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What changed in PROASSURANCE CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PROASSURANCE CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+755 added−785 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in PROASSURANCE CORP's 2023 10-K

755 paragraphs added · 785 removed · 537 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

76 edited+26 added−30 removed76 unchanged
Biggest changeAdditional information on ProAssurance's five operating and reportable segments is included in Note 16 of the Notes to Consolidated Financial Statements and in the segment discussion that follows. 9 Table of Contents Gross Premiums Written Gross premiums written for the years ended December 31, 2022, 2021 and 2020 were comprised as follows: Year Ended December 31 ($ in thousands) 2022 2021 2020 Specialty P&C (1)(2) $ 836,628 76 % $ 681,509 71 % $ 522,911 61 % Workers' Compensation Insurance 247,132 22 % 240,546 25 % 246,791 29 % Segregated Portfolio Cell Reinsurance (3) 78,937 7 % 71,850 8 % 72,843 9 % Lloyd's Syndicates 20,233 2 % 37,969 4 % 84,718 10 % Inter-segment revenues (3) (78,937) (7 %) (71,850) (8 %) (72,841) (9 %) Total $ 1,103,993 100 % $ 960,024 100 % $ 854,422 100 % (1) Premiums in our Specialty P&C segment include $302.0 million of premium contributed by NORCAL for the year ended December 31, 2022 and $154.1 million of premium contributed by NORCAL since the date of acquisition for the year ended December 31, 2021.
Biggest changeGross Premiums Written Gross premiums written for the years ended December 31, 2023, 2022 and 2021 were comprised as follows: Year Ended December 31 ($ in thousands) 2023 2022 2021 Specialty P&C (1) $ 835,430 77 % $ 856,861 78 % $ 719,478 75 % Workers' Compensation Insurance 246,857 23 % 247,132 22 % 240,546 25 % Segregated Portfolio Cell Reinsurance (2) 70,259 7 % 78,937 7 % 71,850 8 % Inter-segment revenues (2) (70,267) (7 %) (78,937) (7 %) (71,850) (8 %) Total $ 1,082,279 100 % $ 1,103,993 100 % $ 960,024 100 % (1) Primarily comprised of twelve month term policies.
We base our rates on current loss projections, maintaining a long-term focus even when this approach may reduce our top line growth. Such projections could also result in us not meeting profit targets during certain phases of the insurance cycle.
We base our rates on current loss projections, maintaining a long-term focus even when this approach may reduce our top line growth. Such loss projections could also result in us not meeting profit targets during certain phases of the insurance cycle.
The workers' compensation premium written is 100% ceded to either the SPCs at Inova Re or Eastern Re, which are reported in our Segregated Portfolio Cell Reinsurance segment, or captive insurers unaffiliated with ProAssurance for two programs. Alternative market solutions include program design, fronting, claims administration, risk management, SPC rental, asset management and SPC management services.
The workers' compensation premium written is 100% ceded to either the SPCs at Inova Re, which are reported in our Segregated Portfolio Cell Reinsurance segment, or captive insurers unaffiliated with ProAssurance for two programs. Alternative market solutions include program design, fronting, claims administration, risk management, SPC rental, asset management and SPC management services.
Healthcare delivery settings are changing with the growth of retail delivery by allied healthcare professionals as well as physicians in distributed clinics, pharmacies, large consumer stores and online. These larger commercial enterprises have differing risk management needs from those in the traditional small physician practices.
Healthcare delivery settings are changing with the growth of retail delivery by allied healthcare professionals as well as physicians practicing in distributed clinics, pharmacies, large consumer stores and online. These larger commercial enterprises have differing risk management needs from those in the traditional small physician practices.
These SEC filings can be found on our website at investor.proassurance.com/Docs. This section also includes information regarding stock trading by corporate insiders by providing access to SEC Forms 3, 4 and 5 when they are filed with the SEC.
These SEC filings can be found on our website at investor.proassurance.com/Docs. This section of our website also includes information regarding stock trading by corporate insiders by providing access to SEC Forms 3, 4 and 5 when they are filed with the SEC.
Our insurance subsidiaries are primarily domiciled in the U.S. Our states of domicile include Alabama, California, Florida, Illinois, Michigan, Missouri, Pennsylvania, Texas and Vermont. Our foreign jurisdictions include our reinsurance operations based in the Cayman Islands and, through our participation in Lloyd's Syndicates, our insurance and reinsurance operations based in the U.K. that we support.
Our insurance subsidiaries are primarily domiciled in the U.S. Our states of domicile include Alabama, California, Florida, Illinois, Missouri, Pennsylvania, Texas and Vermont. Our foreign jurisdictions include our reinsurance operations based in the Cayman Islands and, through our participation in Lloyd's Syndicates, our insurance and reinsurance operations based in the U.K. that we support.
We do not expect compliance with the various data security or data privacy acts to have a material impact on our financial condition or results of operations, as they closely resemble the NAIC Model Law, the NYDFS Cybersecurity Regulations and the CCPA/CPRA.
We do not expect compliance with the various data security or data privacy acts to have a material impact on our financial condition or results of operations, as they closely resemble the NAIC Model Law, the NYDFS Cybersecurity Regulations and the CCPA.
To fund the payment of claims (up to prescribed limits) against insurance companies that become insolvent, these associations levy assessments on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the covered lines of business in that state.
To fund the payment of claims (up to prescribed limits) against insureds of insurance companies that become insolvent, these associations levy assessments on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the covered lines of business in that state.
Each SPC is owned, fully or in part, by an individual company, agency, group or association, and we currently have a 25% participation interest in the results of one of these three SPCs. See further discussion that follows under the heading "Segregated Portfolio Cell Reinsurance Segment." The portion not ceded to the SPCs is retained within our Specialty P&C segment.
Each SPC is owned, fully or in part, by an individual company, agency, group or association, and we currently have a 25% participation interest in the results of one of the SPCs. See further discussion that follows under the heading "Segregated Portfolio Cell Reinsurance Segment." The portion not ceded to the SPCs is retained within our Specialty P&C segment.
Some examples of key programs and initiatives that are focused on attracting, developing and retaining our diverse workforce include: • Diversity, Equity and Inclusion - To advance our commitment to fostering a diverse, inclusive and equitable workplace, our Diversity, Equity and Inclusion Council, comprised of team members from across the organization and supported by a newly appointed Diversity, Equity and Inclusion Program Manager, focused on four key strategic areas, including: ◦ grow team member and management education and awareness; ◦ encourage formation of additional Team Member Engagement Groups; ◦ expand our recruitment practices; and ◦ provide a safe workplace for all team members supported by a zero-tolerance no harassment policy. • Team Member and Leadership Development - We invest in training and development programs that support our Mission, Vision and Values, encourage continuous learning, equip team members for advancement and encourage a long-term partnership with the Company.
Some examples of key programs and initiatives that are focused on attracting, developing and retaining our diverse workforce include: • Diversity, Equity and Inclusion - To advance our commitment to fostering a diverse, inclusive and equitable workplace, our Diversity, Equity and Inclusion Council, comprised of team members from across the organization and supported by a Diversity, Equity and Inclusion Program Manager, focused on four key strategic areas, including: ◦ grow team member and management education and awareness; ◦ support the continued formation of Team Member Engagement Groups; ◦ expand our recruitment practices; and ◦ provide a safe workplace for all team members supported by a zero-tolerance no harassment policy. • Team Member and Leadership Development - We invest in training and development programs that support our Mission, Vision and Values, encourage continuous learning, equip team members for advancement and encourage a long-term partnership with the Company.
Our stock trades on the NYSE under the symbol “PRA.” Our website is www.proassurance.com, and we maintain a dedicated Investor Relations section on that website (investor.proassurance.com) to provide specialized resources for investors and others seeking to learn more about us.
Our stock trades on the NYSE under the symbol “PRA.” Our website is www.proassurancegroup.com, and we maintain a dedicated Investor Relations section on that website (investor.proassurance.com) to provide resources for investors and others seeking to learn more about us.
Insurance Regulation Concerning Cybersecurity In March 2017, the New York Cybersecurity Regulation took effect for financial institutions, insurers and other companies regulated by the NYDFS. The intent of the regulation is to encourage the protection of consumer information, as well as the technology systems of NYDFS regulated entities.
Insurance Regulation Concerning Cybersecurity and Data Privacy In March 2017, the New York Cybersecurity Regulation took effect for financial institutions, insurers and other companies regulated by the NYDFS. The intent of the regulation is to encourage the protection of consumer information, as well as the technology systems of NYDFS regulated entities.
In June 2012, Congress passed the Biggert-Waters Bill, which provided for a five-year renewal of the NFIP and, among other things, authorized the Federal Emergency Management Agency to carry out initiatives to determine the capacity of private 17 Table of Contents insurers, reinsurers, and financial markets to assume a greater portion of the flood risk exposure in the U.S. and to assess the capacity of the private reinsurance market to assume some of the program’s risk.
In June 2012, Congress passed the Biggert-Waters Bill, which provided for a five-year renewal of the NFIP and, among other things, authorized the Federal Emergency Management Agency to carry out initiatives to determine the capacity of private insurers, reinsurers, and financial markets to assume a greater portion of the flood risk exposure in the U.S. and to assess the capacity of the private reinsurance market to assume some of the program’s risk.
Competitive distinctions include pricing, size, name recognition, service quality, market commitment, market conditions, breadth and flexibility of coverage, method of sale, financial stability, ratings assigned by rating agencies and regulatory conditions. The healthcare environment in the U.S. is continuing to consolidate, which brings competitive challenges and opportunities to our largest segment, the Specialty P&C segment.
Competitive distinctions include pricing, size, name recognition, service quality, market commitment, market conditions, breadth and flexibility of coverage, method of sale, financial stability, ratings assigned by rating agencies and regulatory conditions. 13 Table of Contents The healthcare environment in the U.S. is continuing to consolidate, which brings competitive challenges and opportunities to our largest segment, the Specialty P&C segment.
We participate to a varying degree in the results of certain SPCs and, for the SPCs in which we participate, our participation interest ranges from a low of 15% to a high of 85% as of December 31, 2022.
We participate to a varying degree in the results of certain SPCs and, for the SPCs in which we participate, our participation interest ranges from a low of 15% to a high of 85% as of December 31, 2023.
As part of our disclosure, through the Investor Relations section of our website, we publish our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and all other public SEC filings as soon as reasonably practicable after the report is electronically filed with, or furnished to, the SEC.
As part of our disclosure, through the Investor Relations section of our website, we provide access to our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and all other public SEC filings as soon as reasonably practicable after the report is electronically filed with, or furnished to, the SEC.
The territory of appointed brokers is restricted to a state or a small number of states in order to maintain a level of exclusivity. Medical Technology and Life Sciences Insurance Our Medical Technology Liability business offers products-completed operations and errors and omissions liability coverage for medical technology and life sciences companies.
The territory of appointed brokers is restricted to a state or a small number of states in order to maintain a level of exclusivity. 11 Table of Contents Medical Technology and Life Sciences Insurance Our Medical Technology Liability business offers products-completed operations and errors and omissions liability coverage for medical technology and life sciences companies.
Of our total alternative market premiums written, approximately 93% in 2022 and 95% in 2021 was ceded to the SPCs at Inova Re and Eastern Re. All of our workers' compensation products are distributed through a group of appointed independent agents. We utilize an individual account underwriting strategy for our workers' compensation business that is focused on selecting quality accounts.
Of our total alternative market premiums written, approximately 93% in 2023 and 2022 was ceded to the SPCs at Inova Re. All of our workers' compensation products are distributed through a group of appointed independent agents. We utilize an individual account underwriting strategy for our workers' compensation business that is focused on selecting quality accounts.
See Note 4 of the Notes to Consolidated Financial Statements for more information on our investments. Competition The marketplace for all our lines of business is very competitive.
See Note 3 of the Notes to Consolidated Financial Statements for more information on our investments. Competition The marketplace for all our lines of business is very competitive.
New business opportunities, renewal pricing and retention continue to be a challenge as a result of intense competition, especially from multi-line insurers that are willing to underprice their workers’ compensation products in order to gain access to write other coverages that may be more lucrative and we expect this trend to continue in 2023.
New business opportunities, renewal pricing and retention continue to be a challenge as a result of intense competition, especially from multi-line insurers that appear to be willing to underprice their workers’ compensation products in order to gain access to write other coverages that may be more lucrative and we expect this trend to continue in 2024.
For the year ended December 31, 2022, approximately 74% of our HCPL gross premiums written were produced through independent insurance agencies or brokers. The agencies and brokers we use typically sell through healthcare insurance specialists who are able to convey the factors that differentiate our professional liability insurance products.
For the year ended December 31, 2023, approximately 80% of our HCPL gross premiums written were produced through independent insurance agencies or brokers. The agencies and brokers we use typically sell through healthcare insurance specialists who are able to convey the factors that differentiate our professional liability insurance products.
ITEM 1. BUSINESS Overview ProAssurance Corporation is a holding company for property and casualty insurance companies. For the year ended December 31, 2022, our net premiums written totaled $1.0 billion, and at December 31, 2022 we had total assets of $5.7 billion and $1.1 billion of shareholders' equity.
ITEM 1. BUSINESS Overview ProAssurance Corporation is a holding company for property and casualty insurance companies. For the year ended December 31, 2023, our net premiums written totaled $1.0 billion, and at December 31, 2023 we had total assets of $5.6 billion and $1.1 billion of shareholders' equity.
In 2022, our ten largest agents or brokers produced approximately 29% of our HCPL premium; individually, no one agency or broker produced more than 9% of our HCPL premium. In marketing our professional liability products we emphasize our financial strength, product flexibility and excellent claims, underwriting and risk management services.
In 2023, our ten largest agents or brokers produced approximately 30% of our HCPL premium; individually, no one agency or broker produced more than 9% of our HCPL premium. In marketing our professional liability products we emphasize our financial strength, product flexibility and excellent claims, underwriting and risk management services.
Organization and Segment Information We operate through multiple insurance organizations and report our financial results in five segments which are based on our internal management reporting structure for which financial results are regularly evaluated by our CODM to determine resource allocation and assess operating performance: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Reinsurance, Lloyd's Syndicates and Corporate.
Organization and Segment Information We operate through multiple insurance organizations and report our financial results in four segments which are based on our internal management reporting structure for which financial results are regularly evaluated by our CODM to determine resource allocation and assess operating performance: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate.
The basic components of our strategy for achieving this objective are as follows: • Pursue profitable underwriting opportunities. We emphasize profitability, not market share, and strive to achieve a consistent level of underwriting profit over the various economic and insurance cycles.
The basic components of our strategy for achieving this objective are as follows: • Pursue profitable underwriting opportunities. We emphasize profitability, not market share, and our long-term objective is to achieve a consistent level of underwriting profit over the various economic and insurance cycles.
Further, in many instances the coverage we offer is also offered through mutual entities whose ROE objectives may be lower than ours, and thus may be able to price their products more aggressively. Additionally, there are many providers, domestic and international, of alternative risk management solutions.
Further, in many instances the coverage we offer is also offered through mutual entities whose ROE objectives may be lower than ours, and thus may be able to price their products more aggressively given current levels of excess capital. Additionally, there are many providers, domestic and international, of alternative risk management solutions.
We believe that our size, reputation for effective claims management, unique customer service focus, multi-state presence and broad spectrum of coverages offered provides us with competitive advantages, even as the needs of our insureds change. Rating Agencies Our claims paying ability is regularly evaluated and rated by three major rating agencies: AM Best, Fitch and Moody’s.
We believe that our size, reputation for effective claims management, unique customer service focus, multi-state presence and broad spectrum of coverages offered provides us with competitive advantages, even as the needs of our insureds change. 14 Table of Contents Rating Agencies Our claims paying ability is regularly evaluated and rated by two major rating agencies: AM Best and Fitch.
Our custom alternative risk solutions also include a turnkey captive solution whereby we cede all or a portion of the healthcare premium, net of reinsurance, to three SPCs of our wholly owned Cayman Islands reinsurance subsidiaries, Inova Re and Eastern Re, which are reported in our Segregated Portfolio Cell Reinsurance segment.
Our custom alternative risk solutions also include a turnkey captive solution whereby we cede all or a portion of the healthcare premium, net of reinsurance, to three SPCs of our wholly owned Cayman Islands reinsurance subsidiary, Inova Re, which is reported in our Segregated Portfolio Cell Reinsurance segment.
Total gross premiums written in this segment in our alternative market captive cell program were approximately $11.8 million, $8.1 million and $7.1 million during 2022, 2021 and 2020, respectively. 10 Table of Contents We utilize independent agencies and brokers as well as an internal business development team to write our HCPL business.
Total gross premiums written in this segment in our alternative market captive cell program were approximately $6.7 million, $11.8 million and $8.1 million during 2023, 2022 and 2021, respectively. We utilize independent agencies and brokers as well as an internal business development team to write our HCPL business.
Within 15 Table of Contents the past few years, the following domiciliary states of our insurance subsidiaries have enacted or amended data security or data privacy laws: • Alabama enacted the Alabama Data Breach Notification Act of 2018, effective June 1, 2018, and the Insurance Data Security Law, effective May 1, 2019. • California enacted the California Consumer Privacy Act of 2018, effective January 1, 2020, and the California Privacy Rights Act of 2020, effective January 1, 2023.
Within the past few years, the following domiciliary states of our insurance subsidiaries and affiliates have enacted or amended data security or data privacy laws: • Alabama enacted the Insurance Data Security Law, effective May 1, 2019. • California enacted the California Consumer Privacy Act of 2018, effective January 1, 2020, and the California Privacy Rights Act of 2020, effective January 1, 2023.
Senate has yet to vote on the measure. Due to the 2017 hurricane season, Congress adopted a short-term extension to fund the NFIP which has subsequently received multiple short-term extensions and currently expires on September 30, 2023.
