business and, in accordance with GAAP for insurance entities, are considered as a part of the Company's loss reserving process, which is described in detail under the heading "Losses and Loss Adjustment Expenses" in the Accounting Policies section in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 Form 10-K. ProAssurance also has other direct actions against the Company unrelated to its claims activity which are evaluated and accounted for as a part of other liabilities. For these corporate legal actions, the Company evaluates each case separately and establishes what it believes is an appropriate reserve based on GAAP guidance related to contingent liabilities. As of September 30, 2021, there were no material reserves established for corporate legal actions. As a member of Lloyd's, ProAssurance has obligations to Syndicate 1729 and Syndicate 6131 including a Syndicate Credit Agreement and FAL requirements. The Syndicate Credit Agreement is an unconditional revolving credit agreement to the Premium Trust Fund of Syndicate 1729 for the purpose of providing working capital with maximum permitted borrowings of £30 million (approximately $40.4 million as of September 30, 2021). The Syndicate Credit Agreement has a maturity date of December 31, 2021 and contains an annual auto-renewal feature which allows for ProAssurance to elect to non-renew if notice is given at least 30 days prior to the next auto-renewal date, which is one year prior to the maturity date. Under the 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, 2021, subject to extension through the auto-renewal feature. As of September 30, 2021, there were no outstanding borrowings under the Syndicate Credit Agreement. ProAssurance provides FAL to support underwriting by Syndicate 1729 and Syndicate 6131 and is comprised of investment securities and cash and cash equivalents deposited with Lloyd's with a total fair value of approximately $72.5 million at September 30, 2021 (see Note 4). During the second quarter of 2021, ProAssurance received a return of approximately $24.5 million of cash and cash equivalents from the Company's FAL balances given the reduction in the Company's participation in the results of Syndicate 1729, to 5% from 29%, and Syndicate 6131, to 50% from 100%, for the 2021 underwriting year. ProAssurance has entered into financial instrument transactions that may present off-balance sheet credit risk or market risk. These transactions include a short-term loan commitment and commitments to provide funding to non-public investment entities. Under the short-term loan commitment, ProAssurance has agreed to advance funds on a 30 day basis to a counterparty provided there is no violation of any condition established in the contract. As of September 30, 2021, ProAssurance had total funding commitments related to non-public investment entities as well as the short-term loan commitment of approximately $221.6 million which included the amount at risk if the full short-term loan is extended and the counterparties default. However, the credit risk associated with the short-term loan commitment is minimal as the counterparties to the contract are highly rated commercial institutions and to-date have been performing in accordance with their contractual obligations. ProAssurance’s expected credit losses associated with this short-term loan commitment were nominal in amount as of September 30, 2021. The purchase consideration in the NORCAL acquisition included contingent consideration. NORCAL policyholders who elected to receive NORCAL stock and tender it to ProAssurance are eligible for a share of contingent consideration in an amount of up to approximately $84 million depending upon the after-tax development of NORCAL's ultimate net losses |
Leases
Leases | 9 Months Ended |
Sep. 30, 2021 | |
Leases [Abstract] | |
Leases | Leases ProAssurance is involved in a number of operating leases that are primarily for office facilities. Office facility leases have remaining lease terms ranging from one year to ten years; some of which include options to extend the leases for up to fifteen years, and some of which include an option to terminate the lease within one year. ProAssurance subleases certain office facilities to third parties and classifies these leases as operating leases. As a result of ProAssurance's acquisition of NORCAL, the Company recorded $4.4 million of additional operating lease ROU assets and $5.3 million of additional operating lease liabilities during the second quarter of 2021. See Note 2 for more information. The following table provides a summary of the components of net lease expense as well as the reporting location in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021 and 2020. (In thousands) Location in the Condensed Consolidated Statements of Income and Comprehensive Income Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Operating lease expense (1) Operating expense $ 1,425 $ 905 $ 3,577 $ 3,421 Sublease income (2) Other income (66) (42) (190) (118) Net lease expense $ 1,359 $ 863 $ 3,387 $ 3,303 (1) Includes short-term lease costs and variable lease costs, if applicable. For the three and nine months ended September 30, 2021 and 2020, no short-term lease costs were recognized and variable lease costs were nominal in amount. (2) Sublease income excludes rental income from owned properties of $0.6 million and $1.8 million during the three and nine months ended September 30, 2021, respectively, as compared to $0.7 million and $1.9 million during the same respective periods of 2020 which is included in other income. See “Item 2. Properties” in ProAssurance's December 31, 2020 report on Form 10-K for a listing of currently owned properties. The following table provides supplemental lease information for operating leases on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020. ($ in thousands) September 30, 2021 December 31, 2020 Operating lease ROU assets $ 20,253 $ 19,013 Operating lease liabilities $ 21,670 $ 20,116 Weighted-average remaining lease term 7.03 years 8.31 years Weighted-average discount rate 2.84 % 2.97 % The following table provides supplemental lease information for the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020. Nine Months Ended September 30 (In thousands) 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,145 $ 3,123 The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of September 30, 2021. Operating lease payments exclude $0.5 million of future minimum lease payments for one lease signed but not yet commenced as of September 30, 2021. This lease will commence in the fourth quarter of 2021 with a lease term of approximately ten years. (In thousands) 2021 $ 1,630 2022 5,169 2023 3,820 2024 2,475 2025 1,969 Thereafter 8,876 Total future minimum lease payments 23,939 Less: Imputed interest 2,269 Total operating lease liabilities $ 21,670 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Debt ProAssurance’s outstanding debt consisted of the following: ($ in thousands) September 30, December 31, Senior Notes due 2023, unsecured, interest at 5.3% annually $ 250,000 $ 250,000 Contribution Certificates due 2031, interest at 3.0% (effective interest rate at 4.35%) annually beginning April 2022 175,766 — Mortgage Loans, outstanding borrowings were secured by first priority liens on two office buildings, and bore an interest rate of three-month LIBOR plus 1.325% (1.58% at December 31, 2020) determined quarterly — 36,113 Total principal 425,766 286,113 Less unamortized debt issuance costs 1,008 1,400 Debt less unamortized debt issuance costs $ 424,758 $ 284,713 Revolving Credit Agreement ProAssurance has a Revolving Credit Agreement, which expires November 2024, that may be used for general corporate purposes, including, but not limited to, short-term working capital, share repurchases as authorized by the Board and support for other activities. ProAssurance's Revolving Credit Agreement permits borrowings up to $250 million, and has available a $50 million accordion feature which, if successfully subscribed, would expand the permitted borrowings to a maximum of $300 million. In August 2021, ProAssurance repaid the balance outstanding on the Revolving Credit Agreement of $15 million. As of September 30, 2021 and December 31, 2020, there were no outstanding borrowings on the Revolving Credit Agreement. Contribution Certificates On May 5, 2021, NORCAL Insurance Company, successor to NORCAL Mutual Insurance Company, issued Contribution Certificates, which are due in 2031, to certain NORCAL policyholders in the conversion. The Contribution Certificates have a principal amount of $191 million and were recorded at their fair value of $175 million at the date of acquisition. The difference of $16 million between the recorded acquisition date fair value and the principal balance of the Contribution Certificates will be accreted utilizing the effective interest method over the term of the certificates of ten years as an increase to interest expense. In addition, interest payments are subject to deferral if ProAssurance does not receive permission from the California Department of Insurance prior to payment. See Note 2 for additional information on the Contribution Certificates assumed in the NORCAL acquisition. Mortgage Loans During 2017, two of ProAssurance's subsidiaries, ProAssurance Indemnity Company, Inc. and ProAssurance Insurance Company of America, each entered into ten-year mortgage loans (Mortgage Loans) with principal amounts of $17.9 million and $22.6 million, respectively, with one lender in connection with the recapitalization of two office buildings. In June 2021, ProAssurance repaid the balance outstanding on the ProAssurance Indemnity Company, Inc. Mortgage Loan of $15.6 million. In July 2021, ProAssurance repaid the balance outstanding on the ProAssurance Insurance Company of America Mortgage Loan of $19.7 million. Interest expense on the Mortgage Loans during the three and nine months ended September 30, 2021 included the write-off of the unamortized debt issuance costs which were nominal in amount. Covenant Compliance There are no financial covenants associated with the Senior Notes or the Contribution Certificates due 2023 and 2031, respectively. 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. In April 2021, ProAssurance amended and restated its Revolving Credit Agreement to allow for additional indebtedness of a subsidiary in preparation of the close of the NORCAL acquisition. This amendment to the Revolving Credit Agreement was previously filed as Exhibit 10.1 to ProAssurance's March 31, 2021 report on Form 10-Q. Additional Information For additional information regarding ProAssurance's debt, see Note 11 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity At September 30, 2021 and December 31, 2020, ProAssurance had 100 million shares of authorized common stock and 50 million shares of authorized preferred stock. The Board has the authority to determine provisions for the issuance of preferred shares, including the number of shares to be issued, the designations, powers, preferences and rights, and the qualifications, limitations or restrictions of such shares. ProAssurance declared cash dividends of $0.05 per share during each of the first three quarters of 2021, $0.31 per share during the first quarter of 2020 and $0.05 per share during each of the second and third quarters of 2020. Dividends declared during the 2021 and 2020 nine-month periods totaled $8.1 million and $22.1 million, respectively. Any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of financial performance, future expectations and other factors deemed relevant by the Board. See Note 12 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for additional information. At September 30, 2021, Board authorizations for the repurchase of common shares or the retirement of outstanding debt of $110 million remained available for use. ProAssurance did not repurchase any common shares during the nine months ended September 30, 2021 or 2020. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) The following tables provide a detailed breakout of the components of AOCI and the amounts reclassified from AOCI to net income (loss). The tax effects of all amounts in the tables below, except for an immaterial amount of unrealized gains and losses on available-for-sale securities held at the Company's U.K. subsidiary, were computed using the enacted U.S. federal corporate tax rate of 21%. OCI included a deferred tax benefit of $3.2 million and $8.3 million for the three and nine months ended September 30, 2021, respectively, as compared to a deferred tax expense of $1.9 million and $7.7 million for the same respective periods of 2020. The changes in the balance of each component of AOCI for the three and nine months ended September 30, 2021 and 2020 were as follows: (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, July 1, 2021 $ 53,168 $ — $ (96) $ 53,072 OCI, before reclassifications, net of tax (10,158) — — (10,158) Amounts reclassified from AOCI, net of tax (1,503) — 96 (1,407) Net OCI, current period (11,661) — 96 (11,565) Balance, September 30, 2021 $ 41,507 $ — $ — $ 41,507 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, December 31, 2020 $ 75,388 $ (57) $ (104) $ 75,227 OCI, before reclassifications, net of tax (24,655) — 8 (24,647) Amounts reclassified from AOCI, net of tax (9,226) 57 96 (9,073) Net OCI, current period (33,881) 57 104 (33,720) Balance, September 30, 2021 $ 41,507 $ — $ — $ 41,507 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, July 1, 2020 $ 61,912 $ (704) $ (78) $ 61,130 OCI, before reclassifications, net of tax 9,505 — (22) 9,483 Amounts reclassified from AOCI, net of tax (2,975) 647 — (2,328) Net OCI, current period 6,530 647 (22) 7,155 Balance, September 30, 2020 $ 68,442 $ (57) $ (100) $ 68,285 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, December 31, 2019 $ 37,333 $ (300) $ (78) $ 36,955 OCI, before reclassifications, net of tax 37,199 (187) (22) 36,990 Amounts reclassified from AOCI, net of tax (6,090) 430 — (5,660) Net OCI, current period 31,109 243 (22) 31,330 Balance, September 30, 2020 $ 68,442 $ (57) $ (100) $ 68,285 * The Company terminated Eastern's defined benefit plan, effective September 30, 2021, resulting in a settlement of the liabilities under the plan and the net loss previously reflected in AOCI being recognized in earnings for the three and nine months ended September 30, 2021. As a result of the NORCAL acquisition, the Company sponsors another frozen defined benefit plan (see Note 16). Due to the application of GAAP purchase accounting (see Note 2), there were no amounts recorded in AOCI related to this plan as of September 30, 2021 as the plan assets and benefit obligation are not remeasured on a quarterly basis. |
Variable Interest Entities
Variable Interest Entities | 9 Months Ended |
Sep. 30, 2021 | |
Variable Interest Entities [Abstract] | |
Variable Interest Entities | Variable Interest Entities ProAssurance holds passive interests in a number of entities that are considered to be VIEs under GAAP guidance. ProAssurance's VIE interests principally consist of interests in LPs/LLCs formed for the purpose of achieving diversified equity and debt returns. ProAssurance's VIE interests, carried as a part of investment in unconsolidated subsidiaries, totaled $284.7 million at September 30, 2021 and $282.2 million at December 31, 2020. ProAssurance does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Investments in entities where ProAssurance holds a greater than minor interest but does not hold a controlling interest are accounted for using the equity method. Therefore, ProAssurance has not consolidated these VIEs. ProAssurance’s involvement with each of these VIEs is limited to its direct ownership interest in the VIE. Except for the funding commitments disclosed in Note 9, ProAssurance has no arrangements with any of these VIEs to provide other financial support to or on behalf of the VIE. At September 30, 2021, ProAssurance’s maximum loss exposure relative to these investments was limited to the carrying value of ProAssurance’s investment in the VIE. As a result of the Company's acquisition of NORCAL (see Note 2), ProAssurance is the primary beneficiary of PPM RRG. While there is no direct ownership of PPM RRG by ProAssurance, it manages the business operations of PPM RRG through its management services agreement and has effective control of the PPM RRG's Board of Directors through an irrevocable voting proxy. The management services agreement allows ProAssurance to provide management and oversight services to the RRG, which includes the ability to make business decisions impacting the operations of PPM RRG. PPM RRG has a $5 million surplus note to NORCAL which is its only source of capital. ProAssurance has consolidated the account balances and transactions of PPM RRG beginning on the NORCAL acquisition date of May 5, 2021. At September 30, 2021, approximately $145 million of ProAssurance's assets and $145 million of its liabilities included on the Condensed Consolidated Balance Sheet were related to PPM RRG. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 9 Months Ended |
Sep. 30, 2021 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Diluted weighted average shares is calculated as basic weighted average shares plus the effect, calculated using the treasury stock method, of assuming that restricted share units and performance share units have vested. The following table provides a reconciliation between the Company's basic weighted average number of common shares outstanding to its diluted weighted average number of common shares outstanding: (In thousands, except per share data) Three Months Ended Nine Months Ended 2021 2020 2021 2020 Weighted average number of common shares outstanding, basic 53,982 53,889 53,955 53,854 Dilutive effect of securities: Restricted Share Units 92 29 84 41 Performance Share Units 4 — 3 1 Weighted average number of common shares outstanding, diluted 54,078 53,918 54,042 53,896 Effect of dilutive shares on earnings (loss) per share $ — $ — $ (0.01) $ — The diluted weighted average number of common shares outstanding for the three and nine months ended September 30, 2021 excludes approximately 37,000 and 25,000, respectively, of common share equivalents issuable under the Company's stock compensation plans, as compared to approximately 177,000 and 119,000 during the same respective periods of 2020, as their effect would have been antidilutive. Dilutive common share equivalents are reflected in the earnings (loss) per share calculation while antidilutive common share equivalents are not reflected in the earnings (loss) per share calculation. For the three and nine months ended September 30, 2020, all incremental common share equivalents were not included in the computation of diluted earnings (loss) per share because to do so would have been antidilutive. