February 21, 2019
Joseph J. Beneducci
Chairman, President and Chief Executive Officer
ProSight Global, Inc.
412 Mt. Kemble Avenue
Suite 300
Morristown, NJ 07960
Re: ProSight Global, Inc.
Draft Registration Statement on Form S-1
Submitted January 22, 2019
CIK No. 0001634038
Dear Mr. Beneducci:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1 submitted January 22, 2019
Letter From Joe Beneducci, Founder and CEO, page i
1. Please revise the letter to shareholders to provide a balanced
discussion of your company
and products by clarifying the following:
How your insurance products differ from other available insurance
products;
What are the problems your third party solutions are designed to
address;
What is the basis for your statement that you enjoy the financial
strength of a top-tier
insurance company, given your history of losses? How are you defining
financial
strength?;
Joseph J. Beneducci
FirstName LastNameJoseph J. Beneducci
ProSight Global, Inc.
Comapany NameProSight Global, Inc.
February 21, 2019
Page 2
February 21, 2019 Page 2
FirstName LastName
How does technology-based platform allow for growth beyond
ordinary industry
standards?;
Explain your reference to "profitable growth," given your net
losses for the years
ended December 31, 2016 and 2017 and how you are defining
"profitable"; and
Explain the meaning of your statement that you can "respond to
customer needs on an
entirely different level."
Market, Industry and Other Data, page iv
2. Please revise to clarify your liability for statements included in the
prospectus, regardless
of the fact that you did not verify them and cannot guarantee their
accuracy.
Our Company and Business Overview, page 1
3. Please describe the difference between distributing insurance products
on an "admitted"
and "non-admitted" basis the first time the terms are used.
4. Please provide the basis for your assumptions that the rest of the
industry is unable to
respond to changes in industry dynamics because other companies in the
industry rely on
obsolete systems and other companies in the industry are not able to
mine data to manage
their businesses and inform underwriting on a real time basis. Without
support for your
statements that other companies in the industry are unable to do these
things, claiming
these abilities as advantages is not appropriate.
5. Please revise the graph depicting 2018 GWP from Customer Segments by
Distribution
Channels to explain the term "PSIB."
Our Competitive Strengths, page 4
6. The summary should provide a balanced discussion of your company and
its operations.
As currently drafted, your summary provides a detailed discussion of
the positive aspects
of your company and its strategy, much of which is repeated in later
sections of the
registration statement, and a limited discussion of risks associated
with an investment in
the company. Please revise your disclosure to provide a summary of
your competitive
strengths and strategy by eliminating the detailed discussion that is
largely redundant of
your Business and Management sections. The summary discussion of your
advantages,
strategy and risk factors should provide similar levels of detail and
similar prominence.
Our Strategy, page 7
7. Please revise your reference to your A.M. Best rating to also disclose
that it is the fourth
highest of 16 point scale and is a measure of your ability to meet
your obligations to your
policyholder, as opposed to an investment rating. This information
should be provided in
the earliest reference to the rating.
Joseph J. Beneducci
FirstName LastNameJoseph J. Beneducci
ProSight Global, Inc.
Comapany NameProSight Global, Inc.
February 21, 2019
February 21, 2019 Page 3
Page 3
FirstName LastName
Implications of Being an Emerging Growth Company , page 10
8. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
Our ultimate financial obligations to the buyers of our U.K. operations ...,
page 23
9. Please disclose the factors that will determine the timing of the
"Reinsurance to Close"
transaction.
Risk Factors
Our amended and restated certificate of incorporation provides that the Court
of Chancery...,
page 38
10. We note that the forum selection provision described on pages 38 and
140 of your filing
identifies the Court of Chancery of the State of Delaware as the
exclusive forum for
certain litigation, including any "derivative action." Please disclose
whether this provision
applies to actions arising under the Exchange Act. In this regard, we
note that Section 27
of the Exchange Act creates exclusive federal jurisdiction over all
suits brought to enforce
any duty or liability created by the Exchange Act or the rules and
regulations thereunder.