Senate has yet to vote on the measure. Due to the 2017 hurricane season, Congress adopted a short-term extension to fund the NFIP which has subsequently received multiple short-term extensions and currently expires on March 8, 2024.
In late 2010, the NAIC adopted the Model Holding Co. Law. The Model Holding Co. Law, as compared to previous NAIC guidance, increases regulatory oversight of and reporting by insurance holding companies, including reporting related to non-insurance entities, and requires reporting of risks affecting the holding company group.
Law, as compared to previous NAIC guidance, increases regulatory oversight of and reporting by insurance holding companies, including reporting related to non-insurance entities, and requires reporting of risks affecting the holding company group.
A (Excellent) A- (Strong) A3 ProAssurance Specialty Insurance Company A (Excellent) A- (Strong) NR ProAssurance Insurance Company of America A (Excellent) A- (Strong) A3 Medmarc Casualty Insurance Company A (Excellent) A- (Strong) NR NORCAL Group (2) A- (Excellent) NR A3 Allied Eastern Indemnity Company A (Excellent) A- (Strong) A3 Eastern Advantage Assurance Company A (Excellent) A- (Strong) NR Eastern Alliance Insurance Company A (Excellent) A- (Strong) A3 Eastern Re Ltd., SPC NR NR NR Inova Re Ltd., SPC NR NR NR Lloyd's Syndicate 1729 (3) A (Excellent) AA- (Strong) NR (1) NR indicates that the subsidiary has not been rated by the listed rating agency.
(2) A (Excellent) A- (Strong) ProAssurance Specialty Insurance Company A (Excellent) A- (Strong) ProAssurance Insurance Company of America A (Excellent) A- (Strong) Medmarc Casualty Insurance Company A (Excellent) A- (Strong) NORCAL Insurance Company A (Excellent) NR NORCAL Specialty Insurance Company A (Excellent) NR Medicus Insurance Company A (Excellent) NR FD Insurance Company A (Excellent) NR Preferred Physician Medical RRG, a Mutual Insurance Company A (Excellent) NR ProAssurance American Mutual, A RRG A (Excellent) NR Allied Eastern Indemnity Company A (Excellent) A- (Strong) Eastern Advantage Assurance Company A (Excellent) A- (Strong) Eastern Alliance Insurance Company A (Excellent) A- (Strong) Eastern Re Ltd., SPC NR NR Inova Re Ltd., SPC NR NR Lloyd's Syndicate 1729 (3) A (Excellent) AA- (Strong) (1) NR indicates that the subsidiary has not been rated by the listed rating agency.
Our overall investment strategy is to maximize current income from our investment portfolio while maintaining appropriate credit risk, liquidity, duration, portfolio diversification and capital efficiency. The portfolio is generally managed by professional third-party asset managers whose results we monitor and evaluate.
Accordingly, we report those investment results and net investment gains and losses within our Corporate segment. Our overall investment strategy is to maximize current income from our investment portfolio while maintaining appropriate credit risk, liquidity, duration, portfolio diversification and capital efficiency. The portfolio is generally managed by professional third-party asset managers whose results we monitor and evaluate.
As such, we have enhanced our coverage offerings to fit the needs of combined hospital/physician entities, multi-state medical groups, telemedicine companies, miscellaneous facilities, allied healthcare professionals and self-insured entities even as we continue to service that portion of the market maintaining more traditional practice structures. The workers’ compensation industry is highly competitive in the geographic markets in which we operate.
As such, we have enhanced our coverage offerings to fit the needs of combined hospital/physician entities, multi-state medical groups, telemedicine companies, miscellaneous facilities, allied healthcare professionals and self-insured entities even as we continue to service that portion of the market maintaining more traditional practice structures.
We target the full spectrum of the medical professional liability market, covering multiple categories of healthcare professionals, institutions (which includes hospitals, surgery centers and miscellaneous medical facilities) and, to a lesser extent, facilities specializing in long term residential care.
Professional Liability Insurance Our professional liability business is primarily focused on providing professional liability insurance to healthcare providers. We target the full spectrum of the medical professional liability market, covering multiple categories of healthcare professionals, institutions (which includes hospitals, surgery centers and miscellaneous medical facilities) and, to a lesser extent, facilities specializing in long term residential care.
We provide coverage for commercialized products and all phases of clinical trials. Underwriting analysis for Medical Technology Liability contemplates many factors including, but not limited to, the product's risk profile, loss history, the amount of coverage being sought, level of the insured's retention, policy limits, applicant's management experience, regulatory compliance record and volume of sales.
Underwriting analysis for Medical Technology Liability contemplates many factors including, but not limited to, the product's risk profile, loss history, the amount of coverage being sought, level of the insured's retention, policy limits, applicant's management experience, regulatory compliance record and volume of sales. Almost all of our Medical Technology Liability business is written through independent brokers.
Our specialty property and casualty insurance products primarily include professional liability insurance and liability insurance for medical technology and life sciences risks. We also provide capital to Syndicate 1729 which writes a range of property and casualty insurance and reinsurance lines. Our executive offices are located at 100 Brookwood Place, Birmingham, Alabama 35209 and our telephone number is (205) 877-4400.
Our specialty property and casualty insurance products primarily include professional liability insurance and liability insurance for medical technology and life sciences risks. Our executive offices are located at 100 Brookwood Place, Birmingham, Alabama 35209 and our telephone number is (205) 877-4400.
We also leverage our national geographic footprint, broad product spectrum, expertise and financial strength to provide innovative and customized products to meet the risk management needs of larger healthcare organizations or groups. • Provide superior workers' compensation products and services. We provide workers' compensation products and services that focus on increasing an organization's productivity while reducing costs.
We also leverage our national geographic footprint, broad product spectrum, expertise and financial strength to provide innovative and customized products to address the changing needs of customers in those dynamic markets. • Provide superior workers' compensation products and services. We provide workers' compensation products and services that focus on increasing an organization's productivity while reducing costs.
Our valued team members demonstrate our core values of integrity, leadership, relationships and enthusiasm every day and are focused on meeting the needs of our customers. • Focus on operational excellence. We continuously endeavor to improve our competitive position through operational excellence and productivity gains.
Our valued team members demonstrate our core values of integrity, leadership, relationships and enthusiasm every day and are focused on meeting the needs of our customers. • Focus on innovation to achieve operational excellence.
While debt ratings may be of greater interest to investors than our claims paying ratings, these ratings are not evaluations of our equity securities nor a recommendation to buy, hold or sell our equity securities. 14 Table of Contents Insurance Regulatory Matters We are subject to regulation under the insurance and insurance holding company statutes of various jurisdictions, including the domiciliary states of our insurance subsidiaries and other states in which our insurance subsidiaries do business.
These debt ratings reflect each agency’s independent evaluation of our ability to meet our obligation to holders of our debt, if any, and are as follows: • AM Best: "A+" with a stable outlook • Fitch: "BBB-" with a stable outlook While debt ratings may be of greater interest to investors than our claims paying ratings, these ratings are not evaluations of our equity securities nor a recommendation to buy, hold or sell our equity securities. 15 Table of Contents Insurance Regulatory Matters We are subject to regulation under the insurance and insurance holding company statutes of various jurisdictions, including the domiciliary states of our insurance subsidiaries and other states in which our insurance subsidiaries do business.
The underwriting, marketing and distribution of policies written in alternative market programs are the same as that of the segment from which the policy was assumed: Workers' Compensation Insurance or Specialty P&C segments. Lloyd's Syndicates Segment Our Lloyd's Syndicates segment includes the results from our participation in Syndicates 1729 and 6131.
The underwriting, marketing and distribution of policies written in alternative market programs are the same as that of the segment from which the policy was assumed: Workers' Compensation Insurance or Specialty P&C segments. Corporate Segment Our Corporate segment includes our investment operations excluding those reported in our Segregated Portfolio Cell Reinsurance segment.
Risk-Based Capital and Risk Assessment In order to enhance the regulation of insurer solvency, each state of domicile in accordance with an NAIC-defined formula specifies risk-based capital requirements for property and casualty insurance companies. At December 31, 2022, the Company estimates that all of ProAssurance’s insurance subsidiaries will exceed the minimum required risk-based capital levels.
Risk-Based Capital and Risk Assessment In order to enhance the regulation of insurer solvency, each state of domicile in accordance with an NAIC-defined formula specifies risk-based capital requirements for property and casualty insurance companies.
We also provide professional liability coverage to attorneys and their firms in select areas of practice, which is a part of our Small Business Unit. Our legal professional liability coverage is a less significant portion of our business, accounting for approximately 2% of our 2022 gross premiums written.
We also provide professional liability coverage to attorneys and their firms in select areas of practice, which is a part of our Small Business Unit. Our legal professional liability coverage accounts for approximately 2% of our 2023 gross premiums written. This business offers errors and omissions liability insurance policies for law firms engaged in the private practice of law.
We believe its contribution to our customers and culture have expanded our product capabilities with broader geographic scale and efficiencies, supporting a nationwide platform to deliver value to our customers and stakeholders. 8 Table of Contents Our Strategy We seek to generate an attractive total return for our shareholders while focusing on our culture and people.
Further, NORCAL has expanded our product capabilities with broader geographical scale and efficiencies, supporting a nationwide platform that aligns with our long-term goal of delivering value to our customers and stakeholders." 8 Table of Contents Our Strategy Our long-term goal is to generate an attractive long-term total return for our shareholders while focusing on our culture and people.
ORSA requires larger insurers, generally those with annual written premium volume greater than $1 billion as a group or $500 million as an individual insurer, to file an internal assessment of solvency with insurance regulators annually beginning in 2015. 16 Table of Contents Although no specific capital adequacy standard is currently articulated in ORSA, it is possible that such standard will be developed over time.
ORSA requires larger insurers, generally those with annual written premium volume greater than $1 billion as a group or $500 million as an individual insurer, to file an internal assessment of solvency with insurance regulators annually beginning in 2015.
We target accounts with strong return to wellness and safety programs in primarily low to middle hazard levels such as clerical offices, light manufacturing, healthcare, auto dealers and service industries and maintain a strong risk management unit in order to better serve our customers' needs.
We target accounts with strong return to wellness and safety programs in primarily low to middle hazard levels such as clerical offices, light manufacturing, healthcare, auto dealers and service industries and maintain a strong risk management unit in order to better serve our customers' needs. 12 Table of Contents We actively seek to reduce our workers' compensation loss costs by placing a concentrated focus on returning injured workers to wellness and the dignity of work as quickly as possible.
In developing their claims paying ratings, these agencies make an independent evaluation of an insurer’s ability to meet its obligations to policyholders. The following table presents the claims paying ratings of our insurance subsidiaries as of February 22, 2023.
In developing their claims paying ratings, these agencies make an independent evaluation of an insurer’s ability to meet its obligations to policyholders. The following table presents the claims paying ratings of our insurance subsidiaries as of February 27, 2024. Rating Agency (1) AM Best (www.ambest.com) Fitch (www.fitchratings.com) ProAssurance Indemnity Company, Inc.
Our Workers' Compensation Insurance segment consists of two major business activities: • Traditional workers' compensation insurance coverages provided to employers, generally those with 1,000 employees or less. Types of policies offered include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies and deductible policies. • Alternative market workers' compensation solutions provided to individual companies, agencies, groups or associations.
Types of policies offered include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies and deductible policies. • Alternative market workers' compensation solutions provided to individual companies, agencies, groups or associations.
In addition, we believe that our claims handling and risk management services are attractive to our customers and provide us with a competitive advantage even when our pricing is higher than our competitors. 13 Table of Contents For all of our business, we recognize the importance of providing our products at competitive rates, and we believe that we price our products at rates that will permit us to meet our long-term profit targets over the life of the insurance cycle.
For all of our business, we recognize the importance of providing our products at competitive rates, and we believe that we price our products at rates that will permit us to meet our long-term profit targets over the life of the insurance cycle.
Our custom alternative risk solutions include a loss portfolio transfer program for healthcare entities who, most commonly, are exiting a line of business, and assumed reinsurance for healthcare entities who, most commonly, are changing an insurance approach or simply looking for a more tailored solution for transferring risk.
While a majority of our business is written in the standard market, we also offer professional liability insurance on an excess and surplus lines basis through our Specialty business; and we offer alternative risk and self-insurance products on a customized basis. 10 Table of Contents Our custom alternative risk solutions include loss portfolio transfer programs for healthcare entities who, most commonly, are exiting a line of business, and assumed reinsurance for healthcare entities who, most commonly, are changing an insurance approach or simply looking for a more tailored solution for transferring risk.
The CPRA amends and expands the CCPA. • Illinois amended its Personal Information Protection Act, effective January 1, 2020. • Michigan enacted the Michigan Insurance Data Security Law, effective January 20, 2021. • Vermont amended its Security Breach Notice Act, effective July 1, 2020, and enacted the Vermont Insurance Data Security Law, effective January 1, 2023.
The CPRA amends and expands the CCPA. • The District of Columbia enacted the Security Breach Protection Amendment Act of 2020, effective June 17, 2020. • Florida enacted the Florida Digital Bill of Rights, which will be effective July 1, 2024. • Illinois amended its Personal Information Protection Act, effective January 1, 2020, and enacted the Insurance Data Security Law, effective January 1, 2024. • Pennsylvania enacted the Insurance Data Security Law, effective December 11, 2023. • Texas enacted the Texas Data Privacy and Security Act, which will be effective July 1, 2024. • Vermont amended its Security Breach Notice Act, effective July 1, 2020, and enacted the Vermont Insurance Data Security Law, effective January 1, 2023.
This business offers errors and omissions liability insurance policies for law firms engaged in the private practice of law. The program generally insures solo practitioners and smaller firms; almost all of our insured attorneys are members of a firm employing five or fewer attorneys.
The program generally insures solo practitioners and smaller firms; almost all of our insured attorneys are members of a firm employing five or fewer attorneys. The areas of practice of our insured firms include plaintiff, real estate, criminal defense and general corporate law.
Underwriting decisions for our legal professional liability coverage consider the firm’s areas of practice, the experience of the attorneys and the management controls and loss mitigation practices of the applicant. Our legal professional liability line of business operates in 34 states written through independent brokers. Brokers are appointed and must specialize in legal professional liability.
Our legal professional liability line of business operates in 34 states written through independent brokers. Brokers are appointed and must specialize in legal professional liability.
Strategic vendor relationships have been established to reduce medical claim costs and include preferred provider, physical therapy, prescription drug and catastrophic medical services.
We emphasize early intervention and aggressive disability management, utilizing in-house and third-party specialists for case management, including medical care and cost management. Strategic vendor relationships have been established to reduce medical claim costs and include preferred provider, physical therapy, prescription drug and catastrophic medical services.
ProAssurance was not required to file an internal assessment of solvency under the ORSA criteria during the years ended December 31, 2022 or 2021. Due to our written premium volume in 2022, ProAssurance will be required to file an internal assessment during 2023. Also, the NAIC subsequently revised the Model Holding Co.
As of December 31, 2023, all states have adopted the Model Holding Co. Law and 49 states have adopted ORSA. Due to our written premium volume for the year ended December 31, 2022, ProAssurance filed its first internal assessment of solvency under the ORSA criteria during 2023. Also, the NAIC subsequently revised the Model Holding Co.
The Model Holding Co. Law and ORSA will be binding only if adopted by state legislatures and/or state insurance regulatory authorities and actual regulations adopted by any state may differ from that adopted by the NAIC. As of December 31, 2022, all states have adopted the Model Holding Co. Law and 49 states have adopted ORSA.
Although no specific capital adequacy standard is currently articulated in ORSA, it is possible that such standard will be developed over time. The Model Holding Co. Law and ORSA will be binding only if adopted by state legislatures and/or state insurance regulatory authorities and actual regulations adopted by any state may differ from that adopted by the NAIC.
Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials. Professional Liability Insurance Our professional liability business is primarily focused on providing professional liability insurance to healthcare providers.
Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials. As previously discussed, we reorganized our segment reporting in the third quarter of 2023.
We strive to be the Employer of Choice by attracting, retaining and developing a diverse group of team members who embody our Mission, Vision and Values. We are committed to fostering an inclusive workplace in which variety of thought, creativity and innovation fuel team member engagement and ultimately increases shareholder return.
Through a unifying culture, we strive to be the Employer of Choice by attracting, retaining and developing a diverse group of team members who embody our Mission, Vision and Values.
One of the federal government bodies created by the Dodd-Frank Act was the FIO which in December 2013 released a proposal on insurance modernization and improvement of the system of insurance regulation in the U.S.
However, development of regulations is not complete, and there could yet be changes in the regulatory environment that affect the way we conduct our operations or the cost of compliance, or both. 18 Table of Contents One of the federal government bodies created by the Dodd-Frank Act was the FIO which in December 2013 released a proposal on insurance modernization and improvement of the system of insurance regulation in the U.S.
We believe our product offerings allow us to provide flexibility in offering workers’ compensation solutions to our customers at a competitive price.
We believe our product offerings allow us to provide flexibility in offering workers’ compensation solutions to our customers at a competitive price. In addition, we believe that our claims handling and risk management services are attractive to our customers and provide us with a competitive advantage even when our pricing is higher than our competitors.
Premium from our participation in the results of Syndicate 6131 from open underwriting years prior to 2022 will continue to earn out pro rata over the entire policy period of the underlying business. The results of this segment are normally reported on a quarter lag, except when information is available that is material to the current period.
The results from our participation in Syndicate 1729 from open underwriting years prior to 2024 will continue to earn out pro rata over the entire policy period of the underlying business. Due to the quarter lag, our ceased participation in Syndicate 1729 will begin to be reflected in our results in the second quarter of 2024.
Each of the domiciliary states of our insurance subsidiaries, excluding Missouri and Pennsylvania has enacted data security or data privacy laws. These state laws require an information security program, based on an ongoing risk assessment, overseeing third-party service providers, investigating data breaches and notifying regulators of a cybersecurity event.