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2021 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information ProAssurance's segments are based on the Company's internal management reporting structure for which financial results are regularly evaluated by the Company's CODM to determine resource allocation and assess operating performance. The Company operates in five segments that are organized around the nature of the products and services provided: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, Lloyd's Syndicates and Corporate. The Company continually assesses its internal management reporting structure and information evaluated by its CODM to determine whether any changes have occurred that would impact its segment reporting structure. During the second quarter of 2021, the Company reevaluated its segment reporting structure due to the acquisition of NORCAL (see Note 2) and concluded no changes in the Company's segments were required as a result of the acquisition as there was no change to the Company's internal management reporting structure. As NORCAL is an underwriter of healthcare professional liability insurance, NORCAL's underwriting results, since the date of acquisition, are included in the Specialty P&C segment while NORCAL's investment results, since the date of acquisition, are included in the Corporate segment. A description of each of ProAssurance's five operating and reportable segments follows. Specialty P&C includes professional liability insurance and medical technology liability insurance. Professional liability insurance is primarily comprised of medical professional liability products offered to healthcare providers and institutions. The Specialty P&C segment's professional liability insurance also includes the business acquired through the NORCAL transaction that closed on May 5, 2021, as previously discussed. The Company also offers, to a lesser extent, professional liability insurance 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. In addition, the Company also offers custom alternative risk solutions including loss portfolio transfers, assumed reinsurance and captive cell programs for healthcare professional liability insureds. For the alternative market captive cell programs, the Specialty P&C segment cedes either all or a portion of the premium to certain SPCs in the Company's Segregated Portfolio Cell Reinsurance segment. Workers' Compensation Insurance includes workers' compensation insurance products which are provided primarily to employers with 1,000 or fewer employees. The segment's products include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible policies and alternative market solutions. Alternative market program premiums include program design, fronting, claims administration, risk management, SPC rental, asset management and SPC management services. Alternative market program premiums are 100% ceded to either SPCs in the Company's Segregated Portfolio Cell Reinsurance segment or, to a limited extent, to a captive insurer unaffiliated with ProAssurance. Segregated Portfolio Cell Reinsurance includes the results (underwriting profit or loss, plus investment results, net of U.S. federal income taxes) of SPCs at Inova Re and Eastern Re, the Company's Cayman Islands SPC operations. Each SPC is owned, fully or in part, by an agency, group or association, and the results of the SPCs are attributable to the participants of that cell. ProAssurance participates to a varying degree in the results of selected SPCs. SPC results attributable to external cell participants are reflected as SPC dividend expense (income) in the Segregated Portfolio Cell Reinsurance segment and in ProAssurance's Condensed Consolidated Statements of Income and Comprehensive Income. In addition, the Segregated Portfolio Cell Reinsurance segment includes the investment results of the SPCs as the investments are solely for the benefit of the cell participants, and investment results attributable to external cell participants are reflected in SPC dividend expense (income). The SPCs assume workers' compensation insurance, healthcare professional liability insurance or a combination of the two from the Company's Workers' Compensation Insurance and Specialty P&C segments. Lloyd's Syndicates includes the results from ProAssurance's participation in Lloyd's of London Syndicate 1729 and Syndicate 6131. The results of this segment are normally reported on a quarter lag, 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. Syndicate 1729 underwrites risks over a wide range of property and casualty insurance and reinsurance lines in both the U.S. and international markets while Syndicate 6131 focuses on contingency and specialty property business, also within the U.S. and international markets. To support and grow the Company's core insurance operations, ProAssurance decreased its participation in the results of Syndicate 1729 for the 2021 underwriting year to 5% from 29%. Syndicate 6131 is an SPA that underwrites on a quota share basis with Syndicate 1729. Effective July 1, 2020, Syndicate 6131 entered into a six-month quota share reinsurance agreement with an unaffiliated insurer. Under this agreement, Syndicate 6131 ceded essentially half of the premium assumed from Syndicate 1729 to the unaffiliated insurer; the agreement was non-renewed on January 1, 2021 and the Company decreased its participation in the results of Syndicate 6131 to 50% from 100% for the 2021 underwriting year. Due to the quarter lag, the change in the Company's participation in the results of Syndicates 1729 and 6131 was not reflected in its results until the second quarter of 2021. Corporate includes ProAssurance's investment operations, including the investment operations of NORCAL since the date of acquisition and excludes those reported in the Company's Segregated Portfolio Cell Reinsurance and Lloyd's Syndicates segments, interest expense and U.S. income taxes. 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 described in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2020 report on Form 10-K. ProAssurance evaluates the performance of its Specialty P&C and Workers' Compensation Insurance segments based on before tax underwriting profit or loss. ProAssurance evaluates the performance of its Segregated Portfolio Cell Reinsurance segment based on operating profit or loss, which includes investment results of investment assets solely allocated to SPC operations, net of U.S. federal income taxes. Performance of the Lloyd's Syndicates segment is evaluated based on operating profit or loss, which includes 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, other than the investments discussed above that are solely allocated to the Segregated Portfolio Cell Reinsurance and Lloyd's Syndicates segments, and other assets are not managed at the segment level. The tabular information that follows shows the financial results of the Company's reportable segments reconciled to results reflected in the Condensed Consolidated Statements of Income and Comprehensive Income. ProAssurance does not consider goodwill or intangible asset impairments, a gain on bargain purchase or transaction-related costs for completed business combinations, including any related tax impacts, in assessing the financial performance of its operating and reportable segments, and thus are included in the reconciliation of segment results to consolidated results. Financial results by segment were as follows: Three Months Ended September 30, 2021 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 203,716 $ 42,235 $ 15,344 $ 10,953 $ — $ — $ 272,248 Net investment income — — 193 431 18,654 — 19,278 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 15,244 — 15,244 Net realized gains (losses) — — 204 35 291 — 530 Other income (loss) (1) 860 437 — 283 1,542 (722) 2,400 Net losses and loss adjustment expenses (176,490) (31,364) (8,693) (6,846) — — (223,393) Underwriting, policy acquisition and operating expenses (1) (36,147) (13,521) (4,758) (3,909) (6,872) 722 (64,485) SPC U.S. federal income taxes (2) — — (431) — — — (431) SPC dividend (expense) income — — (1,320) — — — (1,320) Interest expense — — — — (5,814) — (5,814) Income tax benefit (expense) — — — — (219) — (219) Segment results $ (8,061) $ (2,213) $ 539 $ 947 $ 22,826 $ — 14,038 Reconciliation of segments to consolidated results: Transaction-related costs, net (3) (1,838) Net income (loss) $ 12,200 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,956 $ 903 $ 397 $ 17 $ 6,973 $ — $ 10,246 Nine Months Ended September 30, 2021 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 487,963 $ 122,872 $ 47,500 $ 40,263 $ — $ — $ 698,598 Net investment income — — 620 1,677 49,416 — 51,713 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 33,959 — 33,959 Net realized gains (losses) — — 2,772 9 17,431 — 20,212 Other income (expense) (1) 2,800 1,730 2 864 3,786 (2,320) 6,862 Net losses and loss adjustment expenses (417,890) (85,323) (26,560) (25,257) — — (555,030) Underwriting, policy acquisition and operating expenses (1) (91,369) (38,519) (15,078) (15,219) (19,050) 2,320 (176,915) SPC U.S. federal income tax expense (2) — — (1,291) — — — (1,291) SPC dividend (expense) income — — (5,926) — — — (5,926) Interest expense — — — — (14,203) — (14,203) Income tax benefit (expense) — — — — (1,369) — (1,369) Segment results $ (18,496) $ 760 $ 2,039 $ 2,337 $ 69,970 $ — 56,610 Reconciliation of segments to consolidated results: Gain on bargain purchase 74,408 Transaction-related costs, net (3) (19,034) Net income (loss) $ 111,984 Significant non-cash items: Gain on bargain purchase $ 74,408 Depreciation and amortization, net of accretion $ 7,261 $ 2,709 $ 1,074 $ 49 $ 15,473 $ — $ 26,566 Three Months Ended September 30, 2020 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 117,849 $ 42,516 $ 16,052 $ 18,142 $ — $ — $ 194,559 Net investment income — — 273 951 15,700 — 16,924 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 4,853 — 4,853 Net realized gains (losses) — — 1,495 489 6,854 — 8,838 Other income (expense) (1) 726 441 12 411 775 (642) 1,723 Net losses and loss adjustment expenses (102,951) (26,455) (6,858) (9,317) — — (145,581) Underwriting, policy acquisition and operating expenses (1) (28,074) (14,983) (5,036) (6,938) (5,044) 642 (59,433) SPC U.S. federal income tax expense (2) — — (871) — — — (871) SPC dividend (expense) income — — (3,854) — — — (3,854) Interest expense — — — — (3,881) — (3,881) Income tax benefit (expense) — — — — (2,141) — (2,141) Segment results $ (12,450) $ 1,519 $ 1,213 $ 3,738 $ 17,116 $ — 11,136 Reconciliation of segments to consolidated results: Goodwill impairment (161,115) Net income (loss) $ (149,979) Significant non-cash items: Goodwill impairment $ 161,115 Depreciation and amortization, net of accretion $ 2,669 $ 923 $ 210 $ 3 $ 2,540 $ — $ 6,345 Nine Months Ended September 30, 2020 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 365,305 $ 129,437 $ 49,780 $ 61,186 $ — $ — $ 605,708 Net investment income — — 832 3,236 51,809 — 55,877 Equity in earnings (loss) of unconsolidated subsidiaries — — — — (22,065) — (22,065) Net realized gains (losses) — — 894 1,100 (1,844) — 150 Other income (expense) (1) 3,515 1,717 203 219 1,813 (1,799) 5,668 Net losses and loss adjustment expenses (373,442) (84,648) (23,890) (39,432) — — (521,412) Underwriting, policy acquisition and operating expenses (1) (82,894) (42,604) (15,474) (23,373) (17,632) 1,799 (180,178) SPC U.S. federal income tax expense (2) — — (1,573) — — — (1,573) SPC dividend (expense) income — — (7,988) — — — (7,988) Interest expense — — — — (11,725) — (11,725) Income tax benefit (expense) — — — 29 48,592 — 48,621 Segment results $ (87,516) $ 3,902 $ 2,784 $ 2,965 $ 48,948 $ — (28,917) Reconciliation of segments to consolidated results: Goodwill impairment (161,115) Net income (loss) $ (190,032) Significant non-cash items: Goodwill impairment $ 161,115 Depreciation and amortization, net of accretion $ 5,930 $ 2,771 $ 371 $ 26 $ 7,070 $ — $ 16,168 (1) Certain fees for services provided to the SPCs at Inova Re and Eastern Re are recorded as expenses within the Segregated Portfolio Cell Reinsurance segment and as other income within the Workers' Compensation Insurance segment. These fees are primarily SPC rental fees and are eliminated between segments in consolidation. (2) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs. (3) Represents the transaction-related costs, after-tax, associated with the acquisition of NORCAL. Pre-tax transaction-related costs of $2.3 million and $23.5 million were included as a component of consolidated operating expense and the associated income tax benefit of $0.5 million and $4.5 million were included as a component of consolidated income tax benefit (expense) on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021, respectively. The following table provides detailed information regarding ProAssurance's gross premiums earned by product as well as a reconciliation to net premiums earned. All gross premiums earned are from external customers except as noted. ProAssurance's insured risks are primarily within the U.S. Three Months Ended September 30 Nine Months Ended September 30 (In thousands) 2021 2020 2021 2020 Specialty P&C Segment Gross premiums earned: HCPL $ 184,893 $ 101,785 $ 432,722 $ 317,088 Small Business Unit 26,958 26,372 78,789 77,937 Medical Technology Liability 9,933 8,749 28,484 25,918 Other 172 138 494 671 Ceded premiums earned (18,240) (19,195) (52,526) (56,309) Segment net premiums earned 203,716 117,849 487,963 365,305 Workers' Compensation Insurance Segment Gross premiums earned: Traditional business 45,331 45,620 130,767 138,628 Alternative market business 16,633 17,187 50,539 53,221 Ceded premiums earned (19,729) (20,291) (58,434) (62,412) Segment net premiums earned 42,235 42,516 122,872 129,437 Segregated Portfolio Cell Reinsurance Segment Gross premiums earned: Workers' compensation (1) 15,846 16,476 48,215 51,178 HCPL (2) 1,649 1,699 5,675 5,099 Ceded premiums earned (2,151) (2,123) (6,390) (6,497) Segment net premiums earned 15,344 16,052 47,500 49,780 Lloyd's Syndicates Segment Gross premiums earned: Property and casualty 13,262 22,777 50,282 77,309 Ceded premiums earned (2,309) (4,635) (10,019) (16,123) Segment net premiums earned 10,953 18,142 40,263 61,186 Consolidated net premiums earned $ 272,248 $ 194,559 $ 698,598 $ 605,708 (1) Premium for all periods is assumed from the Workers' Compensation Insurance segment. (2) Premium for all periods is assumed from the Specialty P&C segment. |
Benefit Plans
Benefit Plans | 9 Months Ended |
Sep. 30, 2021 | |
Retirement Benefits [Abstract] | |
Benefit Plans | Benefit Plans ProAssurance assumed a defined benefit pension plan on May 5, 2021 as a result of its acquisition of NORCAL (see Note 2 for additional information), which covers substantially all NORCAL employees (except those that were previous employees of Medicus Insurance Company and FD Insurance Company, employees of PPM RRG as well as new hires after December 31, 2013). Benefits are based on years of service and the employee’s average of the highest five years of annual compensation. Annual contributions to the defined benefit pension plan are not less than the minimum funding standards outlined in the Employee Retirement Income Security Act of 1974, as amended. ProAssurance makes contributions to the defined benefit pension plan with the goal of ensuring that it is adequately funded to meet its future obligations. ProAssurance did not make any contributions to the pension plan during the period from May 5, 2021 to September 30, 2021 and does not anticipate making any contributions for the remainder of 2021. The defined benefit pension plan no longer has future service accruals or compensation increases because this plan was frozen effective December 31, 2015. The weighted average discount rate used to determine the projected benefit obligation of the defined benefit pension plan as of the date of the NORCAL acquisition on May 5, 2021 was 2.95%. The weighted average discount rate and the weighted average expected return on plan assets used to determine net periodic benefit cost (credit) for the period from May 5, 2021 to December 31, 2021 was 2.95% and 3.75%, respectively. The components of the net periodic benefit cost (credit) for the three and nine months ended September 30, 2021 were as follows: ($ in thousands) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Components of net periodic benefit cost (credit): Interest cost $ 779 1,253 Expected return on Plan assets (896) (1,538) Total net periodic benefit cost (credit)* $ (117) $ (285) *Net periodic benefit cost (credit) is included as a component of operating expense on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of ProAssurance Corporation, its wholly owned subsidiaries and VIEs in which ProAssurance is the primary beneficiary (ProAssurance, PRA or the Company). See Note 13 for more information on ProAssurance's VIE interests. The financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. ProAssurance’s results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes contained in ProAssurance’s December 31, 2020 report on Form 10-K. ProAssurance operates in five reportable segments as follows: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, Lloyd's Syndicates and Corporate. For more information on the Company's segment reporting, including the nature of products and services provided and financial information by segment, refer to Note 15. Certain insignificant prior period amounts have been reclassified to conform to the current period presentation. |
Accounting Policies | Accounting Policies The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosures related to these amounts at the date of the financial statements. The Company evaluates these estimates and assumptions on an ongoing basis based on current and historical developments, market conditions, industry trends and other information that the Company believes to be reasonable under the circumstances, including the potential impacts of the COVID-19 pandemic (see "Item 1A, Risk Factors" in ProAssurance's December 31, 2020 report on Form 10-K for additional information). The Company can make no assurance that actual results will conform to its estimates and assumptions; reported results of operations may be materially affected by changes in these estimates and assumptions. Except as described 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, 2020 report on Form 10-K. |
Business Combination, Contingent Consideration, Accounting Policies Acquired, and Other Assets and Liabilities | Business Combinations The Company accounted for its acquisition of NORCAL in accordance with GAAP relating to business combinations which required management to make certain estimates and assumptions including determining the fair value of the non-cash components of the acquisition consideration and the acquisition date fair values of the acquired tangible and identifiable intangible assets and assumed liabilities of NORCAL. Subsequent to the preliminary valuation of the non-cash components of the purchase consideration and net assets acquired, any adjustment identified associated with the purchase price allocation will be evaluated to determine whether the adjustment represents a measurement period adjustment in accordance with GAAP. If the adjustment is deemed to be a measurement period adjustment and is identified within one year of the acquisition, then the measurement period adjustment will be recorded in the current reporting period with a corresponding adjustment to the gain on bargain purchase. Contingent Consideration Accounting Policies Acquired The significant accounting policies adopted as a result of the acquisition of NORCAL on May 5, 2021 and followed by ProAssurance in making estimates that materially affect financial reporting are summarized below. Other Assets and Liabilities Other assets include the acquired NORCAL investments in a deferred compensation rabbi trust which are carried at fair value. These rabbi trust assets are related to other liabilities associated with funded deferred compensation agreements with NORCAL employees and previous members of NORCAL's Board of Directors. Other liabilities include the assumed NORCAL liability for deferred compensation balances associated with the rabbi trust assets and the reported balance is determined based on the amount of elective deferrals and employer contributions adjusted for periodic changes in fair value of the participant balances based on the performance of the funds selected by the participants. ProAssurance recognizes the net change in the fair value of the rabbi trust assets and associated deferred compensation liabilities as a component of net investment income during the period of change. |
VOBA | VOBA VOBA is based on actuarially determined projections and reflects the estimated fair value of in-force contracts acquired in a business combination. VOBA is recorded as an asset when the in-force contracts acquired are expected to generate underwriting income and is recorded as a liability when the in-force contracts acquired are expected to generate an underwriting loss. VOBA liabilities (negative VOBA) are recorded as a component of the reserve for losses and loss adjustment expenses on the Condensed Consolidated Balance Sheets. To the extent negative VOBA relates to unearned premium, it is amortized over a period in proportion to the earn-out of the premium as a reduction to current accident year net losses and loss adjustment expenses. To the extent negative VOBA relates to the DDR reserve, it is amortized over a period in proportion to the |