If this provision does not apply to actions arising under the Exchange
Act, please ensure
that the exclusive forum provision in your governing documents and the
related filing
disclosure states this clearly.
Use of Proceeds, page 45
11. You appear to have no current specific plan for the proceeds from this
offering. Please
expand your disclosure to discuss the principal reasons for this
offering as required by
Item 504 of Regulation S-K. If proceeds will be used to discharge the
Citizens Bank line
of credit, please provide any additional disclosure that may be
required by Instruction 4 of
Item 504.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Premiums, page 64
12. Please revise your disclosure regarding premium growth in 2017 for
each customer
segment discussed to be more specific as to the underlying cause of
the increases and
decreases related to the specified niches discussed.
Joseph J. Beneducci
FirstName LastNameJoseph J. Beneducci
ProSight Global, Inc.
Comapany NameProSight Global, Inc.
February 21, 2019
February 21, 2019 Page 4
Page 4
FirstName LastName
Financial Condition
Equity-based compensation, page 73
13. Please provide us the following regarding your valuation of RSU and P
Share awards:
for the market-based regression analysis used in the valuation of
RSUs, disclose the
significant assumptions used and why this methodology is
appropriate;
please clarify which stock-option pricing modeling techniques you
used to determine
the valuation of the P Shares;
whether and how you used the assistance of any third-party valuation
specialist; and
if and how you used the guidance in the AICPA Valuation of
Privately-Held-Company
Equity Securities Issued as Compensation.
14. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation and
beneficial conversion features.
Critical Accounting Estimates
Reserves for unpaid losses and LAE, page 78
15. Please revise your disclosure to provide a sensitivity analysis of the
impact on reported
results, financial position and liquidity of reasonably likely changes
in the assumptions
underlying your most recent estimate of reserves for unpaid losses and
LAE. See Section
V of Release No. 33-8350.
Business
Our Company and Business Overview, page 84
16. We note your disclosure that you typically only engage with one
distribution partner for a
given niche. To the extent you substantially dependent on agreements
with distribution
partners, please file them as exhibits to the registration statement,
or tell us why this is not
required. See Item 601(b)(10) of Regulation S-K.
Management, page 110
17. To the extent you provide prior employment history beyond the five
year requirement of
Item 401(e), please provide applicable years and provide all
employment during the time
period presented.
Joseph J. Beneducci
FirstName LastNameJoseph J. Beneducci
ProSight Global, Inc.
Comapany NameProSight Global, Inc.
February 21, 2019
February 21, 2019 Page 5
Page 5
FirstName LastName
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Loss and Loss Adjustment Expenses, page F-13
18. You state that you utilize a variety of standard actuarial methods to
estimate your reserves.
Please disclose in greater detail the basis for estimating the
liabilities for unpaid claims
and claim adjustment expenses. Include disclosure about the
methodologies and
assumptions used. Refer to ASC 944-40-50-1. Also, tell us and disclose
if you included
any changes in methods or assumptions during the periods presented as
stipulated in ASC
944-40-50-4I.
13. Insurance Operations
Unpaid Losses, page F-32
19. Please revise your table to separately present the related amount of
reinsurance
recoverable on unpaid claims for the beginning and ending balance of
each fiscal year
presented as required by ASC 944-40-50-3a and 3cc.
20. Please revise your disclosure to specifically address the underlying
cause of the
unfavorable development for each year reported at the niche level.
Although you disclose
the line/niche experiencing development, you do not disclose the
reasons these
lines/niches experienced development. For example, disclose why your
Commercial Auto
program experienced $33.2 million of unfavorable development in 2017.
Explain whether
frequency and/or severity were worse than expected and why they were
worse. Refer
to ASC 944-40-50-3.