The data security laws require an information security program based on an ongoing risk assessment, overseeing third-party service providers, investigating data breaches and notifying regulators of a cybersecurity event. In May 2018, the European Union implemented the GDPR, designed to protect data privacy of individuals within the European Union and the EEA.
In addition, our written premium in 2022 and 2021 includes $12.0 million and $13.5 million of NORCAL Standard Physician policies with a three-month term, respectively. (3) Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments. We eliminate this inter-segment revenue.
(2) Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments. We eliminate this inter-segment revenue.
The areas of practice of our insured firms include plaintiff, real estate, criminal defense and general corporate law. The program does not insure firms practicing in areas that are considered high hazard such as securities and intellectual property law.
The program does not insure firms practicing in areas that are considered high hazard such as securities and intellectual property law. Underwriting decisions for our legal professional liability coverage consider the firm’s areas of practice, the experience of the attorneys and the management controls and loss mitigation practices of the applicant.
We work with licensed property and casualty insurance brokerages across the country and do not require an appointment except where required by law.
In 2023, our top ten largest brokers generated approximately 47% of our Medical Technology Liability gross written premium, with no one broker representing more than 13%. We work with licensed property and casualty insurance brokerages across the country and do not require an appointment except where required by law.
We are excited to utilize ProActive to support overall health in a variety of ways including an array of educational resources, team member challenges and incentives for healthy habits. • Flexible Workplace - The majority of our team members are either fully-remote or working in a flexible work arrangement that supports healthy work-life balance while capitalizing on opportunities to bring team members together to foster relationships, fuel innovation and facilitate engagement.
During our 2023 benefits open enrollment process, we expanded voluntary benefit program offerings to better address the unique needs of all of our team members as well as added an additional paid holiday each year beginning in 2024. • Flexible Workplace - The majority of our team members are either fully-remote or working in a flexible work arrangement that supports healthy work-life balance while capitalizing on opportunities to bring team members together to foster relationships, fuel innovation and facilitate engagement.
Inova Re and Eastern Re are required to maintain minimum capital of approximately $200,000 and must receive approval from the CIMA before they can pay any dividends. United Kingdom Syndicate 1729 is regulated in the U.K. by the Prudential Regulation Authority and the Financial Conduct Authority.
Inova Re and Eastern Re are required to maintain minimum capital of approximately $200,000 and must receive approval from the CIMA before they can pay any dividends. 19 Table of Contents Human Capital Resources Our people are the most critical element in assuring we deliver our promise of protecting others.
At December 31, 2022, we had 1,083 employees, none of whom were represented by a labor union. We consider our employee relations to be good. 19 Table of Contents
At December 31, 2023, we had 1,094 employees, none of whom were represented by a labor union. We consider our employee relations to be good. 20 Table of Contents Enterprise Risk Management As a property and casualty insurance provider, we are exposed to many risks stemming from both our insurance operations and the environments in which we operate.
Professional liability insurance is primarily offered to healthcare providers and institutions and, to a lesser extent, to attorneys and their firms. Our professional liability insurance also includes the business acquired through the NORCAL transaction that closed on May 5, 2021.
Specialty Property and Casualty Segment Our Specialty P&C segment focuses on professional liability insurance and medical technology liability insurance. Professional liability insurance is primarily offered to healthcare providers and institutions and, to a lesser extent, to attorneys and their firms.
In addition, we had net written premium of $32.5 million in 2022, $23.0 million in 2021 and $11.1 million in 2020 associated with international insurance exposures within our Specialty P&C segment. Specialty Property and Casualty Segment Our Specialty P&C segment focuses on professional liability insurance and Medical Technology Liability insurance.
In our Specialty P&C segment, we had net written premium of $38.1 million in 2023, $39.2 million in 2022 and $37.5 million in 2021 associated with international insurance exposures, primarily related to our strategic partnership with a medical professional liability insurer and, to a lesser extent, exposures from our participation in Lloyd's Syndicates 1729 and 6131.
We are currently compliant with the regulation according to the transition periods as defined in the NYDFS Cybersecurity Regulation. In October 2017, the NAIC adopted the Insurance Data Security Model Law, which created rules for insurers, agents and other licensed entities covering data security and investigation and notification of breach.
The regulation was subsequently amended, with the most recent changes being adopted effective November 1, 2023. In similar efforts, the NAIC adopted the Insurance Data Security Model Law in October 2017, which created rules for insurers, agents and other licensed entities.
In addition, this segment includes corporate expenses, interest expense, U.S. income taxes and non-premium revenues generated outside of our insurance entities. We apply a consistent management strategy to the entire investment portfolio managed at the corporate level. Accordingly, we report those investment results and net investment gains and losses within our Corporate segment.
In addition, this segment includes corporate expenses, interest expense, U.S. and U.K. income taxes and non-premium revenues generated outside of our insurance entities. As previously discussed under the heading "Organization and Segment Information," we reorganized our segment reporting in the third quarter of 2023.
To support those objectives, we conduct quarterly “Pulse” surveys that gain real-time feedback from our team members on key issues. The results are shared with all team members and the data is used to steer our continuous improvement efforts.
To support those objectives, we conduct quarterly “Pulse” surveys that gain real-time feedback from our team members on key issues. In addition, in 2023 we participated in the Best Companies Group's best places to work survey program and we proudly received the best places designation in several of our operating states including Alabama, Pennsylvania and Tennessee.
The GDPR and the CCPA, as amended and expanded by the CPRA, grant individuals the right to request that a company delete or de-identify their personal information. We expect other states, including our domiciliary states of Florida, Missouri, Pennsylvania and Texas, to either adopt the NAIC's Insurance Data Security Model Law or enact their own data security regulations.
We expect that, over time, additional states, will either adopt the NAIC's Insurance Data Security Model Law or enact their own data security regulations. Moreover, we expect to see privacy laws similar to the CCPA to be enacted in other states, including Missouri where we are domiciled, as previously discussed.
Additionally, in 2022 we introduced a team member recognition program, PRAvo!, that enables peer to peer recognition as a well as points-based recognition from leaders, individual award programs and celebrations such as work anniversaries and other professional and personal milestones. We regularly monitor and evaluate turnover metrics to ensure we are responsive to the evolving, competitive market for top talent.
We regularly monitor and evaluate turnover metrics to ensure we are responsive to the evolving, competitive market for top talent.
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This is accomplished through a well-designed organizational structure, data-driven efficiencies, business automation, innovative technology solutions, workflow enhancements and proactive expense management. • Effectively manage capital.
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We believe NORCAL has contributed value to our customers and enhanced our culture.
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(2) Primarily comprised of twelve month term policies, but includes premium related to policies with a twenty-four month term of $8.3 million in 2020. The majority of renewed twenty-four month term policies were re-underwritten to twelve month term policies as we have ceased offering twenty-four month term policies beginning in the second quarter of 2020.
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We are committed to ensuring a supportive and safe environment for all team members, that fosters an inclusive workplace where variety of thought, creativity and innovation fuel team member engagement and ultimately increases shareholder return.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe transfer part of our risks to reinsurance companies in exchange for part of the premium we receive in connection with the risk. Although our reinsurance agreements make the reinsurer liable to us to the extent the risk is transferred, our liability to our policyholders remains our responsibility.
Biggest changeFinancial We cannot guarantee that our reinsurers will pay in a timely fashion or at all, and as a result, we could experience losses . We transfer part of our risks to reinsurance companies in exchange for part of the premium we receive in connection with the risk.
Since the insurance industries in which we operate have a long development period, particularly medical professional liability industry, prices typically fall too far resulting in poor underwriting results for a period of time. The reaction is then a withdrawal of capacity, reduced availability of coverage offerings and price increases.
Since the insurance industries in which we operate have a long development period, particularly the medical professional liability industry, prices typically fall too far resulting in poor underwriting results for a period of time. The reaction is then a withdrawal of capacity, reduced availability of coverage offerings and price increases.
A natural disaster or pandemic event, or closely related series of events, could cause loss of lives or a substantial loss of property or operational ability at one or more of the Company's facilities. The Company's disaster preparedness encompasses our Business Continuity Plan, Disaster Recovery Plan, Operations Plan and Pandemic Response Plan.
A natural disaster or pandemic event, or closely related series of events, could cause loss of lives or a substantial loss of property or operational ability at one or more of the Company's facilities. Our disaster preparedness encompasses our Business Continuity Plan, Disaster Recovery Plan, Operations Plan and Pandemic Response Plan.
As part of the reserving process, we review the known facts surrounding reported claims as well as historical claims data and consider the impact of various factors such as: • for reported claims, the nature of the claim and the jurisdiction in which the claim occurred; • trends in paid and incurred loss development; • trends in claim frequency and severity; • emerging economic and social trends; • trends in healthcare costs for claims involving bodily injury; • monetary and social inflation and levels of employment; and • changes in the regulatory, legal and political environment.
As part of the reserving process, we review the known facts surrounding reported claims as well as historical claims data and consider the impact of various factors such as: • for reported claims, the nature of the claim and the jurisdiction in which the claim occurred; • trends in paid and incurred loss development; • trends in claim frequency and severity; • emerging economic and social trends; • trends in healthcare costs for claims involving bodily injury; • monetary, social and medical inflation and levels of employment; and • changes in the regulatory, legal and political environment.
Technology, Data Security and Privacy. Any factor described in this report could by itself, or together with one or more other factors, have a negative effect on our business, results of operations and/or financial condition. There may be factors not described in this report that could also cause results to differ from our expectations.
Technology, Data Security and Privacy. Any factor described in this report could by itself, or together with one or more other factors, have a negative effect on our business, results of operations, liquidity and/or financial condition. There may be factors not described in this report that could also cause results to differ from our expectations.
The financial strength ratings assigned by rating agencies to insurance companies represent independent opinions of financial strength and ability to meet policyholder and debt obligations and are not directed toward the protection of equity investors. Our principal operating subsidiaries hold favorable claims paying ratings with AM Best, Fitch and Moody’s.
The financial strength ratings assigned by rating agencies to insurance companies represent independent opinions of financial strength and ability to meet policyholder and debt obligations and are not directed toward the protection of equity investors. Our principal operating subsidiaries hold favorable claims paying ratings with AM Best and Fitch.
Our ability to issue additional debt or letters of credit or other types of indebtedness on terms consistent with current debt is subject to market conditions, economic conditions at the time of proposed issuance, results of ratings reviews and the inclusion in certain bond indices of past and future issues.
Our ability to issue debt or letters of credit or other types of indebtedness on terms consistent with current debt is subject to market conditions, economic conditions at the time of proposed issuance, results of ratings reviews and the inclusion in certain bond indices of past and future issues.
A significant portion of our total assets ($4.4 billion or 77%) at December 31, 2022 are financial instruments whose value can be significantly affected by economic and market factors beyond our control including, among others, the unemployment rate, the strength of the domestic housing market, the price of oil, changes in interest rates and spreads, consumer confidence, investor confidence regarding the economic prospects of the entities in which we invest, corrective or remedial actions taken by the entities in which we invest, including mergers, spin-offs and bankruptcy filings, the actions of the U.S. government and global perceptions regarding the stability of the U.S. economy.
A significant portion of our total assets ($4.3 billion or 77%) at December 31, 2023 are financial instruments whose value can be significantly affected by economic and market factors beyond our control including, among others, the unemployment rate, the strength of the domestic housing market, the price of oil, changes in interest rates and spreads, consumer confidence, investor confidence regarding the economic prospects of the entities in which we invest, corrective or remedial actions taken by the entities in which we invest, including mergers, spin-offs and bankruptcy filings, the actions of the U.S. government and global perceptions regarding the stability of the U.S. economy.
When exchange or over-the-counter quotes are not available, we estimate fair values based on broker dealer quotes and various other valuation methodologies, which may require us to choose among various input assumptions and utilize judgment. At December 31, 2022, approximately 84% of our investments were valued in this manner.
When exchange or over-the-counter quotes are not available, we estimate fair values based on broker dealer quotes and various other valuation methodologies, which may require us to choose among various input assumptions and utilize judgment. At December 31, 2023, approximately 84% of our investments were valued in this manner.
Some states permit member insurers to recover assessments paid through surcharges on policyholders or through full or partial premium tax offsets, while other states permit recovery of assessments through the rate filing process. We had no significant guaranty fund recoupments or assessments in 2022, 2021 or 2020. Our practice is to accrue for insurance insolvencies when notified of assessments.
Some states permit member insurers to recover assessments paid through surcharges on policyholders or through full or partial premium tax offsets, while other states permit recovery of assessments through the rate filing process. We had no significant guaranty fund recoupments or assessments in 2023, 2022 or 2021. Our practice is to accrue for insurance insolvencies when notified of assessments.
NAV is provided by the asset managers, and in some cases, estimates are used for valuation and are subject to variations depending on those estimates. Our funds valued at NAV have various redemption requirements and lock-up provisions (see Note 3 of the Notes to Consolidated Financial Statements for further information).
NAV is provided by the asset managers, and in some cases, estimates are used for valuation and are subject to variations depending on those estimates. Our funds valued at NAV have various redemption requirements and lock-up provisions (see Note 2 of the Notes to Consolidated Financial Statements for further information).
If we determine that such goodwill or intangible assets are impaired, we would be required to write down the goodwill or the intangible asset by the amount of the impairment, with a corresponding charge to net income (loss). Such write downs could have a material adverse effect on our results of operations or financial position.
If we determine that such assets are impaired, we would be required to write down the asset by the amount of the impairment, with a corresponding charge to net income (loss). Such write downs could have a material adverse effect on our results of operations or financial position.
At December 31, 2022, approximately 6% of our investments are investment funds which measure fund assets at fair value on a recurring basis and provide us with a NAV for our interest. As a practical expedient, we consider the NAV provided to approximate the fair value of the interest.
At December 31, 2023, approximately 6% of our investments are investment funds which measure fund assets at fair value on a recurring basis and provide us with a NAV for our interest. As a practical expedient, we consider the NAV provided to approximate the fair value of the interest.
The payment of dividends by these operating subsidiaries is subject to restrictions set forth in the insurance laws and regulations of their respective states of domicile, as discussed in Item I under the heading "Insurance Regulatory Matters." 29 Table of Contents Our Board may decide that our financial condition does not allow the continued payment of a quarterly cash dividend, or requires that we reduce the amount of our quarterly cash dividend.
The payment of dividends by these operating subsidiaries is subject to restrictions set forth in the insurance laws and regulations of their respective states of domicile, as discussed in Item I under the heading "Insurance Regulatory Matters." Our Board may decide that our financial condition does not allow the continued payment of a quarterly cash dividend, or requires that we reduce the amount of our quarterly cash dividend.
Our business could be affected by changes to the U.S. system of insurance regulation including legislative or regulatory requirements imposed by or promulgated in connection with the Dodd-Frank Act. The passage of tort reform or other legislation, and the subsequent review of such laws by the courts could have a material impact on our operations.
Our business could be affected by changes to the U.S. system of insurance regulation including legislative or regulatory requirements imposed by or promulgated in connection with the Dodd-Frank Act. 28 Table of Contents The passage of tort reform or other legislation, and the subsequent review of such laws by the courts could have a material impact on our operations.
Should our mandatory participation in such pools be increased or if the assessments from such pools increased, our results of operations and financial condition would be negatively affected, although that was not the case in 2022, 2021 or 2020.
Should our mandatory participation in such pools be increased or if the assessments from such pools increased, our results of operations and financial condition would be negatively affected, although that was not the case in 2023, 2022 or 2021.
The profitability and financial condition of the Company substantially depends on the extent to which our actual experience is consistent with assumptions we use in our models and ultimate model outputs. We are exposed to and may face adverse developments involving mass tort claims arising from coverages provided to our insureds.
The profitability and financial condition of the Company substantially depends on the extent to which our actual experience is consistent with assumptions we use in our models and ultimate model outputs. 24 Table of Contents We are exposed to and may face adverse developments involving mass tort claims arising from coverages provided to our insureds.
Changes to the number of state sponsored entities of this type could result in a large number of insureds changing the amount and type of coverage purchased from private insurance entities such as ProAssurance. We own two subsidiaries domiciled in the Cayman Islands and subject to the laws of the Cayman Islands and regulations promulgated by the CIMA.
Changes to the number of state sponsored entities of this type could result in a large number of insureds changing the amount and type of coverage purchased from private insurance entities such as ProAssurance. 29 Table of Contents We own two subsidiaries domiciled in the Cayman Islands and subject to the laws of the Cayman Islands and regulations promulgated by the CIMA.
We utilize ratings determined by NRSROs (Moody’s, Standard & Poor’s and Fitch) as an element of our evaluation of the creditworthiness of our securities. The ratings are subject to error by the agencies; therefore, we may be subject to additional credit exposure should the rating be misstated. 24 Table of Contents Our asset-backed securities are also subject to prepayment risk.
We utilize ratings determined by NRSROs (Moody’s, Standard & Poor’s and Fitch) as an element of our evaluation of the creditworthiness of our securities. The ratings are subject to error by the agencies; therefore, we may be subject to additional credit exposure should the rating be misstated. Our asset-backed securities are also subject to prepayment risk.
We determine the fair value of our investments using quoted exchange or over-the-counter prices, when available. At December 31, 2022, we valued approximately 7% of our investments in this manner.
We determine the fair value of our investments using quoted exchange or over-the-counter prices, when available. At December 31, 2023, we valued approximately 7% of our investments in this manner.
Tort reforms generally protect the rights of a defendant by, among other limitations, eliminating certain claims that may be heard in a court, limiting the amount or types of damages, changing statutes of limitation or the period of time to make a 26 Table of Contents claim, and limiting venue or court selection.
Tort reforms generally protect the rights of a defendant by, among other limitations, eliminating certain claims that may be heard in a court, limiting the amount or types of damages, changing statutes of limitation or the period of time to make a claim, and limiting venue or court selection.