Pension | Pension As a result of the NORCAL acquisition, the Company sponsors a frozen defined benefit pension plan which covers substantially all NORCAL employees (except those that were previous employees of Medicus Insurance Company and FD Insurance Company, employees of PPM RRG as well as new hires after December 31, 2013). Accounting for pension benefits requires the use of assumptions for the valuation of the PBO and the expected performance of the plan assets. The Company uses December 31 as the measurement date for calculating its obligation related to this defined benefit pension plan. The PBO for pension benefits represents the present value of all future benefits earned as of the measurement date for vested and non-vested employees. At each measurement date, the Company reviews the various assumptions impacting the amounts recorded for the pension plan including the discount rates, which impacts the recorded value of the PBO and interest costs, and the expected return on plan assets. To estimate the discount rate at the measurement date, the Company uses a bond yield curve model, developed based on pricing and yield information for high quality corporate bonds. The assumption for the expected return on plan assets is based on the anticipated returns that will be earned by the portfolio over the long term. The expected return is influenced, but not determined, by historical portfolio performance. |
Accounting Changes Adopted and Not Yet Adopted | Accounting Changes Adopted Clarifying the Interactions between Investments - Equity Securities, Investments - Equity Method and Joint Ventures, and Derivatives and Hedging (ASU 2020-01) Effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, the FASB amended guidance that clarifies the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ProAssurance adopted the guidance beginning January 1, 2021, and adoption had no material effect on ProAssurance's results of operations, financial position or cash flows. Accounting Changes Not Yet Adopted ProAssurance is not aware of any accounting changes not yet adopted as of September 30, 2021 that could have a material impact on its results of operations, financial position or cash flows. |
Credit Losses | Credit Losses ProAssurance's premiums receivable and reinsurance receivables are exposed to credit losses but to-date have not experienced any significant amount of credit losses. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for further information on how the Company estimates and measures expected credit losses on its premiums receivable and reinsurance receivables. ProAssurance's available-for-sale fixed maturity investments are also exposed to credit losses. See Note 4 for information on ProAssurance's allowance for expected credit losses on its available-for-sale fixed maturities. ProAssurance’s premiums receivable on its Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 is reported net of the related allowance for expected credit losses of $7.7 million and $6.1 million, respectively. The following tables present a roll forward of the allowance for expected credit losses related to the Company's premiums receivable for the three and nine months ended September 30, 2021 and 2020. (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, July 1, 2021 $ 288,589 $ 7,729 Provision for expected credit losses 48 Write offs charged against the allowance (125) Recoveries of amounts previously written off 24 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, December 31, 2020 $ 201,395 $ 6,131 Initial allowance recognized in the period for NORCAL premiums receivable (1) 2,137 Provision for expected credit losses 505 Write offs charged against the allowance (1,243) Recoveries of amounts previously written off 146 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Allowance for Expected Credit Losses Balance, July 1, 2020 $ 234,840 $ 6,627 Provision for expected credit losses 123 Write offs charged against the allowance (404) Recoveries of amounts previously written off 270 Balance, September 30, 2020 $ 237,894 $ 6,616 (In thousands) Premiums Allowance for Expected Credit Losses Balance, December 31, 2019 $ 249,540 $ 1,590 Cumulative-effect adjustment, before tax (2) 5,160 Provision for expected credit losses 616 Write offs charged against the allowance (1,078) Recoveries of amounts previously written off 328 Balance, September 30, 2020 $ 237,894 $ 6,616 (1) Represents an initial allowance for expected credit losses recognized during the second quarter of 2021 for NORCAL's premiums receivable to conform NORCAL to ProAssurance's accounting policies. See Note 2 for more information. (2) Due to the adoption of ASU 2016-13, ProAssurance recorded a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020 to increase its consolidated allowance for expected credit losses related to its premiums receivable. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K. |
Fair Value Measurement | 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 as of September 30, 2021 and December 31, 2020. 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. Fixed maturities, trading are held by the Lloyd's Syndicates segment and include U.S. Treasury obligations, corporate debt with multiple observable inputs and other asset-backed securities. These securities were valued using the respective valuation methodologies discussed above for each security type. Equity investments were securities not traded on an exchange on the valuation date. The securities were valued using the most recently available quotes for the securities. 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. Under the terms of the interest rate cap agreement, ProAssurance paid a premium of $2 million 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%. Level 3 Valuations Below is a summary description of the valuation methodologies used as well as quantitative information regarding securities in the Level 3 category, by security type: 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 determined by management if not available. At September 30, 2021, 100% of the securities were rated and the average rating was BBB. At December 31, 2020, 100% of the securities were rated and the average rating was BB+. 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 September 30, 2021, 95% of the securities were rated and the average rating was A. At December 31, 2020, 51% of the securities were rated and the average rating was AA-. Equity Securities consisted of a preferred stock and a mutual fund for which limited observable inputs were available at September 30, 2021. The equity securities were primarily priced using broker/dealer quotes and internal models with some inputs that are unobservable. Other liabilities consisted of the contingent consideration which is a portion of the purchase price for the NORCAL acquisition and is recorded at fair value each reporting period. The ultimate payout under the contingent consideration is dependent on the after-tax development of NORCAL's ultimate net losses over a three-year period beginning December 31, 2020 and may total up to $84 million. See further discussion around the contingent consideration in Note 2 and Note 9. |
Goodwill | Goodwill is recognized in conjunction with business acquisitions as the excess of the purchase consideration for the business acquisition over the fair value of identifiable assets acquired and liabilities assumed. The fair value of identifiable assets acquired and liabilities assumed, and thus goodwill, is subject to redetermination within a measurement period of up to one year following completion of a business acquisition. Goodwill is tested for impairment annually or more frequently if circumstances indicate an impairment may have occurred. The date of the Company's annual goodwill impairment test is October 1. Impairment of goodwill is tested at the reporting unit level, which is consistent with the Company's reportable segments identified in Note 15. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K for further information on how the Company tests goodwill for impairment. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Rollforward of the Allowance for Expected Credit Losses Related to Premiums Receivable | The following tables present a roll forward of the allowance for expected credit losses related to the Company's premiums receivable for the three and nine months ended September 30, 2021 and 2020. (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, July 1, 2021 $ 288,589 $ 7,729 Provision for expected credit losses 48 Write offs charged against the allowance (125) Recoveries of amounts previously written off 24 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Receivable, Net Allowance for Expected Credit Losses Balance, December 31, 2020 $ 201,395 $ 6,131 Initial allowance recognized in the period for NORCAL premiums receivable (1) 2,137 Provision for expected credit losses 505 Write offs charged against the allowance (1,243) Recoveries of amounts previously written off 146 Balance, September 30, 2021 $ 288,819 $ 7,676 (In thousands) Premiums Allowance for Expected Credit Losses Balance, July 1, 2020 $ 234,840 $ 6,627 Provision for expected credit losses 123 Write offs charged against the allowance (404) Recoveries of amounts previously written off 270 Balance, September 30, 2020 $ 237,894 $ 6,616 (In thousands) Premiums Allowance for Expected Credit Losses Balance, December 31, 2019 $ 249,540 $ 1,590 Cumulative-effect adjustment, before tax (2) 5,160 Provision for expected credit losses 616 Write offs charged against the allowance (1,078) Recoveries of amounts previously written off 328 Balance, September 30, 2020 $ 237,894 $ 6,616 (1) Represents an initial allowance for expected credit losses recognized during the second quarter of 2021 for NORCAL's premiums receivable to conform NORCAL to ProAssurance's accounting policies. See Note 2 for more information. (2) Due to the adoption of ASU 2016-13, ProAssurance recorded a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020 to increase its consolidated allowance for expected credit losses related to its premiums receivable. See Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2020 report on Form 10-K. |
Schedule of Other Liabilities | Other liabilities consisted of the following: (In thousands) September 30, 2021 December 31, 2020 SPC dividends payable $ 64,472 $ 68,865 Unpaid shareholder dividends 2,700 2,694 Deferred compensation liabilities 51,456 30,334 Contingent consideration 24,000 — All other 136,648 80,146 Total other liabilities $ 279,276 $ 182,039 |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The preliminary allocation of acquisition consideration is shown in the table below. (In thousands) Fixed maturities, available for sale $ 1,100,058 Equity investments, available for sale 374,484 Short-term investments 61,289 Business owned life insurance 12,581 Investment in unconsolidated subsidiaries 26,948 Other investments 32,461 Cash and cash equivalents 28,233 Premiums receivable 110,905 Receivable from reinsurers on paid losses and loss adjustment expenses 266 Receivable from reinsurers on unpaid losses and loss adjustment expenses 93,342 Prepaid reinsurance premiums 9,238 Deferred tax asset, net 46,759 Operating lease ROU assets 4,385 Intangible assets 14,000 Other assets 38,648 Reserve for losses and loss adjustment expenses (1,182,445) Unearned premiums (178,400) Reinsurance premiums payable (12,981) Operating lease liabilities (5,275) Other liabilities (51,279) Total identifiable net assets acquired $ 523,217 Gain on bargain purchase (74,408) Total acquisition consideration $ 448,809 |
Schedule of Intangible Assets Acquired | Intangible assets acquired included the following: (In thousands) Estimated Fair Value on Acquisition Date Estimated Useful Life Trade name $ 1,000 3 Licenses 13,000 Indefinite Total $ 14,000 |
Schedule of Present Value of Future Insurance Profits, Expected Amortization | The following table reflects the fair value adjustment on the net reserve for losses and loss adjustment expenses, the negative net VOBA recorded on the assumed unearned premium and negative VOBA recorded on the DDR reserve, as well as the expected amortization of each for the five years following the acquisition. (In thousands) Amount at May 5, 2021 Estimated amortization period (years) Expected pre-tax amortization for year following the acquisition 2021 2022 2023 2024 2025 Thereafter Fair value adjustment on reserves, net (1) $ 38,701 7 $ 7,768 $ 10,595 $ 8,090 $ 5,083 $ 3,107 $ 4,058 Unearned premium VOBA, net (2) 11,676 1 6,737 4,939 — — — — DDR reserve VOBA (1) 3,467 15 139 224 243 243 243 2,375 Total $ 53,844 $ 14,644 $ 15,758 $ 8,333 $ 5,326 $ 3,350 $ 6,433 (1) Amortization will be recorded as a reduction to prior accident year net losses and loss adjustment expenses. (2) Amortization will be recorded as a reduction to current accident year net losses and loss adjustment expenses |
Schedule of Pro Forma Results | The following table provides Pro Forma Consolidated Results and Actual Consolidated Results for the three and nine months ended September 30, 2021 and 2020 as if the NORCAL transaction had occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the operating results that may have actually occurred had the acquisition of NORCAL been completed on January 1, 2020. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred to integrate the assets and operations of NORCAL. Three Months Ended September 30 Nine Months Ended September 30 (In thousands) 2021 2020 2021 2020 Revenue: ProAssurance Pro Forma Consolidated Results $ 305,927 $ 340,428 $ 930,350 $ 943,268 ProAssurance Actual Consolidated Results $ 309,700 $ 226,897 $ 811,344 $ 645,338 Net income (loss): ProAssurance Pro Forma Consolidated Results $ 13,366 $ (158,620) $ 58,692 $ (117,906) ProAssurance Actual Consolidated Results $ 12,200 $ (149,979) $ 111,984 $ (190,032) |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value of Assets | Fair values of assets measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 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. September 30, 2021 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 $ — $ 242,705 $ — $ 242,705 U.S. Government-sponsored enterprise obligations — 20,468 — 20,468 State and municipal bonds — 522,707 — 522,707 Corporate debt, multiple observable inputs — 1,943,401 — 1,943,401 Corporate debt, limited observable inputs — — 19,712 19,712 Residential mortgage-backed securities — 473,674 4,235 477,909 Agency commercial mortgage-backed securities — 14,942 — 14,942 Other commercial mortgage-backed securities — 219,024 — 219,024 Other asset-backed securities — 432,261 11,007 443,268 Fixed maturities, trading — 45,049 — 45,049 Equity investments Financial — 868 — 868 Utilities/Energy — — 69 69 Industrial — — 2,500 2,500 Bond funds 191,834 — — 191,834 All other 19,259 — — 19,259 Short-term investments 112,706 39,002 — 151,708 Other investments 1,864 104,978 — 106,842 Other assets — 601 — 601 Total assets categorized within the fair value hierarchy $ 325,663 $ 4,059,680 $ 37,523 4,422,866 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 251,675 Total assets at fair value $ 4,674,541 Liabilities: Other liabilities $ — $ — $ 24,000 $ 24,000 Total liabilities categorized within the fair value hierarchy $ — $ — $ 24,000 $ 24,000 December 31, 2020 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 $ — $ 107,059 $ — $ 107,059 U.S. Government-sponsored enterprise obligations — 12,261 — 12,261 State and municipal bonds — 332,920 — 332,920 Corporate debt, multiple observable inputs — 1,326,077 — 1,326,077 Corporate debt, limited observable inputs — — 3,265 3,265 Residential mortgage-backed securities — 274,509 2,032 276,541 Agency commercial mortgage-backed securities — 13,310 — 13,310 Other commercial mortgage-backed securities — 113,092 — 113,092 Other asset-backed securities — 266,345 6,661 273,006 Fixed maturities, trading — 48,456 — 48,456 Equity investments Financial 13,810 — — 13,810 Utilities/Energy 564 — — 564 Consumer oriented 1,262 — — 1,262 Industrial 2,240 — — 2,240 Bond funds 69,475 — — 69,475 All other 20,202 — — 20,202 Short-term investments 307,695 30,118 — 337,813 Other investments 1,509 42,607 — 44,116 Other assets — 329 — 329 Total assets categorized within the fair value hierarchy $ 416,757 $ 2,567,083 $ 11,958 2,995,798 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 12,548 Investment in unconsolidated subsidiaries 233,711 Total assets at fair value $ 3,242,057 |
Schedule of Quantitative Information Regarding Level 3 Valuations | Quantitative Information Regarding Level 3 Valuations Fair Value at ($ in thousands) September 30, 2021 December 31, 2020 Valuation Technique Unobservable Input Range Assets: Corporate debt, limited observable inputs $19,712 $3,265 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Residential mortgage-backed securities $4,235 $2,032 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Other asset-backed securities $11,007 $6,661 Market Comparable Comparability Adjustment 0% - 5% (2.5%) Discounted Cash Flows Comparability Adjustment 0% - 5% (2.5%) Equity securities $2,569 $— Discounted Cash Flows Comparability Adjustment 0% - 10% (5%) Liabilities: Other liabilities $24,000 $— Stochastic Model/Discounted Cash Flows N/A 0% - 10% (8%) |
Schedule of Fair Value Measurements - Level 3 Assets | The following tables present summary information regarding changes in the fair value of assets measured using Level 3 inputs. September 30, 2021 Level 3 Fair Value Measurements - Assets (In thousands) Corporate Debt Asset-backed Securities Equity Securities Other Investments Total Balance, June 30, 2021 $ 15,065 $ 9,857 $ 852 $ 2,222 $ 27,996 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net realized investment gains (losses) — — (2) (639) (641) Included in other comprehensive income 49 (74) 18 — (7) Purchases 10,881 12,666 2,500 — 26,047 Sales (284) (17) — — (301) Transfers in — — 69 — 69 Transfers out (5,999) (7,190) (868) (1,583) (15,640) Balance, September 30, 2021 $ 19,712 $ 15,242 $ 2,569 $ — $ 37,523 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ (1) $ (639) $ (640) September 30, 2021 Level 3 Fair Value Measurements - Assets (In thousands) Corporate Debt Asset-backed Securities Equity Securities Other Investments Total Balance, December 31, 2020 $ 3,265 $ 8,693 $ — $ — $ 11,958 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income 1 (2) — — (1) Net realized investment gains (losses) — (11) (1) (774) (786) Included in other comprehensive income 82 (171) 16 — (73) Purchases 24,971 28,026 9,083 205 62,285 Sales (461) (506) (5,730) — (6,697) Transfers in 858 — 69 2,152 3,079 Transfers out (9,004) (20,787) (868) (1,583) (32,242) Balance, September 30, 2021 $ 19,712 $ 15,242 $ 2,569 $ — $ 37,523 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ (1) $ (774) $ (775) September 30, 2020 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other Investments Total Balance, June 30, 2020 $ 3,117 $ 5,978 $ 1,568 $ 10,663 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net realized investment gains (losses) — (2) 143 141 Included in other comprehensive income (6) (58) — (64) Purchases 900 8,513 — 9,413 Sales (16) (99) — (115) Transfers out — (1,378) (1,711) (3,089) Balance, September 30, 2020 $ 3,995 $ 12,954 $ — $ 16,949 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ 143 $ 143 September 30, 2020 Level 3 Fair Value Measurements – Assets (In thousands) Corporate Debt Asset-backed Securities Other Investments Total Balance, December 31, 2019 $ 5,079 $ 2,992 $ 3,086 $ 11,157 Total gains (losses) realized and unrealized: Included in earnings, as a part of: Net investment income — (10) — (10) Net realized investment gains (losses) — (2) 151 149 Included in other comprehensive income 38 23 — 61 Purchases 900 13,341 — 14,241 Sales (2,173) (888) — (3,061) Transfers in 945 605 — 1,550 Transfers out (794) (3,107) (3,237) (7,138) Balance, September 30, 2020 $ 3,995 $ 12,954 $ — $ 16,949 Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end $ — $ — $ 151 $ 151 |