Incurred and Paid Claims Development, page F-32
21. Please confirm that your IBNR for each unpaid losses and loss
adjustment expenses-
incurred table presented includes expected development on reported
claims as required by
ASC 944-40-50-4D.
22. Regarding the "ULAE, discounting, and retro" reconciling item in the
table at the bottom
of page F-33, please tell us why it is appropriate to combine each
item into one
reconciling item. In your response:
tell us the amount of each separate item;
confirm that "retro" relates to your retroactive reinsurance
agreements; and
tell us your rationale for the presentation of your retroactive
reinsurance agreements in
your loss development tables.
23. From your chart on page 86, it appears that your "All Other Lines"
incurred and paid loss
development tables include lines with significantly different
characteristics. In this regard
it appears that these tables include your property, professional
liability, inland marine,
umbrella and miscellaneous lines of business. Please tell us how
aggregation of these
lines is consistent with the requirement in ASC 944-40-50-4H. In your
response:
Joseph J. Beneducci
FirstName LastNameJoseph J. Beneducci
ProSight Global, Inc.
Comapany NameProSight Global, Inc.
February 21, 2019
February 21, 2019 Page 6
Page 6
FirstName LastName
confirm which lines are included in your "All Other Lines" tables;
tell us the magnitude of each such line in terms of loss reserve
at the most recent
balance sheet date and current period loss expense; and
tell us how these lines do not have significantly different
characteristics.
24. Please provide the disclosures required by ASC 944-40-50-4F with
regards to the
methodologies for:
determining the total IBNR plus expected development on reported
claims and
calculating cumulative claim frequency information.
15. Statutory Financial Information, page F-43
25. Although you disclose the surplus of each of the domestic insurance
companies is above
the minimum amount required by the NAIC, disclose the amount of
statutory capital and
surplus necessary to satisfy regulatory requirements if significant in
relation to actual
statutory capital and surplus, as required under ASC 944-505-50-1b. If
not significant,
please clarify in the disclosure.
20. Segment Information, page F-47
26. You disclose that you have one reportable segment and that you
currently write insurance
coverage in seven customer segments across a broad range of specialty
lines of business
and that within each customer segment, you have multiple niches which
represent similar
groups of customers. Please address the following:
Reconcile your term customer segment to operating segment and
reportable segment
as used in ASC 280-10. Clarify whether your customer segments are
operating
segments and explain to us why or why not.
Provide us with an analysis under ASC 280-10-50-10 regarding each of
your customer
segments to illustrate why each of your customer segments are not
reportable
segments..
To the extent that each or some of your customer segments are
operating segments
provide us your analysis to support the aggregation of your
customer segments. Refer
to the criteria in ASC 280-10-50-11.
Also address your non-insurance operations, ProSight Specialty
Insurance Brokerage,
and ProSight Direct operations as to where these operations, for
the purpose of
segment reporting, are reported and why they are not considered
separate reportable
segments under the accounting literature.
Schedule V
Valuation and Qualifying Accounts, page F-52
27. Please revise your schedule to identify and separately present each
major class of
valuation and qualifying accounts as stipulated in Rule 12-09 of
Regulation S-X.
Joseph J. Beneducci
ProSight Global, Inc.
February 21, 2019
Page 7
General
28. Please provide us proofs of all graphics, visual, or photographic
information you will
provide in the printed prospectus prior to its use, for example in a
preliminary prospectus.
You may contact Sasha Parikh at 202-551-3627 or Mark Brunhofer at
202-551-3638 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Irene Paik at 202-551-6553 or Suzanne Hayes at 202-551-3675 with any
other questions.
Sincerely,
FirstName LastNameJoseph J. Beneducci
Division of
Corporation Finance
Comapany NameProSight Global, Inc.
Office of
Healthcare & Insurance
February 21, 2019 Page 7
cc: C. Andrew Gerlach - Sullivan & Cromwell LLP
FirstName LastName