Insurance Insurance market conditions may alter the effectiveness of our current business strategy and impact our revenues. The property and casualty insurance business is highly competitive.
Insurance Insurance market conditions may alter or limit the effectiveness of our current business strategy and impact our revenues. The property and casualty insurance business is highly competitive.
Market conditions beyond our control determine the availability and cost of the reinsurance. We may be unable to maintain current reinsurance coverage or to obtain other reinsurance coverage in adequate 22 Table of Contents amounts and at favorable rates.
Market conditions beyond our control determine the availability and cost of the reinsurance. We may be unable to maintain current reinsurance coverage or to obtain other reinsurance coverage in adequate amounts and at favorable rates.
An increase to reserves has a negative effect on our results of operations in the period of increase; a reduction to reserves has a positive effect on our results of operations in the period of reduction. 21 Table of Contents Our loss reserves also may be affected by court decisions that expand liability of our policies after they have been issued.
An increase to reserves has a negative effect on our results of operations in the period of increase whereas a reduction to reserves has a positive effect on our results of operations in the period of reduction. Our loss reserves also may be affected by court decisions that expand liability of our policies after they have been issued.
At December 31, 2022 and in accordance with applicable GAAP, we valued 97% of our investments at fair value and the remaining 3% at cost, equity, or cash surrender value. See Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements for additional information.
At December 31, 2023 and in accordance with applicable GAAP, we valued 97% of our investments at fair value and the remaining 3% at cost, equity, or cash surrender value. See Notes 1, 2 and 3 of the Notes to Consolidated Financial Statements for additional information.
Our largest liability is our reserve for losses and loss adjustment expenses. Due to the size of our reserve for losses and loss adjustment expenses, even a small percentage adjustment to our reserve can have a material effect on our results of operations for the period in which the change is made. The process of estimating loss reserves is complex.
Our largest liability is our reserve for losses and loss adjustment expenses. Due to the size of our reserve for losses and loss adjustment expenses, even a small percentage adjustment to our reserve can have a material effect on our results of operations for the period in which the change is made.
The medical professional liability market has been particularly affected by these cycles. Underwriting cycles are driven, among other reasons, by excess capacity available to compete for business that is deemed profitable. This action drives pricing down.
The medical professional liability market has been particularly affected by these cycles. Underwriting cycles are driven, among other reasons, by excess capacity available to compete for business. This action drives pricing down.
These factors, could lead to greater than anticipated claims and claim handling expenses which could exceed our established reserves causing us to increase our loss reserves, as discussed above. The effects of monetary inflation could cause the cost of claims to rise in the future.
These factors, could lead to greater than anticipated claims and claim handling expenses which could exceed our established reserves causing us to increase our loss reserves, as discussed above. Both the effects of inflation overall as well as medical inflation could cause the cost of claims to rise in the future.
In addition to the evaluation of our claims paying ability, four rating agencies (AM Best, S&P, Fitch and Moody’s) evaluate and rate our ability to service current debt and potential debt. These debt ratings reflect each agency’s independent evaluation of our ability to meet our obligation to holders of our debt, if any.
In addition to the evaluation of our claims-paying ability, two rating agencies (AM Best and Fitch) evaluate and rate our ability to service current and potential debt. These debt ratings reflect each agency’s independent evaluation of our ability to meet our obligation to holders of our debt, if any.
As a result of COVID-19, the industry has experienced new conditions, including the effect of the postponement of court cases and changes in settlement trends. Our reserving process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate, but not necessarily accurate, basis for predicting future events.
As a result of COVID-19, the industry has experienced new conditions, including changes in settlement trends due to the effect of the postponement of court cases during the pandemic. 23 Table of Contents Our reserving process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate, but not necessarily accurate, basis for predicting future events.
As of December 31, 2022, no reinsurer, on an individual basis, had an estimated net amount due which exceeded $55 million. If our businesses do not perform well, we may be required to recognize an impairment of our goodwill or intangible assets, which could have a material adverse effect on our results of operations and financial condition.
As of December 31, 2023, no reinsurer, on an individual basis, had an estimated net amount due which exceeded $65 million. If our businesses do not perform well, we may be required to recognize an impairment of our indefinite lived intangible assets or long-lived assets, which could have a material adverse effect on our results of operations and financial condition.
As of December 31, 2022, we currently have no preferred stock outstanding.
As of December 31, 2023, we currently have no preferred stock outstanding.
These agents and brokers may choose to direct business to competing insurance companies. As a member of the Lloyd's market and a participant in certain Lloyd's Syndicates we are subject to certain risks which could affect us.
These agents and brokers may choose to direct business to competing insurance companies. 25 Table of Contents As a member of the Lloyd's market and a participant in open years of account in certain Lloyd's Syndicates we are subject to certain risks which could affect us.
Conversely, as rates increase and motivations for prepayments lessen, the period of time over which our asset-backed securities are repaid may lengthen, causing us to not reinvest cash flows at the higher available yields. At December 31, 2022 the fair value of our state/municipal portfolio was $439.5 million (amortized cost basis of $483.6 million).
Conversely, as rates increase and motivations for prepayments lessen, the period of time over which our asset-backed securities are repaid may lengthen, causing us to not reinvest cash flows at higher available yields. At December 31, 2023 the fair value of our state/municipal portfolio was $454.4 million (amortized cost basis of $482.4 million).
At December 31, 2022, our receivable from reinsurers on unpaid losses and loss adjustment expenses was $432 million, our receivable from reinsurers on paid losses and loss adjustment expenses was $15 million and our expected credit losses associated with our reinsurance receivables (related to both paid and unpaid losses) were nominal in amount.
At December 31, 2023, our receivable from reinsurers on unpaid losses and loss adjustment expenses was $446 million, our receivable from reinsurers on paid losses and loss adjustment expenses was $21 million and our expected credit losses associated with our reinsurance receivables (related to both paid and unpaid losses) were nominal in amount.
The agreement requires that our consolidated debt to capital ratio (0.28 to 1.0 at December 31, 2022) be 0.35 to 1.0 or less and that we maintain a minimum net worth of $1 billion which represented 65% of consolidated shareholders' equity, excluding AOCI, determined as of June 30, 2019.
The agreement requires that our consolidated debt to capital ratio (0.28 to 1.0 at December 31, 2023) be 0.35 to 1.0 or less and that we maintain a minimum net worth, excluding AOCI, of at least $912 million which represented 65% of consolidated shareholders' equity, excluding AOCI, determined as of December 31, 2022.
Adverse economic and market conditions could cause investment losses or impairment of our securities, which could affect our financial condition, results of operations or cash flows. At December 31, 2022 approximately 23% of our investment portfolio was invested in mortgage and asset-backed securities.
Adverse economic and market conditions could cause investment losses or impairment of our securities, which could affect our financial condition, results of operations or cash flows. 26 Table of Contents At December 31, 2023 approximately 24% of our investment portfolio was invested in mortgage and asset-backed securities.
Changes to our prior estimates in these cases would be reflected in the period changed and could have a material effect on our effective tax rate, financial position, results of operations and cash flows. As the Company has reinsurance operations domiciled in the Cayman Islands, changes in the tax laws of the Cayman Islands.
Changes to our prior estimates in these cases would be reflected in the period changed and could have a material effect on our effective tax rate, financial position, results of operations and cash flows.
There is no guarantee that additional debt could be issued on similar terms in the future as rates available to us may change due to changes in the economic climate, or shifts in the yield curve may occur, or an increase in our level of debt may result in rating agencies lowering our debt rating.
There is no guarantee that additional debt could be issued on similar terms in the future as rates available to us may change due to changes in the economic climate, or shifts in the yield curve may occur, or an increase in our level of debt may result in rating agencies lowering our debt rating. 27 Table of Contents Our outstanding debt is exposed to fluctuations in interest rates, which could adversely impact our results.
During the initial stages of "hard markets", premium volumes rise for existing business and retention levels fall. As more carriers enter this action phase, underwriting profits begin to improve, although their achievement may take several years to materialize. As the cycle progresses, opportunities may then be presented to grow profitably at the higher premium levels.
During the initial stages of "hard markets", premium volumes rise for existing business and retention levels fall. As more carriers enter this action phase, underwriting profits begin to improve, although their achievement may take several years to materialize.
Failure to comply with various SEC reporting and record keeping requirements could result in a decline in the value of our stock or a decline in investor confidence which 28 Table of Contents could directly impact our ability to efficiently raise capital. Failure to adhere to NYSE requirements could result in fines, trading restrictions or delisting.
Failure to comply with various SEC reporting and record keeping requirements could result in a decline in the value of our stock or a decline in investor confidence which could directly impact our ability to efficiently raise capital.
Furthermore, claims may be asserted by either the policyholders or shareholders of any acquired entity related to payments or other issues associated with the acquisition and merger into the consolidated entity. Such claims may prove costly or difficult to resolve or may have unanticipated consequences.
Furthermore, claims may be asserted by either the policyholders or shareholders of any acquired entity related to payments or other issues associated with the acquisition and merger into the consolidated entity.
Our estimate of our potential liability for known uncertain tax positions is reflected in our financial statements. As of December 31, 2022 we had a net deferred tax asset of approximately $209.5 million and a net federal income tax receivable of approximately $8.0 million, which included a liability for unrecognized current tax benefits of $3.6 million.
Our estimate of our potential liability for known uncertain tax positions is reflected in our financial statements. As of December 31, 2023 we had a net deferred tax asset of approximately $186.2 million and a net federal income tax payable of approximately $4.0 million, which included a liability for unrecognized current tax benefits of $4.8 million.
An acquisition of control of ProAssurance would be presumed if any person or entity acquires 10% (5% in Alabama) or more of our outstanding common stock, unless the applicable insurance regulator determines otherwise. These provisions apply even if the offer may be considered beneficial by stockholders.
An acquisition of control of ProAssurance would be presumed if any person or entity acquires 10% (5% in Alabama) or more of our outstanding common stock, unless the applicable insurance regulator determines otherwise.
Projections about our future operations and taxable income are inherently subject to significant risks, assumptions, estimates and uncertainties and may therefore differ materially from our actual financial results, which could have a material adverse effect on our tax positions. We believe our tax positions are supportable under current tax laws and that our estimates are prepared in accordance with GAAP.
Projections about our future operations and taxable income are inherently subject to significant risks, assumptions, estimates and uncertainties and may therefore differ materially from our actual financial results, which could have a material adverse effect on our tax positions.
Our disaster preparedness is focused on maintaining the continuity of the Company's data processing and telephone capabilities in the event of a natural disaster or medical event. Our disaster preparedness also allows team members to work remotely in the event of a natural disaster or medical event.
Our disaster preparedness is focused on maintaining the continuity of our data processing and telephone capabilities in the event of a natural disaster or medical event. Our disaster preparedness also allows team members to work remotely in the event of a natural disaster or medical event. Our plans are reviewed during the insurance department examinations of the statutory insurance companies.
Syndicate 1729 follows the Solvency II compliance guidelines set out by the Council of Lloyd's. The assessments that we are required to pay to state associations may increase or our participation in mandatory risk retention pools could be expanded and our results of operations and financial condition could suffer as a result.
The assessments that we are required to pay to state associations may increase or our participation in mandatory risk retention pools could be expanded and our results of operations and financial condition could suffer as a result.
Over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Further, the design of a control system must reflect the fact that resource constraints exist. Accordingly, our control system can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Further, the design of a control system must reflect the fact that resource constraints exist.
Failure to comply with these laws, regulations and requirements could result in consequences ranging from a regulatory examination to a regulatory takeover of our Cayman Islands subsidiaries, which could potentially impact profitability of alternative market solutions offered through these subsidiaries. Syndicate 1729 is regulated in the U.K. by the Prudential Regulation Authority and the Financial Conduct Authority.
Failure to comply with these laws, regulations and requirements could result in consequences ranging from a regulatory examination to a regulatory takeover of our Cayman Islands subsidiaries, which could potentially impact profitability of alternative market solutions offered through these subsidiaries.
If we are able to identify a target for acquisition, state insurance regulation concerning change or acquisition of control could delay or prevent us from completing the acquisition.
Growth through the acquisition of other companies or books of business is opportunistic and sporadic. If we are able to identify a target for acquisition, state insurance regulation concerning change or acquisition of control could delay or prevent us from completing the acquisition.
Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss by the insured and payment of that loss.
The process of estimating loss reserves is complex and highly judgmental. Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss by the insured and payment of that loss.
However, any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of the Company’s financial performance, future expectations and other factors deemed relevant by the Board.
Instead, we used available capital to repurchase shares pursuant to the existing share repurchase authorization. Any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of the Company’s financial performance, future expectations and other factors deemed relevant by the Board.
Catastrophes can be caused by unpredictable natural events such as hurricanes, windstorms, severe storms, tornadoes, floods, hailstorms, severe winter weather, earthquakes, explosions and fire, and by other natural and man-made events, such as terrorist attacks, civil and political unrest, as well as pandemics and other similar outbreaks in many parts of the world. 20 Table of Contents Insurance companies are not permitted to reserve for a catastrophe until it has occurred.
Catastrophes can be caused by unpredictable natural events such as hurricanes, windstorms, severe storms, tornadoes, floods, hailstorms, severe winter weather, earthquakes, explosions and fire, and by other natural and man-made events, such as terrorist attacks, civil and political unrest, as well as pandemics and other similar outbreaks in many parts of the world.
If our subsidiaries are unable to make payments to us, or are able to pay only limited amounts, we may be unable to make payments on our indebtedness, meet other holding company financial obligations, or pay dividends to shareholders.
In addition, cash dividends and other permitted payments from operating subsidiaries represent another source of funds. If our subsidiaries are unable to make payments to us, or are able to pay only limited amounts, we may be unable to make payments on our indebtedness, meet other holding company financial obligations, or pay dividends to shareholders.
Therefore, the Company has focused resources on securing and preserving the integrity of its data processing systems and related data. Despite the Company's efforts to ensure the integrity of its systems, ProAssurance is increasingly exposed to the risk that its technology infrastructure could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering.
Despite the Company's efforts to ensure the integrity of its systems and those of certain third parties, ProAssurance is increasingly exposed to the risk that its technology infrastructure and that of certain third parties could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering.
Also, certain of our current debt agreements include financial covenants, and the issuance of debt by one of our insurance subsidiaries requires regulatory approval, both of which may limit or prohibit the issuance of additional debt. Our Revolving Credit Agreement, which expires in November 2024, permits borrowings of up $300 million.
Also, certain of our current debt agreements include financial covenants, and the issuance of debt by one of our insurance subsidiaries requires regulatory approval, both of which may limit or prohibit the issuance of additional debt.
Most states also regulate insurance holding companies like us in a variety of matters such as acquisitions, solvency and risk assessment, changes of control and the terms of affiliated transactions. Also, certain states sponsor insurance entities which affect the amount and type of liability coverages purchased in the sponsoring state.
Most states also regulate insurance holding companies like us in a variety of matters such as acquisitions, solvency and risk assessment, changes of control and the terms of affiliated transactions.
Our success has been, and will continue to be, dependent on our ability to retain the services of existing key team members and to attract and retain additional qualified personnel in the future.
We are heavily dependent upon our senior management, and the loss of services of our senior executives could adversely affect our business. Our success has been, and will continue to be, dependent on our ability to retain the services of existing key team members and to attract and retain additional qualified personnel in the future.
However, approval of acquisitions may not be granted or conditions of approval may adversely alter the expected value and benefits of the acquisition. In addition, expected benefits from acquisitions may not be achieved or may be delayed longer than expected. Growth through the acquisition of other companies or books of business is opportunistic and sporadic.
From time to time we may identify opportunities for growth through acquisitions. However, approval of acquisitions may not be granted or conditions of approval may adversely alter the expected value and benefits of the acquisition. In addition, expected benefits from acquisitions may not be achieved or may be delayed longer than expected.
Reinsurers may periodically dispute our demand for reimbursement from them based upon their interpretation of the terms of our agreements or may fail to pay us for financial or other reasons.
Although our reinsurance agreements make the reinsurer liable to us to the extent the risk is transferred, our liability to our policyholders remains our responsibility. Reinsurers may periodically dispute our demand for reimbursement from them based upon their interpretation of the terms of our agreements or may fail to pay us for financial or other reasons.
Our loss reserves include assumptions about future payments for settlement of claims and claims handling expenses, such as medical treatments and litigation costs.
Our loss reserves include assumptions about future payments for settlement of claims and claims handling expenses, such as medical treatments and litigation costs. For our workers' compensation reserves, healthcare wage inflation and medical advancements may also increase the cost of claims.
We test goodwill and intangible assets with indefinite lives for impairment on an annual basis or upon the occurrence of certain triggering events or substantive changes in circumstances that indicate the asset may be impaired.
Indefinite lived intangible assets are evaluated for impairment on an annual basis or upon the occurrence of certain triggering events or substantive changes in circumstances that indicate the asset may be impaired. We review our long-lived assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
We are subject to numerous NYSE and SEC regulations including insider trading regulations, Regulation FD and regulations requiring timely and accurate reporting of our operating results as well as certain events and transactions.
These provisions apply even if the offer may be considered beneficial by stockholders. 30 Table of Contents We are subject to numerous NYSE and SEC regulations including insider trading regulations, Regulation FD and regulations requiring timely and accurate reporting of our operating results as well as certain events and transactions.
The Company's results of operations could be adversely impacted by catastrophes, both natural and man-made, pandemics, severe weather conditions, climate change or closely related series of events.
As the cycle progresses, opportunities may then be presented to grow profitably at the higher premium levels. 22 Table of Contents The Company's results of operations could be adversely impacted by catastrophes, both natural and man-made, pandemics, severe weather conditions, climate change or closely related series of events.
We are a holding company and are dependent on dividends and other payments from our operating subsidiaries, which may be subject to dividend restrictions. We are a holding company whose principal source of external revenue is our investment revenues. In addition, cash dividends and other permitted payments from operating subsidiaries represent another source of funds.