Schedule of Investments in LLCs and Limited Partnerships | The amount of ProAssurance's unfunded commitments related to these investments as of September 30, 2021 and fair values of these investments as of September 30, 2021 and December 31, 2020 were as follows: Unfunded Fair Value (In thousands) September 30, September 30, December 31, Equity investments: Mortgage fund (1) None $ — $ 12,548 Investment in unconsolidated subsidiaries: Private debt funds (2) $8,929 18,523 16,387 Long/short equity funds (3) None 533 596 Non-public equity funds (4) $38,713 144,539 138,357 Credit funds (5) $41,123 43,125 34,848 Strategy focused funds (6) $34,988 44,955 43,523 251,675 233,711 Total investments carried at NAV $ 251,675 $ 246,259 Below is additional information regarding each of the investments listed in the table above as of September 30, 2021. (1) This investment fund was focused on the structured mortgage market. The fund primarily invested 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) This investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent, while the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from three (3) This investment holds primarily long and short North American equities and targets absolute returns using strategies designed to take advantage of market opportunities. Redemptions are permitted; however, 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. (4) This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years. (5) This investment is comprised of multiple unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The remaining funds focus on private middle market company mezzanine and senior secured loans, opportunities across the credit spectrum, mortgage backed-loans, as well as various types of loan-backed investments. Three of the funds allow redemptions at any quarter-end with prior notice requirements that vary from 90 to 180 days, while another fund allows for redemptions with consent of the General Partner. The remaining funds do not allow redemptions. For the funds that do not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames throughout the remaining life of the funds. (6) This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is an LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. For both funds, redemptions are not permitted. Another fund is an LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LPs, one of which allows for redemption with prior notice. |
Schedule of Financial Instruments Not Measured at Fair Value | The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category. September 30, 2021 December 31, 2020 (In thousands) Carrying Fair Carrying Fair Financial assets: BOLI $ 80,821 $ 80,821 $ 67,847 $ 67,847 Other investments $ 3,170 $ 3,170 $ 2,952 $ 2,952 Other assets $ 39,584 $ 39,593 $ 31,128 $ 31,141 Financial liabilities: Senior notes due 2023* $ 250,000 $ 267,988 $ 250,000 $ 269,160 Mortgage Loans* $ — $ — $ 36,113 $ 36,113 Contribution Certificates $ 175,766 $ 178,728 $ — $ — Other liabilities $ 51,456 $ 51,456 $ 30,334 $ 30,334 * Carrying value excludes unamortized debt issuance costs. |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Available-For-Sale Fixed Maturities | Available-for-sale fixed maturities at September 30, 2021 and December 31, 2020 included the following: September 30, 2021 (In thousands) Amortized Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available-for-sale U.S. Treasury obligations $ 241,696 $ 1,681 $ 672 $ 242,705 U.S. Government-sponsored enterprise obligations 20,509 57 98 20,468 State and municipal bonds 513,111 11,155 1,559 522,707 Corporate debt 1,928,543 41,493 6,923 1,963,113 Residential mortgage-backed securities 475,368 5,513 2,972 477,909 Agency commercial mortgage-backed securities 14,531 460 49 14,942 Other commercial mortgage-backed securities 216,595 3,545 1,116 219,024 Other asset-backed securities 440,536 3,661 929 443,268 $ 3,850,889 $ 67,565 $ 14,318 $ 3,904,136 December 31, 2020 (In thousands) Amortized Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, available-for-sale U.S. Treasury obligations $ 104,097 $ — $ 2,985 $ 23 $ 107,059 U.S. Government-sponsored enterprise obligations 12,103 — 158 — 12,261 State and municipal bonds 316,022 — 16,937 39 332,920 Corporate debt 1,267,992 552 63,204 1,302 1,329,342 Residential mortgage-backed securities 269,752 — 7,171 382 276,541 Agency commercial mortgage-backed securities 12,623 — 687 — 13,310 Other commercial mortgage-backed securities 109,244 — 4,788 940 113,092 Other asset-backed securities 269,742 — 4,006 742 273,006 $ 2,361,575 $ 552 $ 99,936 $ 3,428 $ 2,457,531 |
Schedule of Available-For-Sale Securities by Contractual Maturity | The recorded cost basis and estimated fair value of available-for-sale fixed maturities at September 30, 2021, 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 $ 241,696 $ 19,945 $ 133,884 $ 86,726 $ 2,150 $ 242,705 U.S. Government-sponsored enterprise obligations 20,509 3,826 11,363 5,134 145 20,468 State and municipal bonds 513,111 15,273 174,664 188,717 144,053 522,707 Corporate debt 1,928,543 119,700 927,016 809,889 106,508 1,963,113 Residential mortgage-backed securities 475,368 477,909 Agency commercial mortgage-backed securities 14,531 14,942 Other commercial mortgage-backed securities 216,595 219,024 Other asset-backed securities 440,536 443,268 $ 3,850,889 $ 3,904,136 |
Schedule of Investments Held in an Unrealized Loss Position | The following tables provide summarized information with respect to investments held in an unrealized loss position at September 30, 2021 and December 31, 2020, including the length of time the investment had been held in a continuous unrealized loss position. September 30, 2021 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 $ 162,063 $ 672 $ 157,445 $ 582 $ 4,618 $ 90 U.S. Government-sponsored enterprise obligations 14,422 98 14,422 98 — — State and municipal bonds 194,740 1,559 192,610 1,467 2,130 92 Corporate debt 637,694 6,923 607,003 6,134 30,691 789 Residential mortgage-backed securities 284,636 2,972 276,253 2,732 8,383 240 Agency commercial mortgage-backed securities 4,040 49 4,040 49 — — Other commercial mortgage-backed securities 77,254 1,116 72,541 783 4,713 333 Other asset-backed securities 166,667 929 162,161 867 4,506 62 $ 1,541,516 $ 14,318 $ 1,486,475 $ 12,712 $ 55,041 $ 1,606 December 31, 2020 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 $ 14,390 $ 23 $ 14,390 $ 23 $ — $ — State and municipal bonds 6,416 39 6,416 39 — — Corporate debt 94,695 1,302 79,436 1,020 15,259 282 Residential mortgage-backed securities 34,928 382 34,509 381 419 1 Other commercial mortgage-backed securities 18,766 940 18,480 935 286 5 Other asset-backed securities 43,739 742 37,850 701 5,889 41 $ 212,934 $ 3,428 $ 191,081 $ 3,099 $ 21,853 $ 329 |
Schedule of a Roll Forward of Cumulative Credit Losses Recorded in Earnings Related to Impaired Debt Securities | The following tables present a roll forward of the allowance for expected credit losses on available-for-sale fixed maturities for the nine months ended September 30, 2021 and three and nine months ended September 30, 2020. There was no change in the allowance for expected credit losses for the three months ended September 30, 2021. Nine Months Ended September 30, 2021 (In thousands) Corporate Debt Total Balance, at December 31, 2020 $ 552 $ 552 Reductions related to: Securities sold during the period (552) (552) Balance, at September 30, 2021 $ — $ — Three Months Ended September 30, 2020 (In thousands) Corporate Debt Total Balance, at July 1, 2020 $ 1,408 $ 1,408 Reductions related to: Securities sold during the period (856) (856) Balance, at September 30, 2020 $ 552 $ 552 Nine Months Ended September 30, 2020 (In thousands) Corporate Debt Total Balance, at December 31, 2019 $ — $ — Additional credit losses related to securities for which: No allowance for credit losses has been previously recognized 1,508 1,508 Reductions related to: Securities sold during the period (956) (956) Balance, at September 30, 2020 $ 552 $ 552 |
Schedule of Other Information Regarding Available-For-Sale Securities | Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows: Three Months Ended September 30 Nine Months Ended September 30 (In millions) 2021 2020 2021 2020 Proceeds from sales (exclusive of maturities and paydowns) $ 85.4 $ 86.9 $ 343.5 $ 304.6 Purchases $ 404.1 $ 317.5 $ 1,169.6 $ 689.4 |
Schedule of Net Investment Income | Net investment income by investment category was as follows: Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Fixed maturities $ 20,121 $ 16,902 $ 53,969 $ 52,863 Equities 648 706 1,790 3,598 Short-term investments, including Other 587 405 1,539 2,386 BOLI 622 655 1,752 1,568 Investment fees and expenses (2,700) (1,744) (7,337) (4,538) Net investment income $ 19,278 $ 16,924 $ 51,713 $ 55,877 |
Schedule of Investment in Unconsolidated Subsidiaries | ProAssurance's investment in unconsolidated subsidiaries were as follows: September 30, 2021 Carrying Value (In thousands) Percentage September 30, December 31, Qualified affordable housing project tax credit partnerships See below $ 15,980 $ 27,719 All other investments, primarily investment fund LPs/LLCs See below 301,889 282,810 $ 317,869 $ 310,529 |
Schedule of Equity Method Investments | The results recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows: Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Qualified affordable housing project tax credit partnerships Losses recorded $ 3,591 $ 4,798 $ 11,712 $ 14,152 Tax credits recognized $ 3,226 $ 4,369 $ 9,880 $ 13,106 Historic tax credit partnership* Losses (gains) recorded $ — $ (264) $ (182) $ 1,820 Tax credits recognized (reversed) $ (100) $ 103 $ — $ 309 * ProAssurance holds a historic tax credit partnership which was fully amortized in 2020. ProAssurance received a distribution associated with this investment during the first quarter of 2021 as a result of positive cash flows from a project recognizing an operating gain. See further discussion on this investment in Note 3 of the Notes to the Consolidated Financial Statements in ProAssurance’s December 31, 2020 report on Form 10-K. |
Schedule of Net Realized Investment Gains (Losses) | Realized investment gains and losses are recognized on the first-in, first-out basis. The following table provides detailed information regarding net realized investment gains (losses): Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Total impairment losses: Corporate debt $ — $ — $ — $ (1,745) Portion of impairment losses recognized in other comprehensive income before taxes: Corporate debt — — — 237 Net impairment losses recognized in earnings — — — (1,508) Gross realized gains, available-for-sale fixed maturities 2,225 3,996 12,540 10,941 Gross realized (losses), available-for-sale fixed maturities (259) (396) (798) (2,266) Net realized gains (losses), trading fixed maturities (47) 116 17 268 Net realized gains (losses), equity investments 426 31 6,616 10,589 Net realized gains (losses), other investments 1,699 530 6,192 2,442 Change in unrealized holding gains (losses), trading fixed maturities (49) 373 (489) 637 Change in unrealized holding gains (losses), equity investments (945) 2,766 (2,182) (21,012) Change in unrealized holding gains (losses), convertible securities, carried at fair value (2,457) 1,170 (2,118) (190) Other (63) 252 434 249 Net realized investment gains (losses) $ 530 $ 8,838 $ 20,212 $ 150 |
Schedule of Cumulative Credit Losses Recorded in Earnings Related to Impaired Debt Securities for Which a Portion of the OTTI has been Recorded in OCI | The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the impairment was recorded in OCI. Three Months Ended Nine Months Ended (In thousands) 2021 2020 2021 2020 Balance, beginning of period $ — $ 1,322 $ 552 $ 470 Additional credit losses recognized during the period, related to securities for which: No impairment has been previously recognized — — — 1,064 Impairment has been previously recognized — — — 258 Reductions due to: Securities sold during the period (realized) — (770) (552) (1,240) Balance, September 30 $ — $ 552 $ — $ 552 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The table below presents the carrying amount of goodwill and accumulated impairment losses by reporting unit at September 30, 2021 and December 31, 2020: Reporting Unit (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Total Goodwill, gross as of January 1, 2020 $ 161,115 $ 44,110 $ 5,500 $ 210,725 Accumulated impairment losses* (161,115) — — (161,115) Goodwill, net as of December 31, 2020 — 44,110 5,500 49,610 Accumulated impairment losses — — — — Goodwill, net as of September 30, 2021 $ — $ 44,110 $ 5,500 $ 49,610 * Accumulated impairment losses in 2020 represent the pre-tax impairment loss of $161.1 million recognized during the third quarter of 2020 in relation to the Specialty P&C reporting unit. There were no other impairment losses taken prior to 2020. For additional information regarding ProAssurance's goodwill impairment in 2020, see Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Reserve for Losses and Loss A_2
Reserve for Losses and Loss Adjustment Expenses (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Insurance [Abstract] | |
Schedule of Reserve for Losses and Loss Adjustment Expenses | Activity in the reserve for losses and loss adjustment expenses is summarized as follows: (In thousands) Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Year Ended December 31, 2020 Balance, beginning of year $ 2,417,179 $ 2,346,526 $ 2,346,526 Less reinsurance recoverables on unpaid losses and loss adjustment expenses 385,087 390,708 390,708 Net balance, beginning of year 2,032,092 1,955,818 1,955,818 Net reserves acquired from NORCAL acquisition 1,089,103 — — Net losses: Current year (1)(2)(3) 582,235 555,969 711,846 Favorable development of reserves established in prior years, net (27,205) (34,557) (50,399) Total 555,030 521,412 661,447 Paid related to: Current year (62,276) (60,449) (83,204) Prior years (457,578) (400,930) (501,969) Total paid (519,854) (461,379) (585,173) Net balance, end of period 3,156,371 2,015,851 2,032,092 Plus reinsurance recoverables on unpaid losses and loss adjustment expenses 476,315 391,637 385,087 Balance, end of period $ 3,632,686 $ 2,407,488 $ 2,417,179 (1) Current year net losses for the nine months ended September 30, 2021 included $4.3 million of amortization of the negative VOBA associated with NORCAL's assumed unearned premium, which is being amortized over a period in proportion to the earn-out of the associated premium as a reduction to current accident year net losses (see Note 2). Additionally, current year net losses for the nine months ended September 30, 2021 included $5.1 million related to a Custom Physician tail policy in the Specialty P&C segment. (2) Current year net losses for the nine months ended September 30, 2021 included incurred losses of $2.9 million related to an assumed reinsurance arrangement entered into during the first quarter of 2021 in the Specialty P&C segment (see Note 5). (3) Current year net losses for the nine months ended September 30, 2020 and the year ended December 31, 2020 included the impact of a large national healthcare account in the Specialty P&C segment including losses of $60.0 million associated with a tail policy and $9.2 million of amortization of a related PDR. For additional information, see Note 7 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K. |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Leases [Abstract] | |
Schedule of Lease Cost | The following table provides a summary of the components of net lease expense as well as the reporting location in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021 and 2020. (In thousands) Location in the Condensed Consolidated Statements of Income and Comprehensive Income Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 Operating lease expense (1) Operating expense $ 1,425 $ 905 $ 3,577 $ 3,421 Sublease income (2) Other income (66) (42) (190) (118) Net lease expense $ 1,359 $ 863 $ 3,387 $ 3,303 (1) Includes short-term lease costs and variable lease costs, if applicable. For the three and nine months ended September 30, 2021 and 2020, no short-term lease costs were recognized and variable lease costs were nominal in amount. (2) Sublease income excludes rental income from owned properties of $0.6 million and $1.8 million during the three and nine months ended September 30, 2021, respectively, as compared to $0.7 million and $1.9 million during the same respective periods of 2020 which is included in other income. See “Item 2. Properties” in ProAssurance's December 31, 2020 report on Form 10-K for a listing of currently owned properties. The following table provides supplemental lease information for operating leases on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020. ($ in thousands) September 30, 2021 December 31, 2020 Operating lease ROU assets $ 20,253 $ 19,013 Operating lease liabilities $ 21,670 $ 20,116 Weighted-average remaining lease term 7.03 years 8.31 years Weighted-average discount rate 2.84 % 2.97 % The following table provides supplemental lease information for the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020. Nine Months Ended September 30 (In thousands) 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,145 $ 3,123 |
Schedule of Lease Liability | The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of September 30, 2021. Operating lease payments exclude $0.5 million of future minimum lease payments for one lease signed but not yet commenced as of September 30, 2021. This lease will commence in the fourth quarter of 2021 with a lease term of approximately ten years. (In thousands) 2021 $ 1,630 2022 5,169 2023 3,820 2024 2,475 2025 1,969 Thereafter 8,876 Total future minimum lease payments 23,939 Less: Imputed interest 2,269 Total operating lease liabilities $ 21,670 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt | ProAssurance’s outstanding debt consisted of the following: ($ in thousands) September 30, December 31, Senior Notes due 2023, unsecured, interest at 5.3% annually $ 250,000 $ 250,000 Contribution Certificates due 2031, interest at 3.0% (effective interest rate at 4.35%) annually beginning April 2022 175,766 — Mortgage Loans, outstanding borrowings were secured by first priority liens on two office buildings, and bore an interest rate of three-month LIBOR plus 1.325% (1.58% at December 31, 2020) determined quarterly — 36,113 Total principal 425,766 286,113 Less unamortized debt issuance costs 1,008 1,400 Debt less unamortized debt issuance costs $ 424,758 $ 284,713 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