Such claims may prove costly or difficult to resolve or may have unanticipated consequences. 31 Table of Contents We are a holding company and are dependent on dividends and other payments from our operating subsidiaries, which may be subject to dividend restrictions. We are a holding company whose principal source of external revenue is our investment revenues.
Our Board approved a cash dividend policy in September 2011, and we most recently paid a $0.05 per share dividend for the three months ended December 31, 2022.
Our Board approved a cash dividend policy in September 2011, and we most recently paid a $0.05 per share dividend for the three months ended March 31, 2023. In light of the price range in which our stock traded in the second quarter of 2023, our Board decided to suspend payment of a quarterly cash dividend.
A ratings downgrade could also have a material adverse effect on our liquidity, including the ability to refinance long term debt on favorable terms and potentially limit our access to capital markets. See previous discussion under the heading "Rating Agencies" for additional information on our senior debt ratings.
A ratings downgrade could also have a material adverse effect on our liquidity, including the ability to refinance long term debt on favorable terms and potentially limit our access to capital markets. We previously maintained S&P and Moody's ratings for the purpose of issuing registered public debt.
The Company's plans are reviewed during the insurance department examinations of the statutory insurance companies. While the Company has plans in place to respond to both short- and long-term disaster scenarios, the loss of certain key operating facilities or data processing capabilities could have a significant impact on Company operations.
While we have plans in place to respond to both short- and long-term disaster scenarios, the loss of certain key operating facilities or data processing capabilities could have a significant impact on our operations. Our business could be affected by the loss of one or more of our senior executives or other qualified personnel.
Although we purchase reinsurance protection for risks we believe bear a significant level of catastrophe exposure, actual losses resulting from a catastrophic event or events may exceed our reinsurance protection. Furthermore, for significant catastrophic exposure, the inability or unwillingness of the reinsurer to make timely payments under the terms of the reinsurance agreement could impact our liquidity.
Insurance companies are not permitted to reserve for a catastrophe until it has occurred. Although we purchase reinsurance protection for risks we believe bear a significant level of catastrophe exposure, actual losses resulting from a catastrophic event or events may exceed our reinsurance protection.
While ProAssurance reviews and assesses its third-party providers' cybersecurity controls, as appropriate, and make changes to the Company's business processes to manage these risks, there is no guarantee that measures taken to date will completely prevent possible disruption, damage or 30 Table of Contents destruction by intentional or unintentional acts or events such as cyber-attacks, viruses, sabotage, human error, system failure or the occurrence of numerous other human or natural events.
Furthermore, it is impossible to defend against every risk being posed by changing technologies. There is no guarantee that measures taken to date will completely prevent possible disruption, damage or destruction by intentional or unintentional acts or events such as cyber-attacks, viruses, sabotage, human error, system failure or the occurrence of numerous other human or natural events.
These events may have a material adverse effect on our workforce and business operations as well as the workforce and operations of our insureds and independent agents.
Furthermore, for significant catastrophic exposure, the inability or unwillingness of the reinsurer to make timely payments under the terms of the reinsurance agreement could impact our liquidity. These events may have a material adverse effect on our workforce and business operations as well as the workforce and operations of our insureds and independent agents.
Unfavorable business, economic or regulatory conditions in any of these states could have a disproportionately greater effect on us than they would if we were less geographically concentrated. From time to time we may identify opportunities for growth through acquisitions.
Moreover, on a combined basis, Pennsylvania, California and Florida accounted for 34% of our direct premiums written for the year ended December 31, 2023. Unfavorable business, economic or regulatory conditions in any of these states could have a disproportionately greater effect on us than they would if we were less geographically concentrated.
Our top five states, Pennsylvania, California, Florida, Alabama and Texas represented 45% of our direct premiums written for the year ended December 31, 2022. Moreover, on a combined basis, Pennsylvania, California and Florida accounted for 34% of our direct premiums written for the year ended December 31, 2022.
Operational Our performance is dependent on the business, economic, regulatory and legislative conditions of states where we have a significant amount of business. Our top five states, Pennsylvania, California, Florida, Alabama and Texas represented 46% of our direct premiums written for the year ended December 31, 2023.
Resolution of uncertain tax matters and changes in tax laws or taxing authority interpretations of tax laws could result in actual tax benefits or deductions that are different than we have estimated, both with regard to amounts recognized and the timing of recognition. Such differences could affect our results of operations or cash flows.
Our provision for income taxes, our recorded tax liabilities and net deferred tax assets, including any valuation allowances, are recorded based on estimates and actual tax amounts may be different than we have estimated, both with regard to amounts recognized and the timing of recognition. Such differences could affect our results of operations or cash flows.
Technology, Data Security and Privacy The operations of the Company are dependent upon the security, integrity and availability of our internal technology infrastructure and that of certain third parties.
Accordingly, our control system can provide only reasonable, not absolute, assurance of achieving the desired control objectives. 32 Table of Contents Technology, Data Security and Privacy The operations of the Company are dependent upon the security, integrity and availability of our internal technology infrastructure and that of certain third parties including, but not limited to, the use of cloud-based technology.
In addition, we may incur significant costs in the course of complying with NYSE and SEC requirements.
Failure to adhere to NYSE requirements, including the recent requirement around recovery of erroneously awarded compensation, could result in fines, trading restrictions or delisting. In addition, we may incur significant costs in the course of complying with NYSE and SEC requirements.
Removed
As a participant in Lloyd's Syndicates, we are subject to certain risks and uncertainties, including the following: • reliance on insurance and reinsurance brokers and distribution channels to distribute and market products; • obligation to pay levies to Lloyd's; • obligations to maintain funds to support underwriting activities and risk-based capital requirements that are assessed periodically by Lloyd's and subject to variation; • ability to maintain liquidity to fund claims payments, when due; • ability to obtain reinsurance and retrocessional coverage to protect against adverse loss activity; • reliance on ongoing approvals from Lloyd's and various regulators to conduct business, including a requirement that Annual Business Plans be approved by Lloyd's before the start of underwriting for each account year; • financial strength ratings are derived from the rating assigned to Lloyd's, although they have limited ability to directly affect the overall Lloyd's rating; and • reliance on Lloyd's trading licenses in order to underwrite business outside the U.K. 23 Table of Contents Financial We cannot guarantee that our reinsurers will pay in a timely fashion or at all, and as a result, we could experience losses .
Added
In November 2023, we repaid the outstanding balance on our Senior Notes and, as a result, no longer require or receive public ratings from S&P or Moody's. See previous discussion under the heading "Rating Agencies" for additional information on our debt ratings.
Removed
We review our definite–lived intangible assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable from estimated future cash flows.
Added
Prior to the 2024 and 2022 underwriting years, we participated in the results of Syndicate 1729 and Syndicate 6131, respectively. For distribution purposes, Lloyd's of London operates a three year accounting system. At the end of each year of account, the liabilities of the Syndicates are reinsured into the Syndicate's following year of account.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDishart was appointed as an Executive Vice President in 2020 and has served as our Chief Human Resources Officer since 2015. Ms. Dishart has previously served as Vice President of Human Resources of our Eastern subsidiary for 9 years. Ms. Dishart has over 37 years of experience in Human Resources including positions with Johnson & Johnson/Merck. (Age 59) Dana S.
Biggest changeDishart has previously served as Vice President of Human Resources of our Eastern subsidiary for 9 years. Ms. Dishart has over 38 years of experience in Human Resources including positions with Johnson & Johnson/Merck. (Age 60) Robert D. Francis Mr. Francis was appointed President of Healthcare Professional Liability and to the Executive Leadership Team in 2023. Mr.
(Age 53) We have adopted a Code of Ethics and Conduct that applies to our directors and executive officers, including but not limited to our principal executive officers and principal financial officer. We also have share ownership guidelines in place to ensure that management maintains a significant portion of their personal investments in the stock of ProAssurance.
(Age 66) We have adopted a Code of Ethics and Conduct that applies to our directors and executive officers, including but not limited to our principal executive officer and principal financial officer. We also have share ownership guidelines in place to ensure that management maintains a significant portion of their personal investments in the stock of ProAssurance.
Hendricks Ms. Hendricks was appointed as an Executive Vice President in 2018 and is also our Chief Financial Officer and Corporate Treasurer. Ms. Hendricks has previously served as Senior Vice President of Business Operations for our PICA subsidiary. Prior to that time, Ms. Hendricks served PICA as Vice President of Finance and Corporate Controller.
Hendricks was appointed as an Executive Vice President in 2018 and is also our Chief Financial Officer and Corporate Treasurer. Ms. Hendricks has previously served as Senior Vice President of Business Operations for our PICA subsidiary. Prior to that time, Ms. Hendricks served PICA as Vice President of Finance and Corporate Controller. Prior to joining PICA in 2001, Ms.
See Note 9 of the Notes to Consolidated Financial Statements included herein. 31 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of ProAssurance Corporation serve at the pleasure of the Board. We have a knowledgeable and experienced management team with established track records in building and managing successful insurance operations.
See Note 8 of the Notes to Consolidated Financial Statements included herein. 35 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of ProAssurance Corporation serve at the pleasure of the Board. We have a knowledgeable and experienced management team with established track records in building and managing successful insurance operations.
Both our Code of Ethics and Conduct and our Share Ownership Guidelines are available on the Governance section of our website. Printed copies of these documents may be obtained from our Investor Relations department either by mail at P.O. Box 590009, Birmingham, Alabama 35259-0009, or by telephone at (205) 877-4400 or (800) 282-6242. ITEM 4. MINE SAFETY DISCLOSURES.
Both our Code of Ethics and Conduct and our Share Ownership Guidelines are available on the Governance section of our website. Printed copies of these documents may be obtained from our Investor Relations department either by mail at P.O. Box 590009, Birmingham, Alabama 35259-0009, or by telephone at (205) 877-4400 or (800) 282-6242. 36 Table of Contents ITEM 4.
Shook was appointed as President of our Eastern subsidiary in 2019. Mr. Shook previously served as Executive Vice President of our Eastern subsidiary and has been with Eastern for 19 years. Mr. Shook has over 29 years of insurance industry experience, including 10 years with PricewaterhouseCoopers where he primarily served companies within the insurance industry.
Shook was appointed as President of our Eastern subsidiary in 2019. Mr. Shook previously served as Executive Vice President of our Eastern subsidiary and has been with Eastern for 20 years. Mr. Shook has over 30 years of insurance industry experience, including 10 years with PricewaterhouseCoopers where he primarily served companies within the insurance industry. (Age 54) Ross E.
Prior to joining PICA in 2001, Ms. Hendricks held various finance and data analysis positions with American General Life & Accident Insurance Company. (Age 55) Jeffrey P. Lisenby Mr. Lisenby was appointed as an Executive Vice President in 2014 and is also our General Counsel, Corporate Secretary and head of the corporate Legal Department. Mr.
Hendricks held various finance and data analysis positions with American General Life & Accident Insurance Company. (Age 56) Jeffrey P. Lisenby Mr. Lisenby was appointed as an Executive Vice President in 2014 and is also our General Counsel, Corporate Secretary and head of the corporate Legal Department. Mr. Lisenby has previously served as Senior Vice President.
Lisenby has previously served as Senior Vice President. Prior to joining ProAssurance, Mr. Lisenby practiced law privately in Birmingham, Alabama. Mr. Lisenby is a member of the Alabama State Bar and the United States Supreme Court Bar and is a Chartered Property Casualty Underwriter. (Age 54) Kevin M. Shook Mr.
Prior to joining ProAssurance, Mr. Lisenby practiced law privately in Birmingham, Alabama. Mr. Lisenby is a member of the Alabama State Bar and the United States Supreme Court Bar and is a Chartered Property Casualty Underwriter. (Age 55) Karen M. Murphy Ms. Murphy was appointed President of Life Sciences and to the Executive Leadership team in 2023. Ms.
Prior to that time, Mr. Rand served as the Chief Financial Officer of Atlantic American Corporation. (Age 56) Michael L. Boguski Mr. Boguski was appointed as President of our Specialty P&C segment in 2019. Mr. Boguski previously served as President of our Eastern subsidiary since ProAssurance acquired Eastern in 2014. Prior to the acquisition of Eastern, Mr.
Prior to that time, Mr. Rand served as the Chief Financial Officer of Atlantic American Corporation. (Age 57) Noreen L. Dishart Ms. Dishart was appointed as an Executive Vice President in 2020 and has served as our Chief Human Resources Officer since 2015. Ms.
Removed
Boguski served as President and Chief Executive Officer of Eastern since 2011 and had been with the Eastern organization since its inception in 1997. Mr. Boguski has almost 36 years of insurance industry experience. (Age 60) Noreen L. Dishart Ms.
Added
Francis began his career in healthcare professional liability insurance at Mutual Assurance Society of Alabama in 1984 and worked for predecessors of ProAssurance until 2004, serving as Chief Underwriting Officer and Chief Operating Officer of the Southern Division. Prior to rejoining ProAssurance, Mr. Francis was Chief Operating Officer of The Doctor’s Company. (Age 61) Dana S. Hendricks Ms.
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Not applicable. 32 Table of Contents PART II
Added
Murphy previously served as General Counsel of Medmarc where she oversaw the legal, regulatory compliance and human resources functions and functioned as Corporate Secretary. Ms. Murphy is licensed to practice law in the State of New York and holds a Corporate Counsel license in the Commonwealth of Virginia. (Age 59) Kevin M. Shook Mr.
Added
Taubman Dr. Taubman is the President and Chief Medical Officer of the Small Business Unit and was appointed to the Executive Leadership Team in 2023. Dr. Taubman has previously served as President and Executive Vice President of PICA since 2011. Dr.
Added
Taubman was previously in private practice for 26 years in Maryland and is a former President of the Maryland Podiatric Medical Association and former President of the American Podiatric Medical Association from 2008 to 2009.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 32 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 102 Item 8. Financial Statements and Supplementary Data 105
Biggest changeItem 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 113 Item 8. Financial Statements and Supplementary Data 116

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs* (In thousands) October 1 - October 31, 2022 — N/A — $106,390 November 1 - November 30, 2022 — N/A — $106,390 December 1 - December 31, 2022 — N/A — $106,390 Total — $— — * Under its current plan begun in November 2010, the Board has authorized $600 million for the repurchase of common shares or the retirement of outstanding debt.
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs* (In thousands) October 1 - October 31, 2023 — N/A — $55,902 November 1 - November 30, 2023 — N/A — $55,902 December 1 - December 31, 2023 — N/A — $55,902 Total — $— — * Under its current plan begun in November 2010, the Board has authorized $600 million for the repurchase of common shares or the retirement of outstanding debt.
ProAssurance’s common stock currently trades on the NYSE under the symbol “PRA.” For information regarding dividends paid to shareholders in 2022 and 2021 and the declaration and payment of dividends, see Note 12 of the Notes to Consolidated Financial Statements. ProAssurance’s insurance subsidiaries are subject to restrictions on the payment of dividends to the parent.
ProAssurance’s common stock currently trades on the NYSE under the symbol “PRA.” For information regarding dividends paid to shareholders in 2023 and 2022 and the declaration and payment of dividends, see Note 12 of the Notes to Consolidated Financial Statements. ProAssurance’s insurance subsidiaries are subject to restrictions on the payment of dividends to the parent.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information regarding ProAssurance’s equity compensation plans as of December 31, 2022.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information regarding ProAssurance’s equity compensation plans as of December 31, 2023.
This is ProAssurance's only plan for the repurchase of common shares, and the plan has no expiration date. 33 Table of Contents
This is ProAssurance's only plan for the repurchase of common shares, and the plan has no expiration date. 37 Table of Contents
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 909,513 $— * 1,045,378 Equity compensation plans not approved by security holders — — — * No outstanding options as of December 31, 2022.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 1,212,545 $— * 646,431 Equity compensation plans not approved by security holders — — — * No outstanding options as of December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. At February 22, 2023, ProAssurance Corporation had 3,518 stockholders of record and 53,964,169 shares of common stock outstanding.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. At February 22, 2024, ProAssurance Corporation had 3,628 stockholders of record and 50,970,454 shares of common stock outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

356 edited+162 added−187 removed192 unchanged
Biggest changeExcluding NORCAL premiums, our consolidated net premiums earned decreased $16.5 million in 2022 as compared to 2021. • The decrease in our Lloyd's Syndicates segment for the year ended December 31, 2022 was due to our decreased participation in the results of Syndicate 1729 and Syndicate 6131 for the 2021 underwriting year and, to a lesser extent, our ceased participation in Syndicate 6131 for the 2022 underwriting year. • Net premiums earned in our Segregated Portfolio Cell Reinsurance segment increased during 2022 driven by tail coverage premiums primarily related to one program in which we do not participate, which resulted in $4.9 million of one-time premium written and fully earned as well as an increase in audit premium billed to policyholders in 2022. • For our Workers' Compensation Insurance segment, net premiums earned increased for 2022 due to an increase in audit premiums billed to policyholders in 2022 as well as the change in the carried EBUB estimate, which increased $1.5 million in 2022 as compared to a reduction of $1.2 million in 2021, partially offset by the competitive workers' compensation market conditions. • Net premiums earned in our Specialty P&C segment, excluding NORCAL premiums, remained relatively unchanged during 2022 as compared to 2021.