Schedule of Components of AOCI, Net of Tax | The changes in the balance of each component of AOCI for the three and nine months ended September 30, 2021 and 2020 were as follows: (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, July 1, 2021 $ 53,168 $ — $ (96) $ 53,072 OCI, before reclassifications, net of tax (10,158) — — (10,158) Amounts reclassified from AOCI, net of tax (1,503) — 96 (1,407) Net OCI, current period (11,661) — 96 (11,565) Balance, September 30, 2021 $ 41,507 $ — $ — $ 41,507 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, December 31, 2020 $ 75,388 $ (57) $ (104) $ 75,227 OCI, before reclassifications, net of tax (24,655) — 8 (24,647) Amounts reclassified from AOCI, net of tax (9,226) 57 96 (9,073) Net OCI, current period (33,881) 57 104 (33,720) Balance, September 30, 2021 $ 41,507 $ — $ — $ 41,507 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, July 1, 2020 $ 61,912 $ (704) $ (78) $ 61,130 OCI, before reclassifications, net of tax 9,505 — (22) 9,483 Amounts reclassified from AOCI, net of tax (2,975) 647 — (2,328) Net OCI, current period 6,530 647 (22) 7,155 Balance, September 30, 2020 $ 68,442 $ (57) $ (100) $ 68,285 (In thousands) Unrealized Investment Gains (Losses) Non-credit Impairments Unrecognized Change in Defined Benefit Plan Liabilities* Accumulated Other Comprehensive Income (Loss) Balance, December 31, 2019 $ 37,333 $ (300) $ (78) $ 36,955 OCI, before reclassifications, net of tax 37,199 (187) (22) 36,990 Amounts reclassified from AOCI, net of tax (6,090) 430 — (5,660) Net OCI, current period 31,109 243 (22) 31,330 Balance, September 30, 2020 $ 68,442 $ (57) $ (100) $ 68,285 * The Company terminated Eastern's defined benefit plan, effective September 30, 2021, resulting in a settlement of the liabilities under the plan and the net loss previously reflected in AOCI being recognized in earnings for the three and nine months ended September 30, 2021. As a result of the NORCAL acquisition, the Company sponsors another frozen defined benefit plan (see Note 16). Due to the application of GAAP purchase accounting (see Note 2), there were no amounts recorded in AOCI related to this plan as of September 30, 2021 as the plan assets and benefit obligation are not remeasured on a quarterly basis. |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table provides a reconciliation between the Company's basic weighted average number of common shares outstanding to its diluted weighted average number of common shares outstanding: (In thousands, except per share data) Three Months Ended Nine Months Ended 2021 2020 2021 2020 Weighted average number of common shares outstanding, basic 53,982 53,889 53,955 53,854 Dilutive effect of securities: Restricted Share Units 92 29 84 41 Performance Share Units 4 — 3 1 Weighted average number of common shares outstanding, diluted 54,078 53,918 54,042 53,896 Effect of dilutive shares on earnings (loss) per share $ — $ — $ (0.01) $ — |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | The tabular information that follows shows the financial results of the Company's reportable segments reconciled to results reflected in the Condensed Consolidated Statements of Income and Comprehensive Income. ProAssurance does not consider goodwill or intangible asset impairments, a gain on bargain purchase or transaction-related costs for completed business combinations, including any related tax impacts, in assessing the financial performance of its operating and reportable segments, and thus are included in the reconciliation of segment results to consolidated results. Financial results by segment were as follows: Three Months Ended September 30, 2021 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 203,716 $ 42,235 $ 15,344 $ 10,953 $ — $ — $ 272,248 Net investment income — — 193 431 18,654 — 19,278 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 15,244 — 15,244 Net realized gains (losses) — — 204 35 291 — 530 Other income (loss) (1) 860 437 — 283 1,542 (722) 2,400 Net losses and loss adjustment expenses (176,490) (31,364) (8,693) (6,846) — — (223,393) Underwriting, policy acquisition and operating expenses (1) (36,147) (13,521) (4,758) (3,909) (6,872) 722 (64,485) SPC U.S. federal income taxes (2) — — (431) — — — (431) SPC dividend (expense) income — — (1,320) — — — (1,320) Interest expense — — — — (5,814) — (5,814) Income tax benefit (expense) — — — — (219) — (219) Segment results $ (8,061) $ (2,213) $ 539 $ 947 $ 22,826 $ — 14,038 Reconciliation of segments to consolidated results: Transaction-related costs, net (3) (1,838) Net income (loss) $ 12,200 Significant non-cash items: Depreciation and amortization, net of accretion $ 1,956 $ 903 $ 397 $ 17 $ 6,973 $ — $ 10,246 Nine Months Ended September 30, 2021 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 487,963 $ 122,872 $ 47,500 $ 40,263 $ — $ — $ 698,598 Net investment income — — 620 1,677 49,416 — 51,713 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 33,959 — 33,959 Net realized gains (losses) — — 2,772 9 17,431 — 20,212 Other income (expense) (1) 2,800 1,730 2 864 3,786 (2,320) 6,862 Net losses and loss adjustment expenses (417,890) (85,323) (26,560) (25,257) — — (555,030) Underwriting, policy acquisition and operating expenses (1) (91,369) (38,519) (15,078) (15,219) (19,050) 2,320 (176,915) SPC U.S. federal income tax expense (2) — — (1,291) — — — (1,291) SPC dividend (expense) income — — (5,926) — — — (5,926) Interest expense — — — — (14,203) — (14,203) Income tax benefit (expense) — — — — (1,369) — (1,369) Segment results $ (18,496) $ 760 $ 2,039 $ 2,337 $ 69,970 $ — 56,610 Reconciliation of segments to consolidated results: Gain on bargain purchase 74,408 Transaction-related costs, net (3) (19,034) Net income (loss) $ 111,984 Significant non-cash items: Gain on bargain purchase $ 74,408 Depreciation and amortization, net of accretion $ 7,261 $ 2,709 $ 1,074 $ 49 $ 15,473 $ — $ 26,566 Three Months Ended September 30, 2020 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 117,849 $ 42,516 $ 16,052 $ 18,142 $ — $ — $ 194,559 Net investment income — — 273 951 15,700 — 16,924 Equity in earnings (loss) of unconsolidated subsidiaries — — — — 4,853 — 4,853 Net realized gains (losses) — — 1,495 489 6,854 — 8,838 Other income (expense) (1) 726 441 12 411 775 (642) 1,723 Net losses and loss adjustment expenses (102,951) (26,455) (6,858) (9,317) — — (145,581) Underwriting, policy acquisition and operating expenses (1) (28,074) (14,983) (5,036) (6,938) (5,044) 642 (59,433) SPC U.S. federal income tax expense (2) — — (871) — — — (871) SPC dividend (expense) income — — (3,854) — — — (3,854) Interest expense — — — — (3,881) — (3,881) Income tax benefit (expense) — — — — (2,141) — (2,141) Segment results $ (12,450) $ 1,519 $ 1,213 $ 3,738 $ 17,116 $ — 11,136 Reconciliation of segments to consolidated results: Goodwill impairment (161,115) Net income (loss) $ (149,979) Significant non-cash items: Goodwill impairment $ 161,115 Depreciation and amortization, net of accretion $ 2,669 $ 923 $ 210 $ 3 $ 2,540 $ — $ 6,345 Nine Months Ended September 30, 2020 (In thousands) Specialty P&C Workers' Compensation Insurance Segregated Portfolio Cell Reinsurance Lloyd's Syndicates Corporate Inter-segment Eliminations Consolidated Net premiums earned $ 365,305 $ 129,437 $ 49,780 $ 61,186 $ — $ — $ 605,708 Net investment income — — 832 3,236 51,809 — 55,877 Equity in earnings (loss) of unconsolidated subsidiaries — — — — (22,065) — (22,065) Net realized gains (losses) — — 894 1,100 (1,844) — 150 Other income (expense) (1) 3,515 1,717 203 219 1,813 (1,799) 5,668 Net losses and loss adjustment expenses (373,442) (84,648) (23,890) (39,432) — — (521,412) Underwriting, policy acquisition and operating expenses (1) (82,894) (42,604) (15,474) (23,373) (17,632) 1,799 (180,178) SPC U.S. federal income tax expense (2) — — (1,573) — — — (1,573) SPC dividend (expense) income — — (7,988) — — — (7,988) Interest expense — — — — (11,725) — (11,725) Income tax benefit (expense) — — — 29 48,592 — 48,621 Segment results $ (87,516) $ 3,902 $ 2,784 $ 2,965 $ 48,948 $ — (28,917) Reconciliation of segments to consolidated results: Goodwill impairment (161,115) Net income (loss) $ (190,032) Significant non-cash items: Goodwill impairment $ 161,115 Depreciation and amortization, net of accretion $ 5,930 $ 2,771 $ 371 $ 26 $ 7,070 $ — $ 16,168 (1) Certain fees for services provided to the SPCs at Inova Re and Eastern Re are recorded as expenses within the Segregated Portfolio Cell Reinsurance segment and as other income within the Workers' Compensation Insurance segment. These fees are primarily SPC rental fees and are eliminated between segments in consolidation. (2) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs. (3) Represents the transaction-related costs, after-tax, associated with the acquisition of NORCAL. Pre-tax transaction-related costs of $2.3 million and $23.5 million were included as a component of consolidated operating expense and the associated income tax benefit of $0.5 million and $4.5 million were included as a component of consolidated income tax benefit (expense) on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021, respectively. |
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 September 30 Nine Months Ended September 30 (In thousands) 2021 2020 2021 2020 Specialty P&C Segment Gross premiums earned: HCPL $ 184,893 $ 101,785 $ 432,722 $ 317,088 Small Business Unit 26,958 26,372 78,789 77,937 Medical Technology Liability 9,933 8,749 28,484 25,918 Other 172 138 494 671 Ceded premiums earned (18,240) (19,195) (52,526) (56,309) Segment net premiums earned 203,716 117,849 487,963 365,305 Workers' Compensation Insurance Segment Gross premiums earned: Traditional business 45,331 45,620 130,767 138,628 Alternative market business 16,633 17,187 50,539 53,221 Ceded premiums earned (19,729) (20,291) (58,434) (62,412) Segment net premiums earned 42,235 42,516 122,872 129,437 Segregated Portfolio Cell Reinsurance Segment Gross premiums earned: Workers' compensation (1) 15,846 16,476 48,215 51,178 HCPL (2) 1,649 1,699 5,675 5,099 Ceded premiums earned (2,151) (2,123) (6,390) (6,497) Segment net premiums earned 15,344 16,052 47,500 49,780 Lloyd's Syndicates Segment Gross premiums earned: Property and casualty 13,262 22,777 50,282 77,309 Ceded premiums earned (2,309) (4,635) (10,019) (16,123) Segment net premiums earned 10,953 18,142 40,263 61,186 Consolidated net premiums earned $ 272,248 $ 194,559 $ 698,598 $ 605,708 (1) Premium for all periods is assumed from the Workers' Compensation Insurance segment. (2) Premium for all periods is assumed from the Specialty P&C segment. |
Benefit Plans (Tables)
Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Retirement Benefits [Abstract] | |
Schedule of Components of Net Periodic Benefit Cost and Other Amounts Recognized in OCI | The components of the net periodic benefit cost (credit) for the three and nine months ended September 30, 2021 were as follows: ($ in thousands) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Components of net periodic benefit cost (credit): Interest cost $ 779 1,253 Expected return on Plan assets (896) (1,538) Total net periodic benefit cost (credit)* $ (117) $ (285) *Net periodic benefit cost (credit) is included as a component of operating expense on the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021. |
Basis of Presentation (Narrativ
Basis of Presentation (Narrative) (Details) $ in Thousands | 9 Months Ended | |||||
Sep. 30, 2021USD ($)segment | Jun. 30, 2021USD ($) | Dec. 31, 2020USD ($) | Sep. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Number of reportable segments | segment | 5 | |||||
Premium receivable, allowance for credit loss | $ | $ 7,676 | $ 7,729 | $ 6,131 | $ 6,616 | $ 6,627 | $ 1,590 |
Basis of Presentation (Premium
Basis of Presentation (Premium Receivable Expected Credit Losses) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Jun. 30, 2021 | Dec. 31, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Premiums Receivable, Net | $ 288,819 | $ 237,894 | $ 288,819 | $ 237,894 | $ 288,589 | $ 201,395 | $ 234,840 | $ 249,540 |
Premium Receivable, Allowance for Credit Loss [Roll Forward] | ||||||||
Premium receivable, allowance for credit loss, beginning balance | 7,729 | 6,627 | 6,131 | 1,590 | ||||
Initial allowance recognized in the period for NORCAL premium receivable | 2,137 | |||||||
Provision for expected credit losses | 48 | 123 | 505 | 616 | ||||
Write offs charged against the allowance | (125) | (404) | (1,243) | (1,078) | ||||
Recoveries of amounts previously written off | 24 | 270 | 146 | 328 | ||||
Premium receivable, allowance for credit loss, ending balance | $ 7,676 | $ 6,616 | $ 7,676 | 6,616 | ||||
Cumulative-effect adjustment | ||||||||
Premium Receivable, Allowance for Credit Loss [Roll Forward] | ||||||||
Premium receivable, allowance for credit loss, beginning balance | $ 5,160 |
Basis of Presentation (Other Li
Basis of Presentation (Other Liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 | Sep. 30, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
SPC dividends payable | $ 64,472 | $ 68,865 | |
Unpaid shareholder dividends | 2,700 | 2,694 | $ 2,694 |
Deferred compensation liabilities | 51,456 | 30,334 | |
Contingent consideration | 24,000 | 0 | $ 0 |
All other | 136,648 | 80,146 | |
Total other liabilities | $ 279,276 | $ 182,039 |
Business Combination (Narrative
Business Combination (Narrative) (Details) - USD ($) | Sep. 16, 2021 | May 05, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Business Acquisition [Line Items] | |||||||
Contingent consideration | $ 24,000,000 | $ 0 | $ 24,000,000 | $ 0 | $ 0 | ||
Gain on bargain purchase | 0 | 0 | 74,408,000 | 0 | |||
Fair value adjustment on reserves, net | |||||||
Business Acquisition [Line Items] | |||||||
Present value of future insurance profits, expected amortization | $ 38,700,000 | ||||||
NORCAL Group | |||||||
Business Acquisition [Line Items] | |||||||
Percentage of interest acquired | 1.20% | 98.80% | |||||
Total acquisition consideration | $ 3,100,000 | $ 448,809,000 | |||||
Payments to acquire business | 248,000,000 | ||||||
Business combination, consideration transferred, equity interests issued and issuable | 1,800,000 | ||||||
Contingent consideration, maximum estimate | 84,000,000 | ||||||
Contingent consideration | 24,000,000 | 24,000,000 | 24,000,000 | ||||
Proassurance actual revenue consolidation results | 87,800,000 | 141,100,000 | |||||
Proassurance actual net loss consolidated results | 1,700,000 | (3,300,000) | |||||
Transaction-related costs | $ 2,300,000 | $ 500,000 | $ 23,500,000 | $ 1,600,000 | |||
Gain on bargain purchase | 74,408,000 | ||||||
Deferred tax asset, net | 46,759,000 | ||||||
Initial base consideration | 450,000,000 | ||||||
Intangible assets | 14,000,000 | ||||||
Business combination, fair values adjustments on gross reserve | 42,200,000 | ||||||
Business combination, fair values adjustments on reinsurance recoverables | 3,500,000 | ||||||
Present value of future insurance profits, expected amortization | 53,844,000 | ||||||
NORCAL Group | Unearned premium VOBA, net | |||||||
Business Acquisition [Line Items] | |||||||
Present value of future insurance profits, expected amortization | 11,676,000 | ||||||
Estimated negative VOBA | 12,400,000 | ||||||
NORCAL Group | Fair value adjustment on reserves, net | |||||||
Business Acquisition [Line Items] | |||||||
Present value of future insurance profits, expected amortization | 38,701,000 | ||||||
Estimated negative VOBA | 700,000 | ||||||
NORCAL Group | DDR reserve VOBA | |||||||
Business Acquisition [Line Items] | |||||||
Present value of future insurance profits, expected amortization | 3,467,000 | ||||||
NORCAL Group | Contribution Certificates | |||||||
Business Acquisition [Line Items] | |||||||
Principal amount | 191,000,000 | ||||||
Debt instruments | $ 175,000,000 |
Business Combination (Schedule
Business Combination (Schedule of Recognized Identified Assets Acquired and Liabilities Assumed) (Details) - USD ($) $ in Thousands | Sep. 16, 2021 | May 05, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 |
Business Acquisition [Line Items] | ||||||
Gain on bargain purchase | $ 0 | $ 0 | $ (74,408) | $ 0 | ||
NORCAL Group | ||||||
Business Acquisition [Line Items] | ||||||
Fixed maturities, available for sale | $ 1,100,058 | |||||
Equity investments, available for sale | 374,484 | |||||
Short-term investments | 61,289 | |||||
Business owned life insurance | 12,581 | |||||
Investment in unconsolidated subsidiaries | 26,948 | |||||
Other investments | 32,461 | |||||
Cash and cash equivalents | 28,233 | |||||
Premiums receivable | 110,905 | |||||
Receivable from reinsurers on paid losses and loss adjustment expenses | 266 | |||||
Receivable from reinsurers on unpaid losses and loss adjustment expenses | 93,342 | |||||
Prepaid reinsurance premiums | 9,238 | |||||
Deferred tax asset, net | 46,759 | |||||
Operating lease ROU assets | 4,385 | |||||
Intangible assets | 14,000 | |||||
Other assets | 38,648 | |||||
Reserve for losses and loss adjustment expenses | (1,182,445) | |||||
Unearned premiums | (178,400) | |||||
Reinsurance premiums payable | (12,981) | |||||
Operating lease liabilities | (5,275) | |||||
Other liabilities | (51,279) | |||||
Total identifiable net assets acquired | 523,217 | |||||
Gain on bargain purchase | (74,408) | |||||
Total acquisition consideration | $ 3,100 | $ 448,809 |
Business Combination (Summary o
Business Combination (Summary of Intangible Assets Acquired) (Details) - NORCAL Group $ in Thousands | May 05, 2021USD ($) |
Business Acquisition [Line Items] | |
Total | $ 14,000 |
Licenses | |
Business Acquisition [Line Items] | |
Indefinite-lived intangible assets acquired | 13,000 |
Trade name | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired | $ 1,000 |
Acquired intangible assets useful life (in years) | 3 years |
Business Combination ( Schedule
Business Combination ( Schedule of Present Value Of Future Insurance Profits Expected Amortization) (Details) $ in Thousands | May 05, 2021USD ($) |
Fair value adjustment on reserves, net | |
Business Acquisition [Line Items] | |
Amount at May 5, 2021 | $ 38,700 |
NORCAL Group | |
Business Acquisition [Line Items] | |
Amount at May 5, 2021 | 53,844 |
2021 | 14,644 |
2022 | 15,758 |
2023 | 8,333 |
2024 | 5,326 |
2025 | 3,350 |
Thereafter | 6,433 |
NORCAL Group | Fair value adjustment on reserves, net | |
Business Acquisition [Line Items] | |
Amount at May 5, 2021 | $ 38,701 |
Estimated amortization period (years) | 7 years |
2021 | $ 7,768 |
2022 | 10,595 |
2023 | 8,090 |
2024 | 5,083 |
2025 | 3,107 |
Thereafter | 4,058 |
NORCAL Group | Unearned premium VOBA, net | |
Business Acquisition [Line Items] | |
Amount at May 5, 2021 | $ 11,676 |
Estimated amortization period (years) | 1 year |
2021 | $ 6,737 |
2022 | 4,939 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
Thereafter | 0 |
NORCAL Group | DDR reserve VOBA | |
Business Acquisition [Line Items] | |
Amount at May 5, 2021 | $ 3,467 |
Estimated amortization period (years) | 15 years |
2021 | $ 139 |
2022 | 224 |
2023 | 243 |
2024 | 243 |
2025 | 243 |
Thereafter | $ 2,375 |
Business Combination ( Pro Form
Business Combination ( Pro Forma and Actual Consolidated Results) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue: | ||||
ProAssurance Actual Consolidated Results | $ 309,700 | $ 226,897 | $ 811,344 | $ 645,338 |
Net income (loss): | ||||
ProAssurance Actual Consolidated Results | 12,200 | (149,979) | 111,984 | (190,032) |
NORCAL Group | ||||
Revenue: | ||||
ProAssurance Pro Forma Consolidated Results | 305,927 | 340,428 | 930,350 | 943,268 |
Net income (loss): | ||||
ProAssurance Pro Forma Consolidated Results | $ 13,366 | $ (158,620) | $ 58,692 | $ (117,906) |
Fair Value Measurement (Assets
Fair Value Measurement (Assets Measured at Fair Value) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Assets: | ||
Fixed maturities, available-for-sale | $ 3,904,136 | $ 2,457,531 |
Fixed maturities, trading | 45,049 | 48,456 |
Equity investments | 214,530 | 120,101 |
Level 3 | ||
Liabilities: | ||
Other liabilities | 24,000 | 0 |
U.S. Treasury obligations | ||
Assets: | ||
Fixed maturities, available-for-sale | 242,705 | 107,059 |
U.S. Government-sponsored enterprise obligations | ||
Assets: | ||
Fixed maturities, available-for-sale | 20,468 | 12,261 |
State and municipal bonds | ||
Assets: | ||
Fixed maturities, available-for-sale | 522,707 | 332,920 |
Corporate debt, limited observable inputs | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 19,712 | 3,265 |
Residential mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available-for-sale | 477,909 | 276,541 |
Agency commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available-for-sale | 14,942 | 13,310 |
Other commercial mortgage-backed securities | ||
Assets: | ||
Fixed maturities, available-for-sale | 219,024 | 113,092 |
Other asset-backed securities | ||
Assets: | ||
Fixed maturities, available-for-sale | 443,268 | 273,006 |
Recurring | ||
Assets: | ||
Total assets categorized within the fair value hierarchy | 4,674,541 | 3,242,057 |
Recurring | Level 1 | ||
Assets: | ||
Fixed maturities, trading | 0 | 0 |
Other assets | 0 | 0 |
Total assets categorized within the fair value hierarchy | 325,663 | 416,757 |
Liabilities: | ||
Other liabilities | 0 | |
Total liabilities categorized within the fair value hierarchy | 0 | |
Recurring | Level 2 | ||
Assets: | ||
Fixed maturities, trading | 45,049 | 48,456 |
Other assets | 601 | 329 |
Total assets categorized within the fair value hierarchy | 4,059,680 | 2,567,083 |
Liabilities: | ||
Other liabilities | 0 | |
Total liabilities categorized within the fair value hierarchy | 0 | |
Recurring | Level 3 | ||
Assets: | ||
Fixed maturities, trading | 0 | 0 |
Other assets | 0 | 0 |
Total assets categorized within the fair value hierarchy | 37,523 | 11,958 |
Liabilities: | ||
Other liabilities | 24,000 | |
Total liabilities categorized within the fair value hierarchy | 24,000 | |
Recurring | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, trading | 45,049 | 48,456 |
Other assets | 601 | 329 |
Total assets categorized within the fair value hierarchy | 4,422,866 | 2,995,798 |
Liabilities: | ||
Other liabilities | 24,000 | |
Total liabilities categorized within the fair value hierarchy | 24,000 | |
Recurring | U.S. Treasury obligations | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | U.S. Treasury obligations | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 242,705 | 107,059 |
Recurring | U.S. Treasury obligations | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | U.S. Treasury obligations | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 242,705 | 107,059 |