Biggest changeAny significant retrospective revisions in the presentation of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2022 as compared to the year ended December 31, 2021 as reported in ProAssurance's December 31, 2022 report on Form 10-K are located in this report under the section that follows titled "Results of Operations - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021." Revenues The following table shows our consolidated and segment net premiums earned: Year Ended December 31 ($ in thousands) 2023 2022 Change Net premiums earned Specialty P&C $ 755,817 $ 793,400 $ (37,583) (4.7 %) Workers' Compensation Insurance 160,034 166,371 (6,337) (3.8 %) Segregated Portfolio Cell Reinsurance 61,546 69,810 (8,264) (11.8 %) Consolidated total $ 977,397 $ 1,029,581 $ (52,184) (5.1 %) For the year ended December 31, 2023, consolidated net premiums decreased $52.2 million as compared to 2022. • For our Specialty P&C segment, net premiums earned decreased during 2023 as compared to 2022 due to the pro rata effec t of a decrease in the volume of premium written during the preceding twelve months primarily due to competitive market conditions as well as our process of evaluating the NORCAL book of business and implementing ProAssurance's underwriting strategies in 2022, which impacted earned premium in 2023. • For our Workers' Compensation Insurance segment, net premiums earned decreased in 2023 due to the continuation of competitive market conditions and reinsurance reinstatement premium of $1.6 million recorded in 2023 related to a reserve increase on a prior year reinsured claim, partially offset by an increase in the carried EBUB estimate of $2.9 million in 2023 as compared to $1.5 million in 2022. • Net premiums earned in our Segregated Portfolio Cell Reinsurance segment decreased during 2023 due to the continuation of competitive workers' compensation market conditions and a decrease in audit premium billed to policyholders.
See a reconciliation to its GAAP counterpart in the Executive Summary of Operations section under the heading “Non-GAAP Financial Measures” that follows. • Book value per share which is calculated as total shareholders’ equity at the balance sheet date divided by the total number of common shares outstanding.
See a reconciliation to its GAAP counterpart in the Executive Summary of Operations section under the heading “Non-GAAP Financial Measures” that follows. • Book value per share which is calculated as total shareholders’ equity divided by the total number of common shares outstanding at the balance sheet date.
This Non-GAAP calculation measures the net worth of the Company to shareholders on a per share basis excluding AOCI to eliminate the temporary and potentially significant effects of fluctuations in interest rates on our fixed income portfolio; however, it should be considered in conjunction with book value per share computed in accordance with GAAP.
This Non-GAAP calculation measures the net worth of the Company to shareholders on a per share basis excluding AOCI to eliminate the temporary and potentially significant effects of fluctuations in interest rates on our fixed income portfolio; however, it should be considered in conjunction with book value per share computed in accordance with GAAP.
Our retention rate can be impacted by various factors, including price or other competitive issues, insureds being acquired, or a decision not to renew based on our underwriting evaluation. (2) The pricing of our business includes an assessment of the underlying policy exposure and market conditions.
Our retention rate can be impacted by various factors, including price or other competitive issues, insureds being acquired, or a decision not to renew based on our underwriting evaluation. (2) The pricing of our business includes an assessment of the underlying policy exposure and market conditions.
We consider various factors in projecting recovery values and recovery time frames, including the following: • third-party research and credit rating reports; • the current credit standing of the issuer, including credit rating downgrades, whether before or after the balance sheet date; • the extent to which the decline in fair value is attributable to credit risk specifically associated with the security or its issuer; • internal assessments and the assessments of external portfolio managers regarding specific circumstances surrounding an investment, which indicate the investment is more or less likely to recover its amortized cost than other investments with a similar structure; 47 Table of Contents • for asset-backed securities, the origination date of the underlying loans, the remaining average life, the probability that credit performance of the underlying loans will deteriorate in the future and our assessment of the quality of the collateral underlying the loan; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; • recoveries or additional declines in fair value subsequent to the balance sheet date; • adverse legal or regulatory events; • significant deterioration in the market environment that may affect the value of collateral (e.g., decline in real estate prices); • significant deterioration in economic conditions; and • disruption in the business model resulting from changes in technology or new entrants to the industry.
We consider various factors in projecting recovery values and recovery time frames, including the following: • third-party research and credit rating reports; • the current credit standing of the issuer, including credit rating downgrades, whether before or after the balance sheet date; • the extent to which the decline in fair value is attributable to credit risk specifically associated with the security or its issuer; 51 Table of Contents • internal assessments and the assessments of external portfolio managers regarding specific circumstances surrounding an investment, which indicate the investment is more or less likely to recover its amortized cost than other investments with a similar structure; • for asset-backed securities, the origination date of the underlying loans, the remaining average life, the probability that credit performance of the underlying loans will deteriorate in the future and our assessment of the quality of the collateral underlying the loan; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; • recoveries or additional declines in fair value subsequent to the balance sheet date; • adverse legal or regulatory events; • significant deterioration in the market environment that may affect the value of collateral (e.g., decline in real estate prices); • significant deterioration in economic conditions; and • disruption in the business model resulting from changes in technology or new entrants to the industry.
The primary outflow of cash at our insurance subsidiaries is related to paid losses and operating costs, including income taxes. The payment of individual claims cannot be predicted with certainty; therefore, we rely upon the history of paid claims in estimating the timing of future claims payments with consideration to current and anticipated industry trends and macroeconomic conditions.
The primary outflow of cash at our insurance subsidiaries is related to paid losses and operating costs, including income taxes. The payment of individual claims cannot be predicted with certainty; therefore, we rely upon the history of paid claims in estimating the timing of future claims payments with consideration given to current and anticipated industry trends and macroeconomic conditions.
Growth in book value per share, adjusted for dividends declared, is an indicator of overall profitability. • Non-GAAP adjusted book value per share is a Non-GAAP measure widely used within the insurance sector and is calculated as shareholders’ equity, excluding AOCI, divided by the total number of common shares outstanding at the balance sheet date.
Growth in book value per share, adjusted for dividends declared, is an indicator of overall profitability. • Non-GAAP adjusted book value per share which is a Non-GAAP measure widely used within the insurance sector and is calculated as shareholders’ equity, excluding AOCI, divided by the total number of common shares outstanding at the balance sheet date.
Our reserve is established by management after taking into consideration a variety of factors including premium rates, historical paid and incurred loss development trends and our evaluation of the current loss environment including frequency, severity, expected effects of monetary and social inflation, general economic and social trends, and the legal and political environment.
Our reserve is established by management after taking into consideration a variety of factors including premium rates, historical paid and incurred loss development trends and our evaluation of the current loss environment including frequency, severity, expected effects of inflation (monetary, social and medical), general economic and social trends, and the legal and political environment.
This ratio measures our overall after-tax profitability and shows how efficiently capital is being used. • Non-GAAP operating ROE is calculated as Non-GAAP operating income (loss) for the period divided by the average of beginning and ending total GAAP shareholders’ equity.
This ratio measures our overall after-tax profitability and shows how efficiently capital is being used. • Non-GAAP operating ROE which is calculated as Non-GAAP operating income (loss) for the period divided by the average of beginning and ending total GAAP shareholders’ equity.
Net premiums earned also include premium adjustments related to the audit of our insureds' payrolls and changes in our estimates related to EBUB and premium adjustments related to retrospectively-rated policies. Payroll audits are conducted subsequent to the end of the policy period and any related premium adjustments processed are recorded as fully earned in the current period.
Net premiums earned also include premium adjustments related to the audit of our insureds' payrolls, changes in our estimates related to EBUB and premium adjustments related to retrospectively-rated policies. Payroll audits are conducted subsequent to the end of the policy period and any related premium adjustments are recorded as fully earned in the current period.
This very 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.
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.
At December 31, 2022, the distribution of our investments based on GAAP fair value hierarchies (levels) was as follows: Distribution by GAAP Fair Value Hierarchy Level 1 Level 2 Level 3 Not Categorized Total Investments Investments recorded at: Fair value 7% 82% 2% 6% 97% Other valuations 3% Total Investments 100% 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.
At December 31, 2023, the distribution of our investments based on GAAP fair value hierarchies (levels) was as follows: Distribution by GAAP Fair Value Hierarchy Level 1 Level 2 Level 3 Not Categorized Total Investments Investments recorded at: Fair value 7% 82% 2% 6% 97% Other valuations 3% Total Investments 100% 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.
We generated an NOL of approximately $33.3 million from the 2020 tax year that was carried back to the 2015 tax year that resulted in a tax refund of approximately $11.7 million received in February 2023.
We generated an NOL of approximately $33.3 million from the 2020 tax year that was carried back to the 2015 tax year that resulted in a tax refund of approximately $11.7 million which was received in February 2023.
The following table shows the components of our consolidated net prior accident year reserve development: Year Ended December 31 ($ in thousands) 2022 2021 Change Net favorable reserve development $ 25,934 $ 37,576 $ (11,642) (31.0 %) NORCAL Acquisition - Purchase Accounting Amortization* 10,819 7,907 2,912 36.8 % Total net favorable reserve development $ 36,753 $ 45,483 $ (8,730) (19.2 %) *See Note 2 of the Notes to Consolidated Financial Statements for additional information on the purchase accounting adjustments. • Development recognized in our Specialty P&C segment during 2022 principally related to accident years 2017 and 2020 through 2021.
The following table shows the components of our consolidated net prior accident year reserve development: Year Ended December 31 ($ in thousands) 2022 2021 Change Net favorable reserve development $ 25,934 $ 37,576 $ (11,642) (31.0 %) NORCAL Acquisition - Purchase Accounting Amortization* 10,819 7,907 2,912 36.8 % Total net favorable reserve development $ 36,753 $ 45,483 $ (8,730) (19.2 %) *See Note 2 of the Notes to Consolidated Financial Statements in our December 31, 2022 report on Form 10-K for additional information on the purchase accounting adjustments. • Development recognized in our Specialty P&C segment during 2022 principally related to accident years 2017 and 2020 through 2021.
Currently, we target a dynamic long-term ROE of 700 basis points above the 10-year U.S. Treasury rate, which at December 31, 2022 was approximately 10.9%. To achieve our long-term ROE target, we emphasize rate adequacy, selective underwriting, effective claims management, operational efficiency gained by leveraging our enhanced scope and scale and prudent investment management.
Currently, we target a dynamic long-term ROE of 700 basis points above the 10-year U.S. Treasury rate, which at December 31, 2023 was approximately 10.9%. To achieve our long-term ROE target, we emphasize rate adequacy, selective underwriting, effective claims management, operational efficiency gained by leveraging our enhanced scope and scale and prudent investment management.
We also give consideration to the difference between each reporting unit's fair value and carrying value as of the most recent date that a fair value measurement was performed.
We also give consideration to the difference between the reporting unit's fair value and carrying value as of the most recent date that a fair value measurement was performed.
As a result of the CARES Act that was signed into law on March 27, 2020 we were permitted to carryback NOLs generated in tax years 2019 and 2020 for up to five years. See further discussion in the Critical Accounting Estimates section under the heading "U.S. Tax Legislation" and Note 6 of the Notes to Consolidated Financial Statements.
As a result of the CARES Act that was signed into law on March 27, 2020 we were permitted to carryback NOLs generated in tax years 2019 and 2020 for up to five years. See further discussion in the Critical Accounting Estimates section under the heading "U.S. Tax Legislation" and Note 5 of the Notes to Consolidated Financial Statements.
New business, audit premium, retention and renewal price changes for the assumed workers' compensation premium is shown in the table below: Year Ended December 31 ($ in millions) 2022 2021 New business $ 3.6 $ 3.3 Audit premium $ 5.4 $ 1.1 Retention rate (1) 87 % 89 % Change in renewal pricing (2) (4 %) (4 %) (1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal.
New business, audit premium, retention and renewal price changes for the assumed workers' compensation premium is shown in the table below: Year Ended December 31 ($ in millions) 2023 2022 New business $ 4.2 $ 3.6 Audit premium $ 3.6 $ 5.4 Retention rate (1) 89 % 87 % Change in renewal pricing (2) (5 %) (4 %) (1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal.
We believe the need for a cautious approach is required as outcomes are uncertain and results can be significantly affected by outcomes for a small number of cases. 43 Table of Contents Workers' Compensation Claims in our workers’ compensation line of business have historically closed at a faster rate than in our HCPL or Medical Technology Liability lines of business.
We believe the need for a cautious approach is required as outcomes are uncertain and results can be significantly affected by outcomes for a small number of cases. 47 Table of Contents Workers' Compensation Claims in our workers’ compensation line of business have historically closed at a faster rate than in our HCPL or Medical Technology Liability lines of business.
In accordance with GAAP, we classify securities valued using limited observable inputs as Level 3 securities. 46 Table of Contents Fair Values Not Categorized We hold interests in certain investment funds, primarily LPs/LLCs, which measure fund assets at fair value on a recurring basis and provide us with a NAV for our interest.
In accordance with GAAP, we classify securities valued using limited observable inputs as Level 3 securities. 50 Table of Contents Fair Values Not Categorized We hold interests in certain investment funds, primarily LPs/LLCs, which measure fund assets at fair value on a recurring basis and provide us with a NAV for our interest.
Tax Legislation 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 eased certain deduction limitations originally imposed by the TCJA. See further discussion in Note 6 of the Notes to Consolidated Financial Statements.
Tax Legislation 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 eased certain deduction limitations originally imposed by the TCJA. See further discussion in Note 5 of the Notes to Consolidated Financial Statements.
See further information on other notable items impacting our effective tax rate for the years ended December 31, 2022 and 2021 in the Segment Results - Corporate section that follows under the heading "Taxes." Operating Ratio Our operating ratio is our combined ratio, less our investment income ratio. This ratio provides the combined effect of underwriting profitability and investment income.
See further information on other notable items impacting our effective tax rate for the years ended December 31, 2023 and 2022 in the Segment Results - Corporate section that follows under the heading "Taxes." Operating Ratio Our operating ratio is our combined ratio, less our investment income ratio. This ratio provides the combined effect of underwriting profitability and investment income.
See further discussion of our financing activities in this section under the heading "Financing Activities and Related Cash Flows." 53 Table of Contents Operating Activities and Related Cash Flows Losses The following table, known as the Analysis of Reserve Development, presents information over the preceding ten years regarding the payment of our losses as well as changes to (the development of) our estimates of losses during that time period.
See further discussion of our financing activities in this section under the heading "Financing Activities and Related Cash Flows." Operating Activities and Related Cash Flows Losses The following table, known as the Analysis of Reserve Development, presents information over the preceding ten years regarding the payment of our losses as well as changes to (the development of) our estimates of losses during that time period.
While we engage in activities that generate other income, these activities, such as insurance agency services, do not constitute a significant use of our resources or a significant source of revenues or profits. 36 Table of Contents Critical Accounting Estimates Our Consolidated Financial Statements are prepared in conformity with GAAP.
While we engage in activities that generate other income, these activities, such as insurance agency services, do not constitute a significant use of our resources or a significant source of revenues or profits. 40 Table of Contents Critical Accounting Estimates Our Consolidated Financial Statements are prepared in conformity with GAAP.
See further discussion in Note 6 of the Notes to Consolidated Financial Statements. Unrecognized Tax Benefits We evaluate tax positions taken on tax returns and recognize positions in our financial statements when it is more likely than not that we will sustain the position upon resolution with a taxing authority.
See further discussion in Note 5 of the Notes to Consolidated Financial Statements. Unrecognized Tax Benefits We evaluate tax positions taken on tax returns and recognize positions in our financial statements when it is more likely than not that we will sustain the position upon resolution with a taxing authority.
If the available-for-sale debt security’s contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, for example, the prime rate, the LIBOR, or the U.S. Treasury bill weekly average, that security’s effective interest rate is calculated based on the factor as it changes over the life of the security.
If the available-for-sale debt security’s contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, for example, the prime rate, the SOFR, or the U.S. Treasury bill weekly average, that security’s effective interest rate is calculated based on the factor as it changes over the life of the security.
See a reconciliation to its GAAP counterpart in the Executive Summary of Operations section under the heading “Non-GAAP Financial Measures” that follows. In particular, we focus on our combined ratio and investment returns, both of which directly affect our ROE and growth in our book value.
See a reconciliation to its GAAP counterpart in the Executive Summary of Operations section under the heading “Non-GAAP Financial Measures” that follows. In particular, we focus on our combined ratio and investment returns, both of which directly affect our ROE and growth in our book value per share.
See further discussion in our Segment Results - Specialty Property & Casualty section under the heading "Premiums Written." We retained 100% of the twenty-two workers' compensation and three healthcare professional liability alternative market programs up for renewal for the year ended December 31, 2022.
See further discussion in our Segment Results - Specialty Property & Casualty section under the heading "Premiums Written." We retained 100% of the twenty-two workers' compensation and three healthcare professional liability alternative market programs up for renewal for the year ended December 31, 2023.
The following discussion generally focuses on the change in financial condition, results of operations and cash flows for the year ended December 31, 2022 as compared to the year ended December 31, 2021 and should be read in conjunction with the Consolidated Financial Statements and Notes to those statements which accompany this report.
The following discussion generally focuses on the change in financial condition, results of operations and cash flows for the year ended December 31, 2023 as compared to the year ended December 31, 2022 and should be read in conjunction with the Consolidated Financial Statements and Notes to those statements which accompany this report.
This ratio provides the combined effect of underwriting profitability and investment income. • The tax ratio which is calculated as total income tax expense (benefit) divided by income (loss) before income taxes and measures our effective tax rate. • Non-GAAP operating income (loss) is widely used to evaluate performance within the insurance sector.
This ratio provides the combined effect of underwriting profitability and investment income. • The effective tax rate which is calculated as total income tax expense (benefit) divided by income (loss) before income taxes. • Non-GAAP operating income (loss) which is widely used to evaluate performance within the insurance sector.
For further information on our allowance for expected credit losses related to our receivables from reinsurers see Note 1 of the Notes to Consolidated Financial Statements. 45 Table of Contents Investment Valuations We record the majority of our investments at fair value as shown in the table below.
For further information on our allowance for expected credit losses related to our receivables from reinsurers see Note 1 of the Notes to Consolidated Financial Statements. 49 Table of Contents Investment Valuations We record the majority of our investments at fair value as shown in the table below.
(3) Represents our share of the net profit (loss) and OCI of the SPCs in which we participate. 89 Table of Contents Premiums Written Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments.
(3) Represents our share of the net profit (loss) and OCI of the SPCs in which we participate. 94 Table of Contents Premiums Written Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments.