Recurring | U.S. Government-sponsored enterprise obligations | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | U.S. Government-sponsored enterprise obligations | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 20,468 | 12,261 |
Recurring | U.S. Government-sponsored enterprise obligations | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | U.S. Government-sponsored enterprise obligations | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 20,468 | 12,261 |
Recurring | State and municipal bonds | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | State and municipal bonds | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 522,707 | 332,920 |
Recurring | State and municipal bonds | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | State and municipal bonds | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 522,707 | 332,920 |
Recurring | Corporate debt, multiple observable inputs | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Corporate debt, multiple observable inputs | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 1,943,401 | 1,326,077 |
Recurring | Corporate debt, multiple observable inputs | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Corporate debt, multiple observable inputs | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 1,943,401 | 1,326,077 |
Recurring | Corporate debt, limited observable inputs | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Corporate debt, limited observable inputs | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Corporate debt, limited observable inputs | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 19,712 | 3,265 |
Recurring | Corporate debt, limited observable inputs | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 19,712 | 3,265 |
Recurring | Residential mortgage-backed securities | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Residential mortgage-backed securities | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 473,674 | 274,509 |
Recurring | Residential mortgage-backed securities | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 4,235 | 2,032 |
Recurring | Residential mortgage-backed securities | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 477,909 | 276,541 |
Recurring | Agency commercial mortgage-backed securities | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Agency commercial mortgage-backed securities | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 14,942 | 13,310 |
Recurring | Agency commercial mortgage-backed securities | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Agency commercial mortgage-backed securities | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 14,942 | 13,310 |
Recurring | Other commercial mortgage-backed securities | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Other commercial mortgage-backed securities | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 219,024 | 113,092 |
Recurring | Other commercial mortgage-backed securities | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Other commercial mortgage-backed securities | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 219,024 | 113,092 |
Recurring | Other asset-backed securities | Level 1 | ||
Assets: | ||
Fixed maturities, available-for-sale | 0 | 0 |
Recurring | Other asset-backed securities | Level 2 | ||
Assets: | ||
Fixed maturities, available-for-sale | 432,261 | 266,345 |
Recurring | Other asset-backed securities | Level 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 11,007 | 6,661 |
Recurring | Other asset-backed securities | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Fixed maturities, available-for-sale | 443,268 | 273,006 |
Recurring | Financial | Level 1 | ||
Assets: | ||
Equity investments | 0 | 13,810 |
Recurring | Financial | Level 2 | ||
Assets: | ||
Equity investments | 868 | 0 |
Recurring | Financial | Level 3 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Financial | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 868 | 13,810 |
Recurring | Utilities/Energy | Level 1 | ||
Assets: | ||
Equity investments | 0 | 564 |
Recurring | Utilities/Energy | Level 2 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Utilities/Energy | Level 3 | ||
Assets: | ||
Equity investments | 69 | 0 |
Recurring | Utilities/Energy | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 69 | 564 |
Recurring | Consumer oriented | Level 1 | ||
Assets: | ||
Equity investments | 1,262 | |
Recurring | Consumer oriented | Level 2 | ||
Assets: | ||
Equity investments | 0 | |
Recurring | Consumer oriented | Level 3 | ||
Assets: | ||
Equity investments | 0 | |
Recurring | Consumer oriented | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 1,262 | |
Recurring | Industrial | Level 1 | ||
Assets: | ||
Equity investments | 0 | 2,240 |
Recurring | Industrial | Level 2 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Industrial | Level 3 | ||
Assets: | ||
Equity investments | 2,500 | 0 |
Recurring | Industrial | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 2,500 | 2,240 |
Recurring | Bond funds | Level 1 | ||
Assets: | ||
Equity investments | 191,834 | 69,475 |
Recurring | Bond funds | Level 2 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Bond funds | Level 3 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | Bond funds | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 191,834 | 69,475 |
Recurring | All other | Level 1 | ||
Assets: | ||
Equity investments | 19,259 | 20,202 |
Recurring | All other | Level 2 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | All other | Level 3 | ||
Assets: | ||
Equity investments | 0 | 0 |
Recurring | All other | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Equity investments | 19,259 | 20,202 |
Recurring | Short-term investments | Level 1 | ||
Assets: | ||
Short-term and other investments | 112,706 | 307,695 |
Recurring | Short-term investments | Level 2 | ||
Assets: | ||
Short-term and other investments | 39,002 | 30,118 |
Recurring | Short-term investments | Level 3 | ||
Assets: | ||
Short-term and other investments | 0 | 0 |
Recurring | Short-term investments | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Short-term and other investments | 151,708 | 337,813 |
Recurring | Other investments | Level 1 | ||
Assets: | ||
Short-term and other investments | 1,864 | 1,509 |
Recurring | Other investments | Level 2 | ||
Assets: | ||
Short-term and other investments | 104,978 | 42,607 |
Recurring | Other investments | Level 3 | ||
Assets: | ||
Short-term and other investments | 0 | 0 |
Recurring | Other investments | Fair Value, Inputs, Level 1, 2 and 3 | ||
Assets: | ||
Short-term and other investments | 106,842 | 44,116 |
Recurring | Equity investments | Fair Value Measured at Net Asset Value Per Share | Equity investments | ||
Assets: | ||
Total assets categorized within the fair value hierarchy | 12,548 | |
Recurring | Equity investments | Fair Value Measured at Net Asset Value Per Share | Investment in unconsolidated subsidiaries | ||
Assets: | ||
Total assets categorized within the fair value hierarchy | $ 251,675 | $ 233,711 |
Fair Value Measurement (Narrati
Fair Value Measurement (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | May 05, 2021 | |
Credit Derivatives [Line Items] | ||||||
Goodwill impairment | $ 0 | $ 161,115,000 | $ 0 | $ 161,115,000 | $ 161,115,000 | |
Fair value of funded deferred compensation assets | 38,500,000 | 38,500,000 | 30,600,000 | |||
Deferred compensation liabilities | 51,456,000 | 51,456,000 | 30,334,000 | |||
Fair Value | ||||||
Credit Derivatives [Line Items] | ||||||
Deferred compensation liabilities | 51,500,000 | 51,500,000 | 30,300,000 | |||
Fair Value, Nonrecurring | ||||||
Credit Derivatives [Line Items] | ||||||
Fair value, net asset (liability) | 0 | 0 | 0 | |||
Specialty P&C | ||||||
Credit Derivatives [Line Items] | ||||||
Goodwill impairment | $ 161,100,000 | 0 | $ 161,115,000 | |||
NORCAL Group | ||||||
Credit Derivatives [Line Items] | ||||||
Contingent consideration, maximum estimate | $ 84,000,000 | |||||
Fair value of funded deferred compensation assets | 5,100,000 | 5,100,000 | ||||
NORCAL Group | Fair Value | ||||||
Credit Derivatives [Line Items] | ||||||
Deferred compensation liabilities | 18,000,000 | $ 18,000,000 | ||||
Corporate debt, limited observable inputs | NRSRO, Rating BBB | ||||||
Credit Derivatives [Line Items] | ||||||
Credit quality percentage | 100.00% | |||||
Corporate debt, limited observable inputs | NRSRO, Rating BB plus | ||||||
Credit Derivatives [Line Items] | ||||||
Credit quality percentage | 100.00% | |||||
Other asset-backed securities | NRSRO, Rating AA Minus | ||||||
Credit Derivatives [Line Items] | ||||||
Credit quality percentage | 51.00% | |||||
Other asset-backed securities | NRSRO, Rating A | ||||||
Credit Derivatives [Line Items] | ||||||
Credit quality percentage | 95.00% | |||||
Mortgages | LIBOR | ||||||
Credit Derivatives [Line Items] | ||||||
Basis spread on variable rate for debt | 1.325% | 1.325% | ||||
Interest Rate Cap | ||||||
Credit Derivatives [Line Items] | ||||||
Premium paid on derivative for right to receive cash payments | $ 2,000,000 | $ 2,000,000 | ||||
Floor interest rate on derivative | 2.35% | 2.35% | ||||
Interest Rate Cap | Other assets | ||||||
Credit Derivatives [Line Items] | ||||||
Derivative asset, notional amount | $ 35,000,000 | $ 35,000,000 |
Fair Value Measurement (Quantit
Fair Value Measurement (Quantitative Information Regarding Level 3 Valuations) (Details) $ in Thousands | Sep. 30, 2021USD ($) | Dec. 31, 2020USD ($) |
Assets: | ||
Estimated Fair Value | $ 3,904,136 | $ 2,457,531 |
Level 3 | ||
Assets: | ||
Equity securities | 2,569 | 0 |
Other liabilities | $ 24,000 | 0 |
Level 3 | Stochastic Model/Discounted Cash Flows | Minimum | ||
Assets: | ||
Other Liabilities, Measurement Input | 0.00% | |
Level 3 | Stochastic Model/Discounted Cash Flows | Maximum | ||
Assets: | ||
Other Liabilities, Measurement Input | 10.00% | |
Level 3 | Stochastic Model/Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Other Liabilities, Measurement Input | 8.00% | |
Level 3 | Comparability Adjustment | Minimum | ||
Assets: | ||
Equity securities measured at fair value | 0 | |
Level 3 | Comparability Adjustment | Maximum | ||
Assets: | ||
Equity securities measured at fair value | 0.10 | |
Level 3 | Comparability Adjustment | Weighted Average | ||
Assets: | ||
Equity securities measured at fair value | 0.05 | |
Corporate debt, limited observable inputs | Level 3 | ||
Assets: | ||
Estimated Fair Value | $ 19,712 | 3,265 |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Market Comparable Securities | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Market Comparable Securities | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Market Comparable Securities | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 | |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Discounted Cash Flows | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Discounted Cash Flows | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Corporate debt, limited observable inputs | Level 3 | Comparability Adjustment | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 | |
Residential mortgage-backed securities | Level 3 | ||
Assets: | ||
Estimated Fair Value | $ 4,235 | 2,032 |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 | |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Residential mortgage-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 | |
Other asset-backed securities | Level 3 | ||
Assets: | ||
Estimated Fair Value | $ 11,007 | $ 6,661 |
Other asset-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Other asset-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Other asset-backed securities | Level 3 | Comparability Adjustment | Market Comparable Securities | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 | |
Other asset-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Minimum | ||
Assets: | ||
Assets measured at fair value | 0 | |
Other asset-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Maximum | ||
Assets: | ||
Assets measured at fair value | 0.05 | |
Other asset-backed securities | Level 3 | Comparability Adjustment | Discounted Cash Flows | Weighted Average | ||
Assets: | ||
Assets measured at fair value | 0.025 |
Fair Value Measurement (Level 3
Fair Value Measurement (Level 3 Assets and Liability) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | $ 27,996 | $ 10,663 | $ 11,958 | $ 11,157 |
Gains Losses By Earnings Category Assets [Abstract] | ||||
Included in other comprehensive income | (7) | (64) | (73) | 61 |
Purchases | 26,047 | 9,413 | 62,285 | 14,241 |
Sales | (301) | (115) | (6,697) | (3,061) |
Transfers in | 69 | 3,079 | 1,550 | |
Transfers out | (15,640) | (3,089) | (32,242) | (7,138) |
Ending balance | 37,523 | 16,949 | 37,523 | 16,949 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | (640) | 143 | (775) | 151 |
Net investment income | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | (1) | (10) | ||
Net realized investment gains (losses) | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | (641) | 141 | (786) | 149 |
Corporate Debt | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | 15,065 | 3,117 | 3,265 | 5,079 |
Gains Losses By Earnings Category Assets [Abstract] | ||||
Included in other comprehensive income | 49 | (6) | 82 | 38 |
Purchases | 10,881 | 900 | 24,971 | 900 |
Sales | (284) | (16) | (461) | (2,173) |
Transfers in | 0 | 858 | 945 | |
Transfers out | (5,999) | 0 | (9,004) | (794) |
Ending balance | 19,712 | 3,995 | 19,712 | 3,995 |
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 | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | 1 | 0 | ||
Corporate Debt | Net realized investment gains (losses) | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | 0 | 0 | 0 |
Asset-backed Securities | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | 9,857 | 5,978 | 8,693 | 2,992 |
Gains Losses By Earnings Category Assets [Abstract] | ||||
Included in other comprehensive income | (74) | (58) | (171) | 23 |
Purchases | 12,666 | 8,513 | 28,026 | 13,341 |
Sales | (17) | (99) | (506) | (888) |
Transfers in | 0 | 0 | 605 | |
Transfers out | (7,190) | (1,378) | (20,787) | (3,107) |
Ending balance | 15,242 | 12,954 | 15,242 | 12,954 |
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 | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | (2) | (10) | ||
Asset-backed Securities | Net realized investment gains (losses) | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | (2) | (11) | (2) |
Equity securities | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | 852 | 0 | ||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Included in other comprehensive income | 18 | 16 | ||
Purchases | 2,500 | 9,083 | ||
Sales | 0 | (5,730) | ||
Transfers in | 69 | 69 | ||
Transfers out | (868) | (868) | ||
Ending balance | 2,569 | 2,569 | ||
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | (1) | (1) | ||
Equity securities | Net investment income | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | |||
Equity securities | Net realized investment gains (losses) | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | (2) | (1) | ||
Other Investments | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | 2,222 | 1,568 | 0 | 3,086 |
Gains Losses By Earnings Category Assets [Abstract] | ||||
Included in other comprehensive income | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 205 | 0 |
Sales | 0 | 0 | 0 | 0 |
Transfers in | 0 | 2,152 | 0 | |
Transfers out | (1,583) | (1,711) | (1,583) | (3,237) |
Ending balance | 0 | 0 | 0 | 0 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | (639) | 143 | (774) | 151 |
Other Investments | Net investment income | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | 0 | 0 | ||
Other Investments | Net realized investment gains (losses) | ||||
Gains Losses By Earnings Category Assets [Abstract] | ||||
Total gains (losses) realized and unrealized, included in earnings | $ (639) | $ 143 | $ (774) | $ 151 |
Fair Value Measurement (Investm
Fair Value Measurement (Investments in LLCs and Limited Partnerships) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Fair Value | $ 251,675 | $ 246,259 |
Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Fair Value | 251,675 | 233,711 |
Mortgage fund | Equity securities | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 0 | 12,548 |
Private debt funds | Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 8,929 | |
Fair Value | 18,523 | 16,387 |
Long/short equity funds | Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 0 | |
Fair Value | 533 | 596 |
Non-public equity funds | Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 38,713 | |
Fair Value | 144,539 | 138,357 |
Credit funds | Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 41,123 | |
Fair Value | 43,125 | 34,848 |
Strategy focused funds | Equity investments | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Unfunded Commitments | 34,988 | |
Fair Value | $ 44,955 | $ 43,523 |
Fair Value Measurement (Inves_2
Fair Value Measurement (Investments in LLCs and Limited Partnerships Footnote) (Details) | 9 Months Ended |
Sep. 30, 2021fund | |
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 |
Secured debt fund | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Number of limited partners in investment | 2 |
Number of limited partners to allow redemption by special consent | 1 |
Secured debt fund | Minimum | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Liquidating investments remaining period | 3 years |
Secured debt fund | Maximum | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Liquidating investments remaining period | 8 years |
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 | 10 years |
Credit funds | Minimum | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 90 days |
Credit funds | Maximum | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |
Investment redemption notice period | 180 days |
Fair Value Measurement (Financi
Fair Value Measurement (Financial Instruments Not Measured at Fair Value) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Carrying Value | ||
Financial assets: | ||
Other assets | $ 39,584 | $ 31,128 |
Financial liabilities: | ||
Other liabilities | 51,456 | 30,334 |
Carrying Value | Senior notes due 2023 | ||
Financial liabilities: | ||
Debt instruments | 250,000 | 250,000 |
Carrying Value | Mortgage loans | ||
Financial liabilities: | ||
Debt instruments | 0 | 36,113 |
Carrying Value | Contribution Certificates | ||
Financial liabilities: | ||
Debt instruments | 175,766 | 0 |
Carrying Value | BOLI | ||
Financial assets: | ||
Short-term and other investments | 80,821 | 67,847 |
Carrying Value | Other investments | ||
Financial assets: | ||
Short-term and other investments | 3,170 | 2,952 |
Fair Value | ||
Financial assets: | ||
Other assets | 39,593 | 31,141 |
Financial liabilities: | ||
Other liabilities | 51,456 | 30,334 |
Fair Value | Senior notes due 2023 | ||
Financial liabilities: | ||
Debt instruments | 267,988 | 269,160 |
Fair Value | Mortgage loans | ||
Financial liabilities: | ||
Debt instruments | 0 | 36,113 |
Fair Value | Contribution Certificates | ||
Financial liabilities: | ||
Debt instruments | 178,728 | 0 |
Fair Value | BOLI | ||
Financial assets: | ||
Short-term and other investments | 80,821 | 67,847 |
Fair Value | Other investments | ||
Financial assets: | ||
Short-term and other investments | $ 3,170 | $ 2,952 |
Investments (Available-For-Sale
Investments (Available-For-Sale Fixed Maturities) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | $ 3,850,889 | $ 2,361,575 | |||
Allowance for Expected Credit Losses | 0 | 552 | $ 552 | $ 1,408 | $ 0 |
Gross Unrealized Gains | 67,565 | 99,936 | |||
Gross Unrealized Losses | 14,318 | 3,428 | |||
Estimated Fair Value | 3,904,136 | 2,457,531 | |||
U.S. Treasury obligations | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 241,696 | 104,097 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 1,681 | 2,985 | |||
Gross Unrealized Losses | 672 | 23 | |||
Estimated Fair Value | 242,705 | 107,059 | |||
U.S. Government-sponsored enterprise obligations | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 20,509 | 12,103 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 57 | 158 | |||
Gross Unrealized Losses | 98 | 0 | |||
Estimated Fair Value | 20,468 | 12,261 | |||