We recognized $38.1 million of net investment losses for the year ended December 31, 2022 driven by unrealized holding losses resulting from changes in the fair value of our equity investments and convertible securities and, to a lesser extent, realized losses from the sale of equity investments.
We recognized $39.1 million of net investment losses for the year ended December 31, 2022 driven by unrealized holding losses resulting from changes in the fair value of our equity investments and convertible securities and, to a lesser extent, realized losses from the sale of equity investments.
For a full discussion of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2021 as compared to the year ended December 31, 2020, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2021 report on Form 10-K.
For a full discussion of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2022 as compared to the year ended December 31, 2021, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2022 report on Form 10-K.
For a full discussion of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2021 as compared to the year ended December 31, 2020, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2021 report on Form 10-K.
For a full discussion of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2022 as compared to the year ended December 31, 2021, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2022 report on Form 10-K.
We manage our investments to ensure that we will have sufficient liquidity to meet our obligations, taking into consideration the timing of cash flows from our investments, including interest payments, dividends and principal payments, as well as the expected cash flows to be generated by our operations.
We manage our investments to ensure that we will have sufficient liquidity to meet our obligations, taking into consideration the timing of cash flows from our investments, including interest payments, dividends and principal payments, as well as the expected cash flows to be generated or used by our operations.
Operating subsidiaries within our Specialty P&C segment and our Workers' Compensation Insurance segment are charged a management fee by the Corporate segment for services provided to these subsidiaries. The management fee is based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary.
Core domestic operating subsidiaries within our Specialty P&C segment and our Workers' Compensation Insurance segment are charged a management fee by the Corporate segment for services provided to these subsidiaries. The management fee is based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary.
Incurred losses reported in any period reflect our estimate of losses incurred related to the premiums earned in that period as well as any changes to our previous estimate of the reserve required for prior periods. As of December 31, 2022, our reserve is comprised almost entirely of long-tail exposures.
Incurred losses reported in any period reflect our estimate of losses incurred related to the premiums earned in that period as well as any changes to our previous estimate of the reserve required for prior periods. As of December 31, 2023, our reserve is comprised almost entirely of long-tail exposures.
We evaluate each of our ceded reinsurance contracts at inception to confirm that there is sufficient risk transfer to allow the contract to be accounted for as reinsurance under current accounting guidance. At December 31, 2022, all ceded contracts were accounted for as risk transferring contracts.
We evaluate each of our ceded reinsurance contracts at inception to confirm that there is sufficient risk transfer to allow the contract to be accounted for as reinsurance under current accounting guidance. At December 31, 2023, all ceded contracts were accounted for as risk transferring contracts.
Due to the nature of our claims, our loss costs, even for claims with similar characteristics, can vary significantly depending upon many factors, including but not limited to the specific characteristics of the claim and the manner in which the claim is resolved.
Due to the nature of our claims, our loss costs, even for claims with similar characteristics, can vary significantly depending upon many factors, including but not limited to the specific characteristics of the claim and the manner or jurisdiction in which the claim is resolved.
We also consider reasonable and supportable forecasts of future economic conditions in our estimate of expected credit losses. Expected credit losses associated with our reinsurance receivables (related to both paid and unpaid losses) were nominal in amount as of December 31, 2022 and 2021.
We also consider reasonable and supportable forecasts of future economic conditions in our estimate of expected credit losses. Expected credit losses associated with our reinsurance receivables (related to both paid and unpaid losses) were nominal in amount as of December 31, 2023 and 2022.
We manage our investing cash flows to ensure that we will have sufficient liquidity to meet our obligations, taking into consideration the timing of cash flows from our investments, including interest payments, dividends and principal payments, as well as the expected cash flows to be generated by our operations as discussed in this section under the heading "Investing Activities and Related Cash Flows." Our financing cash flows are primarily comprised of dividend payments.
We manage our investing cash flows to ensure that we will have sufficient liquidity to meet our obligations, taking into consideration the timing of cash flows from our investments, including interest payments, dividends and principal payments, as well as the expected cash flows to be generated by our operations as discussed in this section under the heading "Investing Activities and Related Cash Flows." Our financing cash flows are primarily comprised of share repurchases and dividend payments to our stockholders.
Management fees are charged pursuant to a management agreement by the Corporate segment to the operating subsidiaries within our Specialty P&C segment for services provided based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary.
Management fees are charged pursuant to a management agreement by the Corporate segment to the core domestic operating subsidiaries within our Specialty P&C segment for services provided based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary.
The SPCs assume workers' compensation insurance, healthcare professional liability insurance or a combination of the two from our Workers' Compensation Insurance and Specialty P&C segments. As of December 31, 2022, there were two SPCs that assumed both workers' compensation insurance and healthcare professional liability insurance and one SPC that assumed only healthcare professional liability insurance.
The SPCs assume workers' compensation insurance, healthcare professional liability insurance or a combination of the two from our Workers' Compensation Insurance and Specialty P&C segments. As of December 31, 2023, there were two SPCs that assumed both workers' compensation insurance and healthcare professional liability insurance and one SPC that assumed only healthcare professional liability insurance.
In evaluating our performance, we consider a number of performance measures, including the following: • The net loss ratio which is calculated as net losses and loss adjustment expenses incurred divided by net premiums earned and is a component of underwriting profitability. • The underwriting expense ratio which is calculated as underwriting, policy acquisition and operating expenses incurred divided by net premiums earned and is a component of underwriting profitability. • The combined ratio which is the sum of the net loss ratio and the underwriting expense ratio and measures underwriting profitability. • The investment income ratio which is calculated as net investment income divided by net premiums earned and measures the contribution investment earnings provide to our overall profitability. 35 Table of Contents • The operating ratio which is the combined ratio, less the investment income ratio.
In evaluating our performance, we consider a number of performance measures, including the following: • The net loss ratio which is calculated as net losses and loss adjustment expenses incurred divided by net premiums earned and is a component of underwriting profitability. • The underwriting expense ratio which is calculated as underwriting, policy acquisition and operating expenses incurred divided by net premiums earned and is a component of underwriting profitability. • The combined ratio which is the sum of the net loss ratio and the underwriting expense ratio and measures underwriting profitability. • The investment income ratio which is calculated as net investment income divided by net premiums earned and measures the contribution investment earnings provide to our overall profitability. • The operating ratio which is the combined ratio, less the investment income ratio.
(2) Under our external reinsurance treaty for traditional business, we retain the first $0.5 million in risk insured by us and cede losses in excess of this amount on each loss occurrence, subject to an AAD, equal to 3.5% of subject earned premium for the treaty year effective May 1, 2022.
(2) Under our external reinsurance treaty for traditional business, we retain the first $0.5 million in risk insured by us and cede losses in excess of this amount on each loss occurrence, subject to an AAD, equal to 3.5% of subject earned premium for the treaty years effective May 1, 2023 and 2022.
As a holding company, our principal source of external revenue is our investment revenues. In addition, dividends from our operating subsidiaries represent another source of funds for our obligations, including debt service and shareholder dividends.
As a holding company, our principal source of external revenue is our investment revenues. In addition, dividends from our operating subsidiaries represent another source of funds for our obligations, including debt service and shareholder dividends, if declared.
IBNR reserves are estimated by accident year and represent our estimate in the aggregate of future development on losses that have been reported to us and our estimate of losses that have been incurred but not reported to us.
IBNR reserves are estimated by accident year by our actuarial department and represent our estimate in the aggregate of future development on losses that have been reported to us and our estimate of losses that have been incurred but not reported to us.
Federal income tax return that includes the parent company and its U.S. subsidiaries, except for ProAssurance American Mutual, a Risk Retention Group. Our filing obligations include a requirement to make quarterly payments of estimated taxes to the IRS using the corporate tax rate effective for the tax year.
We file a consolidated U.S. federal income tax return that includes the parent company and its U.S. subsidiaries, except for ProAssurance American Mutual, A Risk Retention Group. Our filing obligations include a requirement to make quarterly payments of estimated taxes to the IRS using the corporate tax rate effective for the tax year.
A summary of the activity in our net reserve for losses during 2022 and 2021 is provided under the heading "Losses" in the Liquidity and Capital Resources and Financial Condition section that follows. 37 Table of Contents Current Accident Year - Initial Reserve Considerable judgment is required in establishing our initial reserve for any current accident year period, as there is limited data available upon which to base our estimate (see further discussion that follows under the heading "Use of Judgment").
A summary of the activity in our net reserve for losses during 2023 and 2022 is provided under the heading "Losses" in the Liquidity and Capital Resources and Financial Condition section that follows. 41 Table of Contents Current Accident Year - Initial Reserve Considerable judgment is required in establishing our initial reserve for any current accident year period, as there is limited data available upon which to base our estimate (see further discussion that follows under the heading "Use of Judgment").
Source: S&P, Copyright ©2023, S&P Global Market Intelligence 61 Table of Contents A detailed listing of our investment holdings as of December 31, 2022 is located under the Financial Information heading on the Investor Relations page of our website which can be reached directly at https://investor.proassurance.com/financial-information/quarterly-investment-supplements/default.aspx or through links from the Investor Relations section of our website, investor.proassurance.com.
Source: S&P, Copyright ©2023, S&P Global Market Intelligence A detailed listing of our investment holdings as of December 31, 2023 is located under the Financial Information heading on the Investor Relations page of our website which can be reached directly at https://investor.proassurance.com/financial-information/quarterly-investment-supplements/default.aspx or through links from the Investor Relations section of our website, investor.proassurance.com.
See further discussion in our Segment Results - Specialty Property & Casualty section that follows under the heading "Losses and Loss Adjustment Expenses." The risks insured in our Medical Technology Liability business (2% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2022) are more varied, and policies are individually priced based on the risk characteristics of the policy and the account.
See further discussion in our Segment Results - Specialty Property & Casualty section that follows under the heading "Losses and Loss Adjustment Expenses." The risks insured in our Medical Technology Liability business (3% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2023) are more varied, and policies are individually priced based on the risk characteristics of the policy and the account.
Many factors affect the ultimate losses incurred for our workers' compensation coverages (5% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2022) including but not limited to the type and severity of the injury, the age, health and occupation of the injured worker, the estimated length of disability, medical treatment and related costs, and the jurisdiction and workers' compensation laws of the state of the injury occurrence.
Many factors affect the ultimate losses incurred for our workers' compensation coverages (6% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2023) including but not limited to the type and severity of the injury, the age, health and occupation of the injured worker, the estimated length of disability, medical treatment and related costs, and the jurisdiction and workers' compensation laws of the state of the injury occurrence.
Additional information on ProAssurance's five operating and reportable segments is included in Note 16 of the Notes to Consolidated Financial Statements, Part I and in the Segment Results sections herein that follow. 34 Table of Contents Growth Opportunities and Outlook Over the long-term we expect our growth to come primarily through controlled expansion of our existing operations.
Additional information on ProAssurance's four operating and reportable segments is included in Note 16 of the Notes to Consolidated Financial Statements, Part I and in the Segment Results sections herein that follow. 38 Table of Contents Growth Opportunities and Outlook Over the long-term we expect our growth to come primarily through controlled expansion of our existing operations.
The ceded premiums ratio was as follows: Year Ended December 31 2022 2021 Change Ceded premiums ratio 8.5 % 8.1 % 0.4 pts Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed) (0.3 %) (0.6 %) 0.3 pts Ratio, current accident year 8.8 % 8.7 % 0.1 pts The above table reflects ceded premiums written, excluding the effect of prior year ceded premium adjustments, as previously discussed, as a percent of gross premiums written.
The ceded premiums ratio was as follows: Year Ended December 31 2022 2021 Change Ceded premiums ratio 8.5 % 8.6 % (0.1 pts) Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed) (0.3 %) (0.5 %) 0.2 pts Ratio, current accident year 8.8 % 9.1 % (0.3 pts) The above table reflects ceded premiums written, excluding the effect of prior year ceded premium adjustments, as previously discussed, as a percent of gross premiums written.
ProAssurance Shareholder Dividends Our Board declared cash dividends during 2022, 2021 and 2020 as follows: Quarterly Cash Dividends Declared, per Share 2022 2021 2020 First Quarter $ 0.05 $ 0.05 $ 0.31 Second Quarter $ 0.05 $ 0.05 $ 0.05 Third Quarter $ 0.05 $ 0.05 $ 0.05 Fourth Quarter $ 0.05 $ 0.05 $ 0.05 Each dividend was paid in the month following the quarter in which it was declared.
ProAssurance Shareholder Dividends Our Board declared cash dividends during 2023, 2022 and 2021 as follows: Quarterly Cash Dividends Declared, per Share 2023 2022 2021 First Quarter $ 0.05 $ 0.05 $ 0.05 Second Quarter $ — $ 0.05 $ 0.05 Third Quarter $ — $ 0.05 $ 0.05 Fourth Quarter $ — $ 0.05 $ 0.05 Each dividend was paid in the month following the quarter in which it was declared.
In addition to the interest and dividends we will receive from our investments, we anticipate that between $90 million and $160 million of our portfolio will mature (or be paid down) each quarter over the next twelve months and become available, if needed, to meet our cash flow requirements.
In addition to the interest and dividends we will receive from our investments, we anticipate that between $70 million and $140 million of our portfolio will mature (or be paid down) each quarter over the next twelve months and become available, if needed, to meet our cash flow requirements.
For the current accident year, given the lack of seasoned information, the different actuarial methodologies produce results with significant variability; therefore, more emphasis is placed on supplementing results from the actuarial methodologies with trends in exposure base, medical expense inflation, general inflation, severity, and claim counts, among other things, to select an ultimate loss indication.
For the current accident year, given the lack of seasoned information, the different actuarial methodologies produce results with significant variability; therefore, more emphasis is placed on supplementing results from the actuarial methodologies with trends in exposure base, medical expense inflation, general inflation, severity, and claim counts, among other things, to select an ultimate loss indication. Segregated Portfolio Cell Reinsurance Segment.
Changes to estimates of premiums ceded related to prior accident years are fully earned in the period the changes in estimates occur. Ceded Premiums Ratio As shown in the table below, our ceded premiums ratio was affected in both 2022 and 2021 by revisions to our estimate of premiums owed to reinsurers related to coverages provided in prior accident years.
Changes to estimates of premiums ceded related to prior accident years are fully earned in the period the changes in estimates occur. 83 Table of Contents Ceded Premiums Ratio As shown in the table below, our ceded premiums ratio was affected in both 2023 and 2022 by revisions to our estimate of premiums owed to reinsurers related to coverages provided in prior accident years.
As of December 31, 2022, there is no reinsurer, on an individual basis, for which our recoverables for both paid and unpaid claims (net of amounts due to the reinsurer) and our prepaid balances are more than $55 million, in the aggregate.
As of December 31, 2023, there is no reinsurer, on an individual basis, for which our recoverables for both paid and unpaid claims (net of amounts due to the reinsurer) and our prepaid balances are more than $65 million, in the aggregate.
No reinsurance balances were written off for credit reasons during the years ended December 31, 2022 or 2021.
No reinsurance balances were written off for credit reasons during the years ended December 31, 2023 or 2022.
The remaining variance in operating cash flows in 2022 as compared to 2021 was composed of individually insignificant components.
The remaining variance in operating cash flows in 2023 as compared to 2022 was composed of individually insignificant components.
(2) For the year ended December 31, 2022, our current accident year net loss ratio (as shown in the table above), improved 4.4 percentage points as compared to 2021.
(2) For the year ended December 31, 2022, our current accident year net loss ratio (as shown in the table above), improved 3.5 percentage points as compared to 2021.
In response to these trends, we have enhanced our coverage offerings to fit the needs of combined hospital/physician entities, multi-state medical groups, telemedicine companies, miscellaneous facilities, allied healthcare professionals and self-insured entities even as we continue to service that portion of the market maintaining more traditional practice structures.
As such, we have enhanced our coverage offerings to fit the needs of combined hospital/physician entities, multi-state medical groups, telemedicine companies, miscellaneous facilities, allied healthcare professionals and self-insured entities even as we continue to service that portion of the market maintaining more traditional practice structures.
The factors that affect the ultimate losses incurred for the workers' compensation and HCPL coverages assumed by the SPCs at Inova Re and Eastern Re (2% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2022) are consistent with that of our Workers’ Compensation Insurance and Specialty P&C segments, respectively. Lloyd's Syndicates Segment .
The factors that affect the ultimate losses incurred for the workers' compensation and HCPL coverages assumed by the SPCs at Inova Re and Eastern Re (2% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2023) are consistent with that of our Workers’ Compensation Insurance and Specialty P&C segments, respectively.
These factors could lead to greater than anticipated claims and claim handling expenses which could exceed our established reserves causing us to increase our loss reserves. 40 Table of Contents The effects of monetary inflation could cause the cost of claims to rise in the future.
These factors could lead to greater than anticipated claims and claim handling expenses which could exceed our established reserves causing us to increase our loss reserves. The effects of monetary and medical inflation could cause the cost of claims to rise in the future.
The alternative market workers' compensation policies are ceded from our Workers' Compensation Insurance segment to the SPCs under 100% quota share reinsurance agreements. The alternative market healthcare professional liability policies are ceded from our Specialty P&C segment to the SPCs under either excess of loss or quota share reinsurance agreements, depending on the structure of the individual program.
The alternative market healthcare professional liability policies are ceded from our Specialty P&C segment to the SPCs under either excess of loss or quota share reinsurance agreements, depending on the structure of the individual program.
New business, audit premium, renewal retention and renewal price changes for our traditional business and the alternative market business are shown in the table below: Year Ended December 31 2022 2021 ($ in millions) Traditional Business Alternative Market Business Segment Results Traditional Business Alternative Market Business Segment Results New business $ 14.1 $ 3.6 $ 17.7 $ 17.8 $ 3.3 $ 21.1 Audit premium (excluding EBUB) $ 8.2 $ 5.4 $ 13.6 $ (1.9) $ 1.1 $ (0.8) Retention rate (1) 82 % 87 % 83 % 86 % 89 % 87 % Change in renewal pricing (2) (5 %) (4 %) (5 %) (1 %) (4 %) (2 %) (1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal.