State and municipal bonds | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 513,111 | 316,022 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 11,155 | 16,937 | |||
Gross Unrealized Losses | 1,559 | 39 | |||
Estimated Fair Value | 522,707 | 332,920 | |||
Corporate debt | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 1,928,543 | 1,267,992 | |||
Allowance for Expected Credit Losses | 0 | 552 | $ 552 | $ 1,408 | $ 0 |
Gross Unrealized Gains | 41,493 | 63,204 | |||
Gross Unrealized Losses | 6,923 | 1,302 | |||
Estimated Fair Value | 1,963,113 | 1,329,342 | |||
Residential mortgage-backed securities | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 475,368 | 269,752 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 5,513 | 7,171 | |||
Gross Unrealized Losses | 2,972 | 382 | |||
Estimated Fair Value | 477,909 | 276,541 | |||
Agency commercial mortgage-backed securities | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 14,531 | 12,623 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 460 | 687 | |||
Gross Unrealized Losses | 49 | 0 | |||
Estimated Fair Value | 14,942 | 13,310 | |||
Other commercial mortgage-backed securities | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 216,595 | 109,244 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 3,545 | 4,788 | |||
Gross Unrealized Losses | 1,116 | 940 | |||
Estimated Fair Value | 219,024 | 113,092 | |||
Other asset-backed securities | |||||
Reclassifications from AOCI to net income (loss): | |||||
Amortized Cost | 440,536 | 269,742 | |||
Allowance for Expected Credit Losses | 0 | ||||
Gross Unrealized Gains | 3,661 | 4,006 | |||
Gross Unrealized Losses | 929 | 742 | |||
Estimated Fair Value | $ 443,268 | $ 273,006 |
Investments (Available-For-Sa_2
Investments (Available-For-Sale Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | $ 3,850,889 | $ 2,361,575 |
Total Fair Value | 3,904,136 | 2,457,531 |
U.S. Treasury obligations | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 241,696 | 104,097 |
Due in one year or less | 19,945 | |
Due after one year through five years | 133,884 | |
Due after five years through ten years | 86,726 | |
Due after ten years | 2,150 | |
Total Fair Value | 242,705 | 107,059 |
U.S. Government-sponsored enterprise obligations | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 20,509 | 12,103 |
Due in one year or less | 3,826 | |
Due after one year through five years | 11,363 | |
Due after five years through ten years | 5,134 | |
Due after ten years | 145 | |
Total Fair Value | 20,468 | 12,261 |
State and municipal bonds | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 513,111 | 316,022 |
Due in one year or less | 15,273 | |
Due after one year through five years | 174,664 | |
Due after five years through ten years | 188,717 | |
Due after ten years | 144,053 | |
Total Fair Value | 522,707 | 332,920 |
Corporate debt | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 1,928,543 | 1,267,992 |
Due in one year or less | 119,700 | |
Due after one year through five years | 927,016 | |
Due after five years through ten years | 809,889 | |
Due after ten years | 106,508 | |
Total Fair Value | 1,963,113 | 1,329,342 |
Residential mortgage-backed securities | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 475,368 | 269,752 |
Total Fair Value | 477,909 | 276,541 |
Agency commercial mortgage-backed securities | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 14,531 | 12,623 |
Total Fair Value | 14,942 | 13,310 |
Other commercial mortgage-backed securities | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 216,595 | 109,244 |
Total Fair Value | 219,024 | 113,092 |
Other asset-backed securities | ||
Reclassifications from AOCI to net income (loss): | ||
Amortized Cost | 440,536 | 269,742 |
Total Fair Value | $ 443,268 | $ 273,006 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2021USD ($)businesssecurityissuerinvestmentpartnership | Jun. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($)businesssecurityissuerinvestmentpartnership | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($)securityissuer | |
Reclassifications from AOCI to net income (loss): | ||||||
Number of investment in any entity or affiliates greater than 10% of stockholders' equity | investment | 0 | 0 | ||||
Threshold limit of investments based on shareholders' equity | 10.00% | 10.00% | ||||
Securities on deposit with state insurance departments | $ 54,800,000 | $ 54,800,000 | ||||
Business owned life insurance cost | 43,000,000 | 43,000,000 | ||||
Investment in unconsolidated subsidiaries | $ 317,869,000 | $ 317,869,000 | $ 310,529,000 | |||
Number of LPs / LLCs with investment ownership percent over 25% (in businesses) | business | 4 | 4 | ||||
Portion of impairment losses recognized in other comprehensive income (loss) before taxes | $ 0 | $ 0 | $ 0 | $ 237,000 | ||
Net impairment losses recognized in earnings | 0 | 0 | 0 | 1,508,000 | ||
Net realized investment (losses) gains | 530,000 | $ 8,838,000 | 20,212,000 | $ 150,000 | ||
Tax Credit Partnership Investment Tax Credit Carryforward | Tax Year 2020 | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Deferred tax credit for partnership investments | $ 3,100,000 | $ 9,900,000 | ||||
Tax Credit Partnerships Almost 100% Ownership | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Number of tax credit partnerships almost 100% ownership percentage | partnership | 2 | 2 | ||||
Investment in unconsolidated subsidiaries | $ 4,900,000 | $ 4,900,000 | 9,400,000 | |||
Tax Credit Partnerships Almost 100% Ownership | Maximum | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Investment ownership percentage | 100.00% | 100.00% | ||||
Tax Credit Partnerships Less Than 20% Ownership | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Investment in unconsolidated subsidiaries | $ 11,100,000 | $ 11,100,000 | 18,300,000 | |||
Tax Credit Partnerships Less Than 20% Ownership | Maximum | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Investment ownership percentage | 20.00% | 20.00% | ||||
Other Limited Partnerships and Limited Liability Company, Greater Than 25% Ownership | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Investment ownership percentage | 25.00% | 25.00% | ||||
Investment in unconsolidated subsidiaries | $ 49,200,000 | $ 49,200,000 | 46,200,000 | |||
Other Limited Partnerships and Limited Liability Company Less than 25% Ownership | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Investment in unconsolidated subsidiaries | 252,700,000 | 252,700,000 | $ 236,600,000 | |||
NORCAL Group | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Business owned life insurance cost | $ 10,000,000 | $ 10,000,000 | ||||
Syndicate 1729 | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Return of deposit assets | $ 24,500,000 | |||||
Proportion of capital provided to support Lloyd's Syndicate | 5.00% | 5.00% | 29.00% | |||
Syndicate 6131 | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Proportion of capital provided to support Lloyd's Syndicate | 50.00% | 50.00% | 100.00% | |||
Fixed maturities | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Required FAL deposit | $ 64,300,000 | $ 64,300,000 | ||||
Cash and cash equivalents | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Required FAL deposit | $ 8,200,000 | $ 8,200,000 | ||||
Non government-backed | ||||||
Reclassifications from AOCI to net income (loss): | ||||||
Debt securities in unrealized loss position (in securities) | security | 1,246 | 1,246 | 292 | |||
Debt securities in unrealized loss position as percentage of total debt securities held | 32.30% | 32.30% | 11.10% | |||
Issuers in unrealized loss position (in issuers) | issuer | 768 | 768 | 229 | |||
Single greatest unrealized loss position | $ 300,000 | $ 300,000 | $ 400,000 | |||
Second greatest unrealized loss position | $ 200,000 | $ 200,000 | $ 200,000 |
Investments (Investments Held i
Investments (Investments Held in a Loss Position) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Fair value | ||
Fair Value | $ 1,541,516 | $ 212,934 |
Less than 12 Months, Fair Value | 1,486,475 | 191,081 |
More than 12 Months, Fair Value | 55,041 | 21,853 |
Unrealized Loss | ||
Unrealized Loss | 14,318 | 3,428 |
Less than 12 Months, Unrealized Loss | 12,712 | 3,099 |
More than 12 Months, Unrealized Loss | 1,606 | 329 |
U.S. Treasury obligations | ||
Fair value | ||
Fair Value | 162,063 | 14,390 |
Less than 12 Months, Fair Value | 157,445 | 14,390 |
More than 12 Months, Fair Value | 4,618 | 0 |
Unrealized Loss | ||
Unrealized Loss | 672 | 23 |
Less than 12 Months, Unrealized Loss | 582 | 23 |
More than 12 Months, Unrealized Loss | 90 | 0 |
U.S. Government-sponsored enterprise obligations | ||
Fair value | ||
Fair Value | 14,422 | |
Less than 12 Months, Fair Value | 14,422 | |
More than 12 Months, Fair Value | 0 | |
Unrealized Loss | ||
Unrealized Loss | 98 | |
Less than 12 Months, Unrealized Loss | 98 | |
More than 12 Months, Unrealized Loss | 0 | |
State and municipal bonds | ||
Fair value | ||
Fair Value | 194,740 | 6,416 |
Less than 12 Months, Fair Value | 192,610 | 6,416 |
More than 12 Months, Fair Value | 2,130 | 0 |
Unrealized Loss | ||
Unrealized Loss | 1,559 | 39 |
Less than 12 Months, Unrealized Loss | 1,467 | 39 |
More than 12 Months, Unrealized Loss | 92 | 0 |
Corporate debt | ||
Fair value | ||
Fair Value | 637,694 | 94,695 |
Less than 12 Months, Fair Value | 607,003 | 79,436 |
More than 12 Months, Fair Value | 30,691 | 15,259 |
Unrealized Loss | ||
Unrealized Loss | 6,923 | 1,302 |
Less than 12 Months, Unrealized Loss | 6,134 | 1,020 |
More than 12 Months, Unrealized Loss | 789 | 282 |
Residential mortgage-backed securities | ||
Fair value | ||
Fair Value | 284,636 | 34,928 |
Less than 12 Months, Fair Value | 276,253 | 34,509 |
More than 12 Months, Fair Value | 8,383 | 419 |
Unrealized Loss | ||
Unrealized Loss | 2,972 | 382 |
Less than 12 Months, Unrealized Loss | 2,732 | 381 |
More than 12 Months, Unrealized Loss | 240 | 1 |
Agency commercial mortgage-backed securities | ||
Fair value | ||
Fair Value | 4,040 | |
Less than 12 Months, Fair Value | 4,040 | |
More than 12 Months, Fair Value | 0 | |
Unrealized Loss | ||
Unrealized Loss | 49 | |
Less than 12 Months, Unrealized Loss | 49 | |
More than 12 Months, Unrealized Loss | 0 | |
Other commercial mortgage-backed securities | ||
Fair value | ||
Fair Value | 77,254 | 18,766 |
Less than 12 Months, Fair Value | 72,541 | 18,480 |
More than 12 Months, Fair Value | 4,713 | 286 |
Unrealized Loss | ||
Unrealized Loss | 1,116 | 940 |
Less than 12 Months, Unrealized Loss | 783 | 935 |
More than 12 Months, Unrealized Loss | 333 | 5 |
Other asset-backed securities | ||
Fair value | ||
Fair Value | 166,667 | 43,739 |
Less than 12 Months, Fair Value | 162,161 | 37,850 |
More than 12 Months, Fair Value | 4,506 | 5,889 |
Unrealized Loss | ||
Unrealized Loss | 929 | 742 |
Less than 12 Months, Unrealized Loss | 867 | 701 |
More than 12 Months, Unrealized Loss | $ 62 | $ 41 |
Investments (Credit Losses Rela
Investments (Credit Losses Related to Debt Securities) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward] | |||
Allowance for credit loss beginning balance | $ 1,408 | $ 552 | $ 0 |
No allowance for credit losses has been previously recognized | 1,508 | ||
Securities sold during the period | (856) | (552) | (956) |
Allowance for credit loss ending balance | 552 | 0 | 552 |
Corporate Debt | |||
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward] | |||
Allowance for credit loss beginning balance | 1,408 | 552 | 0 |
No allowance for credit losses has been previously recognized | 1,508 | ||
Securities sold during the period | (856) | (552) | (956) |
Allowance for credit loss ending balance | $ 552 | $ 0 | $ 552 |
Investments (Sales and Purchase
Investments (Sales and Purchases of Available-for-Sale Securities) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Information regarding sales and purchases of available-for-sale securities | ||||
Proceeds from sales (exclusive of maturities and paydowns) | $ 85,400 | $ 86,900 | $ 343,500 | $ 304,600 |
Purchases | $ 404,100 | $ 317,500 | $ 1,169,582 | $ 689,429 |
Investments (Net Investment Inc
Investments (Net Investment Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Net Investment Income | ||||
Investment fees and expenses | $ (2,700) | $ (1,744) | $ (7,337) | $ (4,538) |
Net investment income | 19,278 | 16,924 | 51,713 | 55,877 |
Fixed maturities | ||||
Net Investment Income | ||||
Investment Income | 20,121 | 16,902 | 53,969 | 52,863 |
Equities | ||||
Net Investment Income | ||||
Investment Income | 648 | 706 | 1,790 | 3,598 |
Short-term investments, including Other | ||||
Net Investment Income | ||||
Investment Income | 587 | 405 | 1,539 | 2,386 |
BOLI | ||||
Net Investment Income | ||||
Investment Income | $ 622 | $ 655 | $ 1,752 | $ 1,568 |
Investments (Unconsolidated Sub
Investments (Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | $ 317,869 | $ 310,529 |
Qualified affordable housing project tax credit partnerships | ||
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | 15,980 | 27,719 |
All other investments, primarily investment fund LPs/LLCs | ||
Unconsolidated Subsidiaries | ||
Investment in unconsolidated subsidiaries | $ 301,889 | $ 282,810 |
Investments (Equity in Earnings
Investments (Equity in Earnings (Loss) of Unconsolidated Subsidiaries) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Losses recorded | $ 3,591 | $ 4,798 | $ 11,712 | $ 14,152 |
Tax credits recognized | 3,226 | 4,369 | 9,880 | 13,106 |
Losses (gains) recorded | 0 | (264) | (182) | 1,820 |
Tax credits recognized (reversed) | $ (100) | $ 103 | $ 0 | $ 309 |
Investments (Net Realized Inves
Investments (Net Realized Investment Gains (Losses)) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Impairment losses | $ 0 | $ 0 | $ 0 | $ (1,745,000) |
Portion of impairment losses recognized in other comprehensive income before taxes: | 0 | 0 | 0 | 237,000 |
Net impairment losses recognized in earnings | 0 | 0 | 0 | (1,508,000) |
Gross realized gains, available-for-sale fixed maturities | 2,225,000 | 3,996,000 | 12,540,000 | 10,941,000 |
Gross realized (losses), available-for-sale fixed maturities | (259,000) | (396,000) | (798,000) | (2,266,000) |
Net realized gains (losses), trading fixed maturities | (47,000) | 116,000 | 17,000 | 268,000 |
Net realized gains (losses), equity investments | 426,000 | 31,000 | 6,616,000 | 10,589,000 |
Net realized gains (losses), other investments | 1,699,000 | 530,000 | 6,192,000 | 2,442,000 |
Change in unrealized holding gains (losses), trading fixed maturities | (49,000) | 373,000 | (489,000) | 637,000 |
Change in unrealized holding gains (losses), equity investments | (945,000) | 2,766,000 | (2,182,000) | (21,012,000) |
Change in unrealized holding gains (losses), convertible securities, carried at fair value | (2,457,000) | 1,170,000 | (2,118,000) | (190,000) |
Other | (63,000) | 252,000 | 434,000 | 249,000 |
Total net realized investment gains (losses) | $ 530,000 | $ 8,838,000 | $ 20,212,000 | $ 150,000 |
Investments (Roll Forward of Cu
Investments (Roll Forward of Cumulative Credit Losses Recorded in Earnings) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||||
Balance, beginning of period | $ 0 | $ 1,322 | $ 552 | $ 470 |
No impairment has been previously recognized | 0 | 0 | 0 | 1,064 |
Impairment has been previously recognized | 0 | 0 | 0 | 258 |
Securities sold during the period (realized) | 0 | (770) | (552) | (1,240) |
Balance ending of period | $ 0 | $ 552 | $ 0 | $ 552 |
Retroactive Insurance Contrac_2
Retroactive Insurance Contracts (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums earned | $ 272,248 | $ 194,559 | $ 698,598 | $ 605,708 | ||
Net losses and loss adjustment expenses | $ 582,235 | $ 555,969 | $ 711,846 | |||
Retroactive Insurance Contract | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums written | $ 4,500 | |||||
Net premiums earned | 3,000 | |||||
Net losses and loss adjustment expenses | 2,900 | |||||
Prospective coverage for retroactive insurance contract | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums written | 2,200 | |||||
Net premiums earned | 700 | |||||
Retroactive coverage for retroactive insurance contract | ||||||
Liabilities for Guarantees on Long-Duration Contracts [Line Items] | ||||||
Net premiums written | 2,300 | |||||
Net premiums earned | $ 2,300 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | May 05, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Income Tax Contingency [Line Items] | ||||||
Gain on bargain purchase | $ 0 | $ 0 | $ 74,408 | $ 0 | ||
Goodwill impairment | 0 | 161,115 | 0 | $ 161,115 | $ 161,115 | |
Non-deductible goodwill impairment loss | 149,600 | |||||
Deductible goodwill impairment losses | $ 11,500 | |||||
Income taxes receivable | 6,700 | 6,700 | 18,900 | |||
Unrecognized tax benefits | 5,800 | 5,800 | 5,700 | |||
Accrued liability for interest related to unrecognized tax benefits | 600 | 600 | $ 500 | |||
Tax Year 2020 | ||||||
Income Tax Contingency [Line Items] | ||||||
Operating loss carryforwards | 33,300 | 33,300 | ||||
Income tax refund, CARES Act | 11,700 | 11,700 | ||||
Tax Year 2019 | ||||||
Income Tax Contingency [Line Items] | ||||||
Operating loss carryforwards | 25,600 | 25,600 | ||||
Income tax refund, CARES Act | 9,000 | 9,000 | ||||
NORCAL Group | ||||||
Income Tax Contingency [Line Items] | ||||||
Gain on bargain purchase | $ 74,408 | |||||
Deferred tax asset, net | $ 46,759 | |||||
Operating loss carryforwards | $ 68,000 | $ 68,000 |
Goodwill (Narrative) (Details)
Goodwill (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2021segmentreporting_unit | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Number of reportable segments | segment | 5 |
Number of reporting units | reporting_unit | 2 |
Goodwill (Schedule of Goodwill)
Goodwill (Schedule of Goodwill) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Goodwill [Roll Forward] | |||||
Goodwill | $ 49,610 | $ 210,725 | $ 210,725 | ||
Accumulated impairment losses | $ 0 | $ (161,115) | 0 | (161,115) | (161,115) |
Goodwill | 49,610 | 49,610 | 49,610 | ||
Specialty P&C | |||||
Goodwill [Roll Forward] | |||||
Goodwill | 0 | 161,115 | 161,115 | ||
Accumulated impairment losses | $ (161,100) | 0 | (161,115) | ||
Goodwill | 0 | 0 | 0 | ||
Workers' Compensation Insurance | |||||
Goodwill [Roll Forward] | |||||
Goodwill | 44,110 | 44,110 | 44,110 | ||
Accumulated impairment losses | 0 | 0 | |||
Goodwill | 44,110 | 44,110 | 44,110 | ||
Segregated Portfolio Cell Reinsurance | |||||
Goodwill [Roll Forward] | |||||
Goodwill | 5,500 | $ 5,500 | 5,500 | ||
Accumulated impairment losses | 0 | 0 | |||
Goodwill | $ 5,500 | $ 5,500 | $ 5,500 |
Reserve for Losses and Loss A_3
Reserve for Losses and Loss Adjustment Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Minimum period for claims resolution (in years) | 5 years | |||
Net reserves from NORCAL acquisition | $ 1,089,103 | $ 0 | $ 0 | |
Summary of reserve for losses and loss adjustment expenses | ||||
Balance, beginning of year | $ 2,417,179 | 2,417,179 | 2,346,526 | 2,346,526 |
Less reinsurance recoverables on unpaid losses and loss adjustment expenses | 385,087 | 385,087 | 390,708 | 390,708 |
Net balance, beginning of year | 2,032,092 | 2,032,092 | 1,955,818 | 1,955,818 |
Net reserves acquired from NORCAL acquisition | 1,089,103 | 0 | 0 | |
Net losses: | ||||
Current year | 582,235 | 555,969 | 711,846 | |
Favorable development of reserves established in prior years, net | (27,205) | (34,557) | (50,399) | |
Total | 555,030 | 521,412 | 661,447 | |
Paid related to: | ||||
Current year | (62,276) | (60,449) | (83,204) | |
Prior years | (457,578) | (400,930) | (501,969) | |
Total paid | (519,854) | (461,379) | (585,173) | |
Net balance, end of period | 3,156,371 | 2,015,851 | 2,032,092 | |
Plus reinsurance recoverables on unpaid losses and loss adjustment expenses | 476,315 | 391,637 | 385,087 | |
Balance, end of period | 3,632,686 | 2,407,488 | 2,417,179 | |
Retroactive Insurance Contract | ||||
Net losses: | ||||
Current year | $ 2,900 | |||
Specialty P&C | ||||
Net losses: | ||||
Current year | 5,100 | 60,000 | 60,000 | |
Favorable development of reserves established in prior years, net | 1,000 | $ 9,200 | $ 9,200 | |
NORCAL Group | ||||
Net losses: | ||||
Current year | 4,300 | |||
NORCAL Group | Specialty P&C | ||||
Net losses: | ||||
Favorable development of reserves established in prior years, net | $ 5,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended | 9 Months Ended | ||||