New business, audit premium, renewal retention and renewal price changes for our traditional business and the alternative market business are shown in the table below: Year Ended December 31 2023 2022 ($ in millions) Traditional Business Alternative Market Business Segment Results Traditional Business Alternative Market Business Segment Results New business $ 22.0 $ 4.2 $ 26.2 $ 14.1 $ 3.6 $ 17.7 Audit premium (excluding EBUB) $ 9.1 $ 3.6 $ 12.7 $ 8.2 $ 5.4 $ 13.6 Retention rate (1) 83 % 89 % 85 % 82 % 87 % 83 % Change in renewal pricing (2) (5 %) (5 %) (5 %) (5 %) (4 %) (5 %) (1) We calculate our workers' compensation retention rate as annualized expiring renewed premium divided by all annualized expiring premium subject to renewal.
Consolidated tax expense (benefit) reflects the tax expense (benefit) of both segments and the tax impact of items excluded from segment reporting, as shown in the table below: Year Ended December 31 (In thousands) 2022 2021 Corporate segment income tax expense (benefit) $ (5,423) $ 4,651 Income tax expense (benefit) - transaction-related costs* (391) (2,168) Consolidated income tax expense (benefit) $ (5,814) $ 2,483 *Represents the income tax benefit associated with the transaction-related costs related to our acquisition of NORCAL that are not included in a segment as we do not consider these costs in assessing the financial performance of any of our operating or reportable segments.
Consolidated tax expense (benefit) reflects the tax expense (benefit) of both segments and the tax impact of items excluded from segment reporting, as shown in the table below: Year Ended December 31 (In thousands) 2023 2022 Corporate segment income tax expense (benefit) $ (545) $ (5,423) Income tax expense (benefit) - transaction-related costs* — (391) Consolidated income tax expense (benefit) $ (545) $ (5,814) *Represents the income tax benefit associated with the transaction-related costs related to our acquisition of NORCAL that are not included in a segment as we do not consider these costs in assessing the financial performance of any of our operating or reportable segments.
(2) We have entered into various shared risk arrangements, including quota share, fronting and captive arrangements, with certain large healthcare systems and other insurance entities. While we cede a large portion of the premium written under these arrangements, they provide us an opportunity to grow net premium through strategic partnerships. These arrangements primarily include our Ascension Health program.
(2) We have entered into various shared risk arrangements, including quota share, fronting and captive arrangements, with certain large healthcare systems and other insurance entities. While we cede a large portion of the premium written under these arrangements, they provide us an opportunity to grow net premium through strategic partnerships.
See Note 8 of the Notes to Consolidated Financial Statements for additional information. At December 31, 2022 our gross reserve for losses included case reserves of approximately $2.3 billion and IBNR reserves of approximately $1.2 billion.
See Note 7 of the Notes to Consolidated Financial Statements for additional information. At December 31, 2023 our gross reserve for losses included case reserves of approximately $2.3 billion and IBNR reserves of approximately $1.2 billion.
As part of the review of our reserves for 2022 and 2021, we recorded a net decrease in our estimate of expected losses and associated recoveries for prior year ceded losses, as well as our estimate of ceded premiums owed to reinsurers.
As part of the review of our reserves for 2023 and 2022, we recorded a net decrease in our estimate of ceded premiums owed to reinsurers due to a decrease in our estimate of expected losses and associated recoveries for prior year ceded losses.
We currently cede either all or a portion of the alternative market premium, net of reinsurance, to three SPCs of our wholly owned Cayman Islands reinsurance subsidiaries, Inova Re and Eastern Re, which are reported in our Segregated Portfolio Cell Reinsurance segment (see further discussion in the Ceded Premiums Written section that follows).
We currently cede either all or a portion of the alternative market premium, net of reinsurance, to three SPCs of our wholly owned Cayman Islands reinsurance subsidiary, Inova Re, which is reported in our Segregated Portfolio Cell Reinsurance segment (see further discussion in the Ceded Premiums Written section that follows).
We offer alternative market solutions whereby we cede certain premiums from our Workers' Compensation Insurance and Specialty P&C segments to either the SPCs at Inova Re or Eastern Re, our Cayman Islands reinsurance subsidiaries which are 57 Table of Contents reported in our Segregated Portfolio Cell Reinsurance segment or captive insurers unaffiliated with ProAssurance for two programs.
We offer alternative market solutions whereby we cede certain premiums from our Workers' Compensation Insurance and Specialty P&C segments to either the SPCs at Inova Re, one of our Cayman Islands reinsurance subsidiaries which is reported in our Segregated Portfolio Cell Reinsurance segment, or captive insurers unaffiliated with ProAssurance for two programs.
The increase in the ceded premiums ratio in 2022 as compared to 2021 primarily reflected the higher reinsurance rates and a decrease in the estimated return premium. 86 Table of Contents Net Premiums Earned Net premiums earned consist of gross premiums earned less the portion of earned premiums that we cede to SPCs in our Segregated Portfolio Cell Reinsurance segment, external reinsurers (including changes related to the return premium and revenue share estimates) and the unaffiliated captive insurers.
The increase in the ceded premiums ratio in 2023 as compared to 2022 primarily reflected the higher reinsurance rates. 90 Table of Contents Net Premiums Earned Net premiums earned consist of gross premiums earned less the portion of earned premiums that we cede to SPCs in our Segregated Portfolio Cell Reinsurance segment, external reinsurers (including changes related to the return premium and revenue share estimates) and the unaffiliated captive insurers.
The net favorable prior year reserve development for the years ended December 31, 2022 and 2021 reflected overall favorable trends in claim closing patterns. Net favorable development for the year ended December 31, 2022 primarily related to accident years 2017 through 2020.
The net favorable prior year development for the year ended December 31, 2022 reflected overall favorable trends in claim closing patterns primarily related to accident years 2020 and prior.
See Note 16 of the Notes to Consolidated Financial Statements for a reconciliation of our segment results to our consolidated results. 100 Table of Contents Listed below are the primary factors affecting our consolidated effective tax rate for the years ended December 31, 2022 and 2021.
See Note 16 of the Notes to Consolidated Financial Statements for a reconciliation of our segment results to our consolidated results. Listed below are the primary factors affecting our consolidated effective tax rate for the years ended December 31, 2023 and 2022.
Ceded Premiums Ratio Ceded premiums ratio was as follows: Year Ended December 31 2022 2021 Change Ceded premiums ratio 14.1 % 13.6 % 0.5 pts The above table reflects ceded premiums as a percent of gross premiums written for the workers' compensation business only; healthcare professional liability business is assumed net of reinsurance, as discussed above.
Ceded Premiums Ratio Ceded premiums ratio was as follows: Year Ended December 31 2023 2022 Change Ceded premiums ratio 14.1 % 14.1 % — pts The above table reflects ceded premiums as a percent of gross premiums written for the workers' compensation business only; healthcare professional liability business is assumed net of reinsurance, as discussed above.
A significant portion of our deferred tax asset is related to unrealized losses on our fixed maturities due to the significant rise in interest rates in 2022. Any loss realized prior to recovery would require sufficient income of the appropriate character (i.e., capital gains), and in the appropriate timeframe, to realize the tax benefit.
A significant portion of our deferred tax asset is related to unrealized losses on our fixed maturities due to the significant effect of fluctuations in interest rates in 2022 that continued through 2023. Any loss realized prior to recovery would require sufficient income of the appropriate character (i.e., capital gains), and in the appropriate timeframe, to realize the tax benefit.
See previous discussion in this section under the heading "Expenses" and further discussion in our Segment Operating Results sections that follow. Non-GAAP Adjusted Book Value per Share Book value per share is calculated as total GAAP shareholders’ equity divided by the total number of common shares outstanding at the balance sheet date.
See previous discussions in this section under the headings "Executive Summary of Operations" and further discussion in our Segment Operating Results sections that follow. Non-GAAP Adjusted Book Value per Share Book value per share is calculated as total GAAP shareholders’ equity divided by the total number of common shares outstanding at the balance sheet date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+4 added−3 removed10 unchanged
Biggest changeAs of December 31, 2022, 92% of our fixed maturity securities were rated investment grade as determined by NRSROs, such as Fitch, Moody’s and Standard & Poor’s. We believe that this concentration in investment grade securities reduces our exposure to credit risk on our fixed income investments to an acceptable level.
Biggest changeWe control this exposure by emphasizing investment grade credit quality in the fixed income securities we purchase. As of December 31, 2023, 93% of our fixed maturity securities were rated investment grade as determined by NRSROs, such as Fitch, Moody’s and Standard & Poor’s.
The following tables summarize estimated changes in the fair value of our available-for-sale fixed maturity securities for specific hypothetical changes in interest rates by asset class at December 31, 2022 and December 31, 2021. There are principally two factors that determine interest rates on a given security: changes in the level of yield curves and credit spreads.
The following tables summarize estimated changes in the fair value of our available-for-sale fixed maturity securities for specific hypothetical changes in interest rates by asset class at December 31, 2023 and December 31, 2022. There are principally two factors that determine interest rates on a given security: changes in the level of yield curves and credit spreads.
As different asset classes can be affected in different ways by movements in those two factors, we have separated our portfolio by asset class in the following tables. Interest Rate Shift in Basis Points December 31, 2022 ($ in millions) (200) (100) Current 100 200 Fair Value: Fixed maturities, available-for-sale: U.S.
As different asset classes can be affected in different ways by movements in those two factors, we have separated our portfolio by asset class in the following tables. Interest Rate Shift in Basis Points December 31, 2023 ($ in millions) (200) (100) Current 100 200 Fair Value: Fixed maturities, available-for-sale: U.S.
At December 31, 2022, our fixed maturities portfolio includes fixed maturities classified as trading securities which do not have a significant amount of exposure to market interest rates or credit spreads. Our cash and short-term investments at December 31, 2022 were carried at fair value which approximates their cost basis due to their short-term nature.
At December 31, 2023, our fixed maturities portfolio includes fixed maturities classified as trading securities which do not have a significant amount of exposure to market interest rates or credit spreads. Our cash and short-term investments at December 31, 2023 were carried at fair value which approximates their cost basis due to their short-term nature.
We monitor the credit risk associated with our reinsurers using publicly available financial and rating agency data. We have not historically experienced material credit losses due to the financial condition of a reinsurer, and as of December 31, 2022 our expected credit losses associated with our receivables from reinsurers were nominal in amount. 104 Table of Contents
We monitor the credit risk associated with our reinsurers using publicly available financial and rating agency data. We have not historically experienced material credit losses due to the financial condition of a reinsurer, and as of December 31, 2023 our expected credit losses associated with our receivables from reinsurers were nominal in amount. 115 Table of Contents
See Note 1 of the Notes to Consolidated Financial Statements for further information on our allowance for expected credit losses related to our premiums receivable. Our receivables from reinsurers (with regard to both paid and unpaid losses) approximated $447 million at December 31, 2022 and $466 million at December 31, 2021.
See Note 1 of the Notes to Consolidated Financial Statements for further information on our allowance for expected credit losses related to our premiums receivable. Our receivables from reinsurers (with regard to both paid and unpaid losses) approximated $467 million at December 31, 2023 and $447 million at December 31, 2022.
We also have exposure to credit risk related to our premiums receivable and receivables from reinsurers; however, to-date we have not experienced any significant amount of credit losses. At December 31, 2022, our premiums receivable was approximately $246 million, net of an allowance for expected credit losses of approximately $8 million.
We also have exposure to credit risk related to our premiums receivable and receivables from reinsurers; however, to-date we have not experienced any significant amount of credit losses. At December 31, 2023, our premiums receivable was approximately $236 million, net of an allowance for expected credit losses of approximately $8 million.
However, investment grade securities, in spite of their rating, can rapidly deteriorate and result in significant losses. Ratings published by the NRSROs are one of the tools used to evaluate the creditworthiness of our securities.
We believe that this concentration in investment grade securities reduces our exposure to credit risk on our fixed income investments to an acceptable level. However, investment grade securities, in spite of their rating, can rapidly deteriorate and result in significant losses. Ratings published by the NRSROs are one of the tools used to evaluate the creditworthiness of our securities.
As of December 31, 2022, no borrowings were outstanding under our Revolving Credit Agreement. Defined Benefit Pension Plan We are exposed to certain economic risks related to the costs of our defined benefit pension plan, including changes in discount rates for high quality corporate bonds and changes in the expected return on plan assets.
Defined Benefit Pension Plan We are exposed to certain economic risks related to the costs of our defined benefit pension plan, including changes in discount rates for high quality corporate bonds and changes in the expected return on plan assets. 114 Table of Contents Credit Risk We have exposure to credit risk primarily as a holder of fixed income securities.
Government-sponsored enterprise obligations 3.41 3.45 3.43 3.38 3.32 State and municipal bonds 3.91 3.99 4.10 4.21 4.30 Corporate debt 3.79 3.74 3.68 3.60 3.52 Asset-backed securities 2.76 2.87 2.97 3.00 3.01 Total fixed maturities, available-for-sale 3.48 3.50 3.50 3.48 3.45 102 Table of Contents Interest Rate Shift in Basis Points December 31, 2021 ($ in millions) (200) (100) Current 100 200 Fair Value: Fixed maturities, available-for-sale: U.S.
Government-sponsored enterprise obligations 3.46 3.46 3.41 3.35 3.27 State and municipal bonds 3.90 3.97 4.07 4.19 4.30 Corporate debt 3.26 3.25 3.23 3.18 3.12 Asset-backed securities 2.82 2.94 3.03 3.10 3.14 Total fixed maturities, available-for-sale 3.19 3.23 3.25 3.26 3.25 113 Table of Contents Interest Rate Shift in Basis Points December 31, 2022 ($ in millions) (200) (100) Current 100 200 Fair Value: Fixed maturities, available-for-sale: U.S.
Government-sponsored enterprise obligations 1.58 1.63 2.64 2.84 2.85 State and municipal bonds 4.22 4.20 4.26 4.36 4.49 Corporate debt 4.17 4.13 4.13 4.14 4.11 Asset-backed securities 2.33 2.25 2.67 3.13 3.39 Total fixed maturities, available-for-sale 3.64 3.58 3.71 3.86 3.93 Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including the maintenance of the existing level and composition of fixed income security assets, and should not be relied on as indicative of future results.
Government-sponsored enterprise obligations 3.41 3.45 3.43 3.38 3.32 State and municipal bonds 3.91 3.99 4.10 4.21 4.30 Corporate debt 3.79 3.74 3.68 3.60 3.52 Asset-backed securities 2.76 2.87 2.97 3.00 3.01 Total fixed maturities, available-for-sale 3.48 3.50 3.50 3.48 3.45 Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including the maintenance of the existing level and composition of fixed income security assets, and should not be relied on as indicative of future results.
Our cash and short-term investments lack significant interest rate sensitivity due to their short duration. Debt Our Revolving Credit Agreement is exposed to interest rate risk as it is LIBOR based and a 1% change in LIBOR will impact annual interest expense only to the extent that there is an outstanding balance.
Our cash and short-term investments lack significant interest rate sensitivity due to their short duration. Debt We are exposed to interest rate risk due to variability in the base rate on borrowings under our amended Revolving Credit Agreement and Term Loan.
Government-sponsored enterprise obligations 21 21 20 20 19 State and municipal bonds 564 541 519 498 478 Corporate debt 2,063 1,979 1,899 1,821 1,748 Asset-backed securities 1,211 1,186 1,157 1,123 1,087 Total fixed maturities, available-for-sale $ 4,119 $ 3,976 $ 3,834 $ 3,691 $ 3,551 Duration: Fixed maturities, available-for-sale: U.S. Treasury obligations 4.42 4.33 4.25 4.18 4.10 U.S.
Government-sponsored enterprise obligations 20 19 19 18 18 State and municipal bonds 492 473 454 436 418 Corporate debt 1,865 1,807 1,751 1,697 1,645 Asset-backed securities 1,090 1,058 1,026 995 963 Total fixed maturities, available-for-sale $ 3,725 $ 3,608 $ 3,494 $ 3,383 $ 3,274 Duration: Fixed maturities, available-for-sale: U.S. Treasury obligations 2.95 2.88 2.82 2.76 2.70 U.S.
Removed
Treasury obligations $ 260 $ 249 $ 239 $ 229 $ 219 U.S.
Added
Treasury obligations $ 258 $ 251 $ 244 $ 237 $ 230 U.S.
Removed
For every $100 million drawn on our Revolving Credit Agreement, a 1% change in interest rates will change our annual interest expense by $1 million. Any outstanding balances on the Revolving Credit Agreement can be repaid on each maturity date, which has typically ranged from one to three months.
Added
See further information regarding the Revolving Credit Agreement and Term Loan in Note 10 of the Notes to Consolidated Financial Statements. Borrowings under our Revolving Credit Agreement and Term Loan accrue interest at a selected SOFR base rate, adjusted by a margin.
Removed
See further discussion in Item 7, Management's Discussion and Analysis, in the Critical Accounting Estimates section under the heading "Pension." 103 Table of Contents Credit Risk We have exposure to credit risk primarily as a holder of fixed income securities. We control this exposure by emphasizing investment grade credit quality in the fixed income securities we purchase.
Added
To manage our exposure to interest rate risk on any borrowings under these agreements, we entered into two Interest Rate Swaps which effectively fix the base rate on borrowings under the Revolving Credit Agreement and Term Loan to 3.187% and 3.207%, respectively. See further information regarding the Interest Rate Swaps in Note 10 of the Notes to Consolidated Financial Statements.
Added
As of December 31, 2023, the Revolving Credit Agreement and Term Loan each have $125 million in outstanding borrowings. Additional information regarding our debt is provided in Note 10 of the Notes to Consolidated Financial Statements.

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