Jun. 30, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021GBP (£) | May 05, 2021USD ($) | Dec. 31, 2020USD ($) | Sep. 30, 2020USD ($) | |
Other Commitments [Line Items] | ||||||
Contingent consideration | $ 24,000,000 | $ 0 | $ 0 | |||
NORCAL Group | ||||||
Other Commitments [Line Items] | ||||||
Contingent consideration, maximum estimate | $ 84,000,000 | |||||
Contingent consideration | 24,000,000 | $ 24,000,000 | ||||
Funding Commitments | ||||||
Other Commitments [Line Items] | ||||||
Commitments total | 221,600,000 | |||||
Lloyd's Syndicates | ||||||
Other Commitments [Line Items] | ||||||
Current lending capacity under revolving credit agreement | £ | £ 30,000,000 | |||||
Unused commitments to extend credit | $ 40,400,000 | |||||
Non-renew notice, period | 30 days | |||||
Auto-renewal period prior to maturity date | 1 year | |||||
Interest rate on revolving credit agreement (percent) | 3.80% | 3.80% | ||||
Outstanding borrowings | $ 0 | |||||
Required FAL deposit | $ 72,500,000 | |||||
Syndicate 1729 | ||||||
Other Commitments [Line Items] | ||||||
Return of deposit assets | $ 24,500,000 | |||||
Proportion of capital provided to support Lloyd's Syndicate | 5.00% | 5.00% | 29.00% | |||
Syndicate 6131 | ||||||
Other Commitments [Line Items] | ||||||
Proportion of capital provided to support Lloyd's Syndicate | 50.00% | 50.00% | 100.00% |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | May 05, 2021 |
Lessee, Lease, Description [Line Items] | ||
Renewal term (up to) (in years) | 15 years | |
Termination period | 1 year | |
NORCAL Group | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease ROU assets | $ 4,385 | |
Operating lease liabilities | $ 5,275 | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Lease term (in years) | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Lease term (in years) | 10 years |
Leases (Lease Cost) (Details)
Leases (Lease Cost) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Leases [Abstract] | ||||
Operating lease expense | $ 1,425,000 | $ 905,000 | $ 3,577,000 | $ 3,421,000 |
Sublease income | (66,000) | (42,000) | (190,000) | (118,000) |
Net lease expense | 1,359,000 | 863,000 | 3,387,000 | 3,303,000 |
Short-term lease costs | 0 | 0 | 0 | 0 |
Rental income from owned properties | $ 600,000 | $ 700,000 | $ 1,800,000 | $ 1,900,000 |
Leases (Supplemental Lease Info
Leases (Supplemental Lease Information) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Leases [Abstract] | |||
Operating lease ROU assets | $ 20,253 | $ 19,013 | |
Operating lease liabilities | $ 21,670 | $ 20,116 | |
Weighted-average remaining lease term | 7 years 10 days | 8 years 3 months 21 days | |
Weighted-average discount rate | 2.84% | 2.97% | |
Operating cash flows from operating leases | $ 4,145 | $ 3,123 |
Leases (Future Minimum Lease Pa
Leases (Future Minimum Lease Payments) (Details) $ in Thousands | Sep. 30, 2021USD ($)lease | Dec. 31, 2020USD ($) |
Leases [Abstract] | ||
Future lease payments on lease not yet commenced | $ 500 | |
Number of leases not yet commenced | lease | 1 | |
Term of lease not yet commenced yet | 10 years | |
2021 | $ 1,630 | |
2022 | 5,169 | |
2023 | 3,820 | |
2024 | 2,475 | |
2025 | 1,969 | |
Thereafter | 8,876 | |
Total future minimum lease payments | 23,939 | |
Less: Imputed interest | 2,269 | |
Total operating lease liabilities | $ 21,670 | $ 20,116 |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Debt Instrument [Line Items] | ||
Gross debt | $ 425,766 | $ 286,113 |
Less unamortized debt issuance costs | 1,008 | 1,400 |
Debt less unamortized debt issuance costs | 424,758 | 284,713 |
Mortgage loans | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 0 | $ 36,113 |
Mortgage loans | LIBOR | ||
Debt Instrument [Line Items] | ||
Effective interest rate on debt | 1.58% | |
Basis spread on variable rate for debt | 1.325% | 1.325% |
Senior notes due 2023 | Senior notes due 2023 | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 250,000 | $ 250,000 |
Stated interest rate on debt | 5.30% | 5.30% |
Contribution Certificates | ||
Debt Instrument [Line Items] | ||
Gross debt | $ 175,766 | $ 0 |
Stated interest rate on debt | 3.00% | |
Effective interest rate on debt | 4.35% |
Debt (Narrative) (Details)
Debt (Narrative) (Details) - USD ($) | May 05, 2021 | Aug. 31, 2021 | Jul. 31, 2021 | Jun. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2017 | Dec. 31, 2020 |
Debt Instrument [Line Items] | ||||||||
Repayments of outstanding mortgage loans | $ 36,113,000 | $ 1,127,000 | ||||||
Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of lines of credit | $ 15,000,000 | |||||||
Contribution Certificates | NORCAL Group | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal amount | $ 191,000,000 | |||||||
Debt instrument fair value | 175,000,000 | |||||||
Debt instrument, premium | $ 16,000,000 | |||||||
Debt instrument term | 10 years | |||||||
Line of Credit | Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Line of credit borrowing capacity | 250,000,000 | |||||||
Accordion feature borrowing capacity | 50,000,000 | |||||||
Line of credit, borrowing capacity including accordion feature | 300,000,000 | |||||||
Outstanding borrowing | $ 0 | $ 0 | ||||||
Mortgage loans | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument term | 10 years | |||||||
Repayments of outstanding mortgage loans | $ 19,700,000 | $ 15,600,000 | ||||||
Mortgage loans | ProAssurance Indemnity | ||||||||
Debt Instrument [Line Items] | ||||||||
Total principal payments | $ 17,900,000 | |||||||
Mortgage loans | PICA | ||||||||
Debt Instrument [Line Items] | ||||||||
Total principal payments | $ 22,600,000 |
Shareholders' Equity (Narrative
Shareholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Equity [Abstract] | |||||||||
Common shares, shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | ||||||
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | 50,000,000 | ||||||
Cash dividends declared per common share (in usd per share) | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.31 | $ 0.15 | $ 0.41 | |
Dividend declared | $ 8.1 | $ 22.1 | |||||||
Total authorizations which remain available for use | $ 110 | $ 110 | |||||||
Common shares acquired (in shares) | 0 | 0 | |||||||
Deferred tax (benefit) expense included in OCI | $ (3.2) | $ 1.9 | $ (8.3) | $ 7.7 |
Shareholders' Equity (Roll Forw
Shareholders' Equity (Roll Forward of AOCI) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | $ 1,424,040 | $ 1,474,390 | $ 1,349,210 | $ 1,511,913 |
OCI, before reclassifications, net of tax | (10,158) | 9,483 | (24,647) | 36,990 |
Amounts reclassified from AOCI, net of tax | (1,407) | (2,328) | (9,073) | (5,660) |
Net OCI, current period | (11,565) | 7,155 | (33,720) | 31,330 |
Ending balance | 1,423,102 | 1,329,893 | 1,423,102 | 1,329,893 |
Unrealized Investment Gains (Losses) | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 53,168 | 61,912 | 75,388 | 37,333 |
OCI, before reclassifications, net of tax | (10,158) | 9,505 | (24,655) | 37,199 |
Amounts reclassified from AOCI, net of tax | (1,503) | (2,975) | (9,226) | (6,090) |
Net OCI, current period | (11,661) | 6,530 | (33,881) | 31,109 |
Ending balance | 41,507 | 68,442 | 41,507 | 68,442 |
Non-credit Impairments | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 0 | (704) | (57) | (300) |
OCI, before reclassifications, net of tax | 0 | 0 | 0 | (187) |
Amounts reclassified from AOCI, net of tax | 0 | 647 | 57 | 430 |
Net OCI, current period | 0 | 647 | 57 | 243 |
Ending balance | 0 | (57) | 0 | (57) |
Unrecognized Change in Defined Benefit Plan Liabilities | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (96) | (78) | (104) | (78) |
OCI, before reclassifications, net of tax | 0 | (22) | 8 | (22) |
Amounts reclassified from AOCI, net of tax | 96 | 0 | 96 | 0 |
Net OCI, current period | 96 | (22) | 104 | (22) |
Ending balance | 0 | (100) | 0 | (100) |
Accumulated Other Comprehensive Income (Loss) | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 53,072 | 61,130 | 75,227 | 36,955 |
Ending balance | $ 41,507 | $ 68,285 | $ 41,507 | $ 68,285 |
Variable Interest Entities (Nar
Variable Interest Entities (Narrative) (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Variable Interest Entity [Line Items] | ||
VIEs carrying value | $ 6,327,268 | $ 4,654,803 |
Liabilities | 4,904,166 | 3,305,593 |
Variable Interest Entity, Primary Beneficiary | PPM RRG | ||
Variable Interest Entity [Line Items] | ||
VIEs carrying value | 145,000 | |
Surplus Notes | 5,000 | |
Liabilities | 145,000 | |
Equity investments | Variable Interest Entity, Not Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
VIEs carrying value | $ 284,700 | $ 282,200 |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted average number of common shares outstanding, basic (in shares) | 53,982 | 53,889 | 53,955 | 53,854 |
Weighted average number of common shares outstanding, diluted (in shares) | 54,078 | 53,918 | 54,042 | 53,896 |
Effect of dilutive shares on earnings (loss) per share (in usd per share) | $ 0 | $ 0 | $ (0.01) | $ 0 |
Antidilutive shares excluded from computation of earnings per share (in shares) | 37 | 177 | 25 | 119 |
Restricted Share Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dilutive securities (in shares) | 92 | 29 | 84 | 41 |
Performance Share Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dilutive securities (in shares) | 4 | 0 | 3 | 1 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) - segment | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Segment Reporting Information [Line Items] | ||
Number of reportable segments | 5 | |
Number of operating segments | 5 | |
Workers' Compensation Insurance Segment | ||
Segment Reporting Information [Line Items] | ||
Worker's compensation SPC percentage ceded | 100.00% | |
Syndicate 1729 | ||
Segment Reporting Information [Line Items] | ||
Proportion of capital provided to support Lloyd's Syndicate | 5.00% | 29.00% |
Syndicate 6131 | ||
Segment Reporting Information [Line Items] | ||
Proportion of capital provided to support Lloyd's Syndicate | 50.00% | 100.00% |
Segment Information (Financial
Segment Information (Financial Data by Segment) (Details) - USD ($) $ in Thousands | May 05, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | $ 272,248 | $ 194,559 | $ 698,598 | $ 605,708 | ||
Net investment income | 19,278 | 16,924 | 51,713 | 55,877 | ||
Equity in earnings (loss) of unconsolidated subsidiaries | 15,244 | 4,853 | 33,959 | (22,065) | ||
Net realized gains (losses) | 530 | 8,838 | 20,212 | 150 | ||
Other income (loss) (expense) | 2,400 | 1,723 | 6,862 | 5,668 | ||
Net losses and loss adjustment expenses | (223,393) | (145,581) | (555,030) | (521,412) | ||
Underwriting, policy acquisition and operating expenses | (64,485) | (59,433) | (176,915) | (180,178) | ||
SPC U.S. federal income taxes expense | (431) | (871) | (1,291) | (1,573) | ||
SPC dividend (expense) income | (1,320) | (3,854) | (5,926) | (7,988) | ||
Interest expense | (5,814) | (3,881) | (14,203) | (11,725) | ||
Income tax benefit (expense) | (219) | (2,141) | (1,369) | 48,621 | ||
Segment results | 14,038 | 11,136 | 56,610 | (28,917) | ||
Gain on bargain purchase | 0 | 0 | 74,408 | 0 | ||
Goodwill impairment | 0 | 161,115 | 0 | 161,115 | $ 161,115 | |
Net income (loss) | 12,200 | (149,979) | 111,984 | (190,032) | ||
Depreciation and amortization, net of accretion | 10,246 | 6,345 | 26,566 | 16,168 | ||
Income tax expense (benefit) | (270) | 2,141 | (3,132) | (48,621) | ||
NORCAL Group | ||||||
Segment Reporting Information [Line Items] | ||||||
Gain on bargain purchase | $ 74,408 | |||||
Transaction-related costs | (2,300) | (500) | (23,500) | (1,600) | ||
Income tax expense (benefit) | (500) | (4,500) | ||||
Specialty P&C | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 203,716 | 117,849 | 487,963 | 365,305 | ||
Workers' Compensation Insurance | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 42,235 | 42,516 | 122,872 | 129,437 | ||
Segregated Portfolio Cell Reinsurance | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 15,344 | 16,052 | 47,500 | 49,780 | ||
Lloyd's Syndicates | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 10,953 | 18,142 | 40,263 | 61,186 | ||
Operating segments | Specialty P&C | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 203,716 | 117,849 | 487,963 | 365,305 | ||
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 (loss) (expense) | 860 | 726 | 2,800 | 3,515 | ||
Net losses and loss adjustment expenses | (176,490) | (102,951) | (417,890) | (373,442) | ||
Underwriting, policy acquisition and operating expenses | (36,147) | (28,074) | (91,369) | (82,894) | ||
SPC U.S. federal income taxes expense | 0 | 0 | 0 | 0 | ||
SPC dividend (expense) income | 0 | 0 | 0 | 0 | ||
Interest expense | 0 | 0 | 0 | 0 | ||
Income tax benefit (expense) | 0 | 0 | 0 | 0 | ||
Segment results | (8,061) | (12,450) | (18,496) | (87,516) | ||
Depreciation and amortization, net of accretion | 1,956 | 2,669 | 7,261 | 5,930 | ||
Operating segments | Workers' Compensation Insurance | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 42,235 | 42,516 | 122,872 | 129,437 | ||
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 (loss) (expense) | 437 | 441 | 1,730 | 1,717 | ||
Net losses and loss adjustment expenses | (31,364) | (26,455) | (85,323) | (84,648) | ||
Underwriting, policy acquisition and operating expenses | (13,521) | (14,983) | (38,519) | (42,604) | ||
SPC U.S. federal income taxes expense | 0 | 0 | 0 | 0 | ||
SPC dividend (expense) income | 0 | 0 | 0 | 0 | ||
Interest expense | 0 | 0 | 0 | 0 | ||
Income tax benefit (expense) | 0 | 0 | 0 | 0 | ||
Segment results | (2,213) | 1,519 | 760 | 3,902 | ||
Depreciation and amortization, net of accretion | 903 | 923 | 2,709 | 2,771 | ||
Operating segments | Segregated Portfolio Cell Reinsurance | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 15,344 | 16,052 | 47,500 | 49,780 | ||
Net investment income | 193 | 273 | 620 | 832 | ||
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 | ||
Net realized gains (losses) | 204 | 1,495 | 2,772 | 894 | ||
Other income (loss) (expense) | 0 | 12 | 2 | 203 | ||
Net losses and loss adjustment expenses | (8,693) | (6,858) | (26,560) | (23,890) | ||
Underwriting, policy acquisition and operating expenses | (4,758) | (5,036) | (15,078) | (15,474) | ||
SPC U.S. federal income taxes expense | (431) | (871) | (1,291) | (1,573) | ||
SPC dividend (expense) income | (1,320) | (3,854) | (5,926) | (7,988) | ||
Interest expense | 0 | 0 | 0 | 0 | ||
Income tax benefit (expense) | 0 | 0 | 0 | 0 | ||
Segment results | 539 | 1,213 | 2,039 | 2,784 | ||
Depreciation and amortization, net of accretion | 397 | 210 | 1,074 | 371 | ||
Operating segments | Lloyd's Syndicates | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 10,953 | 18,142 | 40,263 | 61,186 | ||
Net investment income | 431 | 951 | 1,677 | 3,236 | ||
Equity in earnings (loss) of unconsolidated subsidiaries | 0 | 0 | 0 | 0 | ||
Net realized gains (losses) | 35 | 489 | 9 | 1,100 | ||
Other income (loss) (expense) | 283 | 411 | 864 | 219 | ||
Net losses and loss adjustment expenses | (6,846) | (9,317) | (25,257) | (39,432) | ||
Underwriting, policy acquisition and operating expenses | (3,909) | (6,938) | (15,219) | (23,373) | ||
SPC U.S. federal income taxes expense | 0 | 0 | 0 | 0 | ||
SPC dividend (expense) income | 0 | 0 | 0 | 0 | ||
Interest expense | 0 | 0 | 0 | 0 | ||
Income tax benefit (expense) | 0 | 0 | 0 | 29 | ||
Segment results | 947 | 3,738 | 2,337 | 2,965 | ||
Depreciation and amortization, net of accretion | 17 | 3 | 49 | 26 | ||
Operating segments | Corporate | ||||||
Segment Reporting Information [Line Items] | ||||||
Net premiums earned | 0 | 0 | 0 | 0 | ||
Net investment income | 18,654 | 15,700 | 49,416 | 51,809 | ||
Equity in earnings (loss) of unconsolidated subsidiaries | 15,244 | 4,853 | 33,959 | (22,065) | ||
Net realized gains (losses) | 291 | 6,854 | 17,431 | (1,844) | ||
Other income (loss) (expense) | 1,542 | 775 | 3,786 | 1,813 | ||
Net losses and loss adjustment expenses | 0 | 0 | 0 | 0 | ||
Underwriting, policy acquisition and operating expenses | (6,872) | (5,044) | (19,050) | (17,632) | ||
SPC U.S. federal income taxes expense | 0 | 0 | 0 | 0 | ||
SPC dividend (expense) income | 0 | 0 | 0 | 0 | ||
Interest expense | (5,814) | (3,881) | (14,203) | (11,725) | ||
Income tax benefit (expense) | (219) | (2,141) | (1,369) | 48,592 | ||
Segment results | 22,826 | 17,116 | 69,970 | 48,948 | ||
Depreciation and amortization, net of accretion | 6,973 | 2,540 | 15,473 | 7,070 | ||
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 (loss) (expense) | (722) | (642) | (2,320) | (1,799) | ||
Net losses and loss adjustment expenses | 0 | 0 | 0 | 0 | ||
Underwriting, policy acquisition and operating expenses | 722 | 642 | 2,320 | 1,799 | ||
SPC U.S. federal income taxes expense | 0 | 0 | 0 | 0 | ||
SPC dividend (expense) income | 0 | 0 | 0 | 0 | ||
Interest expense | 0 | 0 | 0 | 0 | ||
Income tax benefit (expense) | 0 | 0 | 0 | 0 | ||
Segment results | 0 | 0 | 0 | 0 | ||
Depreciation and amortization, net of accretion | 0 | 0 | 0 | 0 | ||
Segment reconciling items | ||||||
Segment Reporting Information [Line Items] | ||||||
Gain on bargain purchase | 74,408 | |||||
Transaction-related costs | $ (1,838) | $ (19,034) | ||||
Goodwill impairment | $ 161,115 | $ 161,115 |
Segment Information (Gross Prem
Segment Information (Gross Premiums Earned and Reconciliation to Net Premiums) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Segment Reporting Information [Line Items] | ||||
Segment net premiums earned | $ 272,248 | $ 194,559 | $ 698,598 | $ 605,708 |
Specialty P&C | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (18,240) | (19,195) | (52,526) | (56,309) |
Segment net premiums earned | 203,716 | 117,849 | 487,963 | 365,305 |
Specialty P&C | HCPL | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 184,893 | 101,785 | 432,722 | 317,088 |
Specialty P&C | Small Business Unit | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 26,958 | 26,372 | 78,789 | 77,937 |
Specialty P&C | Medical Technology Liability | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 9,933 | 8,749 | 28,484 | 25,918 |
Specialty P&C | Other | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 172 | 138 | 494 | 671 |
Workers' Compensation Insurance | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (19,729) | (20,291) | (58,434) | (62,412) |
Segment net premiums earned | 42,235 | 42,516 | 122,872 | 129,437 |
Workers' Compensation Insurance | Traditional business | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 45,331 | 45,620 | 130,767 | 138,628 |
Workers' Compensation Insurance | Alternative market business | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 16,633 | 17,187 | 50,539 | 53,221 |
Segregated Portfolio Cell Reinsurance Segment | ||||
Segment Reporting Information [Line Items] | ||||
Ceded premiums earned | (2,151) | (2,123) | (6,390) | (6,497) |
Segment net premiums earned | 15,344 | 16,052 | 47,500 | 49,780 |
Segregated Portfolio Cell Reinsurance Segment | HCPL | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 1,649 | 1,699 | 5,675 | 5,099 |
Segregated Portfolio Cell Reinsurance Segment | Workers' compensation | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 15,846 | 16,476 | 48,215 | 51,178 |
Lloyd's Syndicates Segment | ||||
Segment Reporting Information [Line Items] | ||||
Gross premiums earned | 13,262 | 22,777 | 50,282 | 77,309 |
Ceded premiums earned | (2,309) | (4,635) | (10,019) | (16,123) |
Segment net premiums earned | $ 10,953 | $ 18,142 | $ 40,263 | $ 61,186 |
Benefit Plans (Narrative) (Deta
Benefit Plans (Narrative) (Details) - NORCAL Group | 8 Months Ended | |
Dec. 31, 2021 | May 05, 2021 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Projected benefit obligation, weighted average discount rate | 2.95% | |
Forecast | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Net periodic benefit cost (credit), weighted average discount rate | 2.95% | |
Net periodic benefit cost, expected weighted average long-term rate of return on plan assets | 3.75% |
Benefit Plans (Components of Ne
Benefit Plans (Components of Net Periodic Benefit Cost Credit) (Details) - Pension Plan - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Components of net periodic benefit cost (credit) | ||
Interest cost | $ 779 | $ 1,253 |
Expected return on Plan assets | (896) | (1,538) |
Total net periodic (benefit) cost | $ (117) | $ (285) |