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What changed in PROASSURANCE CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PROASSURANCE CORP's 2023 and 2024 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 2024 report.

+666 added−780 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-27)

Top changes in PROASSURANCE CORP's 2024 10-K

666 paragraphs added · 780 removed · 526 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

77 edited+14 added−22 removed79 unchanged
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.
Biggest changeAdditional information on our four operating and reportable segments is included in Note 16 of the Notes to Consolidated Financial Statements and in the segment discussions that follows. 9 Table of Contents Gross Premiums Written Gross premiums written for the years ended December 31, 2024, 2023 and 2022 were comprised as follows: Year Ended December 31 ($ in thousands) 2024 2023 2022 Specialty P&C $ 807,463 77 % $ 835,430 77 % $ 856,861 78 % Workers' Compensation Insurance 243,404 23 % 246,857 23 % 247,132 22 % Segregated Portfolio Cell Reinsurance (1) 57,904 6 % 70,259 7 % 78,937 7 % Inter-segment revenues (1) (57,904) (6 %) (70,267) (7 %) (78,937) (7 %) Total $ 1,050,867 100 % $ 1,082,279 100 % $ 1,103,993 100 % (1) Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments.
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.
Our specialty property and casualty insurance products primarily include medical 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.
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.
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, 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 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.
As such, we have enhanced our coverage offerings to fit the needs of combined hospital/physician entities, multi-state medical groups, telemedicine companies, miscellaneous medical 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 products we insure cover a broad array of medical devices and pharmaceuticals including, but not limited to, infusion systems, operating room surgical instruments and disposables, laboratory equipment and supplies, in vitro diagnostic test kits and instruments, patient mobility aids, respiratory and anesthesia products, cardiovascular devices, vaccines or cancer therapeutics, laser surgical instruments, non-invasive diagnostic imaging systems, orthopedic implants and human and veterinary branded and generic drugs.
The products we insure cover a broad array of medical devices, pharmaceuticals and biologics including, but not limited to, infusion systems, operating room surgical instruments and disposables, laboratory equipment and supplies, in vitro diagnostic test kits and instruments, patient mobility aids, respiratory and anesthesia products, cardiovascular devices, vaccines or cancer therapeutics, laser surgical instruments, non-invasive diagnostic imaging systems, orthopedic implants, human and veterinary branded and generic drugs and biologics.
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.
Professional Liability Insurance Our professional liability business is focused on providing medical professional liability insurance to healthcare providers and facilities. 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.
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.
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 traditional small physician practices.
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.
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 2025.
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.
Inova Re and Eastern Re are required 17 Table of Contents to maintain minimum capital of approximately $200,000 and must receive approval from the CIMA before they can pay any dividends. Human Capital Resources Our people are the most critical element in assuring we deliver our promise of protecting others.
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.
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 two SPCs of our wholly owned Cayman Islands reinsurance subsidiary, Inova Re, which is reported in our Segregated Portfolio Cell Reinsurance segment.
As part of the evaluation and preparation process for HCPL claims, we meet regularly with medical advisory committees in our key markets to examine claims, attempt to evaluate practice patterns and make recommendations to our underwriting and risk management team members for implementation with customers.
As part of the evaluation and preparation process for MPL claims, we meet regularly with medical advisory committees in our key markets to examine claims, attempt to evaluate practice patterns and make recommendations to our underwriting and risk management team members for implementation with customers.
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.
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 Chief Executive Officer (our CODM) to determine resource allocation and assess operating performance: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate.
The segment results also reflect our share of the results of the SPCs in which we participate. 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.
The segment results also reflect our share of the results of the SPCs in which we participate. The SPCs assume workers' compensation insurance, medical professional liability insurance or a combination of the two from our Workers' Compensation Insurance and Specialty P&C segments.
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. In recent years, participation in guaranty funds has not had a material effect on our results of operations.
Some states permit member insurers to recover assessments paid through surcharges on policyholders or through full or partial premium tax offsets, while other states 16 Table of Contents permit recovery of assessments through the rate filing process. In recent years, participation in guaranty funds has not had a material effect on our results of operations.
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.
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, 2024.
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.
As of December 31, 2024, 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, 2023, ProAssurance filed its internal assessment of solvency under the ORSA criteria during 2024. Also, the NAIC subsequently revised the Model Holding Co.
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.
ITEM 1. BUSINESS Overview ProAssurance Corporation is a holding company for property and casualty insurance companies. For the year ended December 31, 2024, our net premiums written totaled $1.0 billion, and at December 31, 2024 we had total assets of $5.6 billion and $1.2 billion of shareholders' equity.
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.
These SEC filings can be found on our website at investor.proassurance.com/SEC-Filings. The Investor Relations 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.
These data privacy laws establish numerous consumer rights, such as the right to be notified of privacy practices and the right to know, delete, or correct certain personal information. 16 Table of Contents Each of the domiciliary states of our insurance subsidiaries and affiliates, excluding Missouri, has enacted data security or data privacy laws.
These data privacy laws establish numerous consumer rights, such as the right to be notified of privacy practices and the right to know, delete, or correct certain personal information. Each of the domiciliary states of our insurance subsidiaries and affiliates, excluding Missouri, has enacted data security or data privacy laws.
(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.
A (Excellent) ProAssurance Specialty Insurance Company A (Excellent) ProAssurance Insurance Company of America A (Excellent) Medmarc Casualty Insurance Company A (Excellent) NORCAL Insurance Company A (Excellent) NORCAL Specialty Insurance Company A (Excellent) Medicus Insurance Company A (Excellent) FD Insurance Company A (Excellent) Preferred Physician Medical RRG, a Mutual Insurance Company A (Excellent) ProAssurance American Mutual, A RRG A (Excellent) Allied Eastern Indemnity Company A (Excellent) Eastern Advantage Assurance Company A (Excellent) Eastern Alliance Insurance Company A (Excellent) Eastern Re Ltd., SPC NR Inova Re Ltd., SPC NR Lloyd's Syndicate 1729 (2) A+ (Superior) (1) NR indicates that the subsidiary has not been rated by the listed rating agency.
To ensure our workforce is comprised of a diverse group of highly-qualified individuals, we are committed to advertising job openings and sourcing candidates through broad-reaching techniques. We are committed to a strategy of workforce diversity and inclusion, starting with our Board and extending through all levels within our organization.
To ensure our workforce is comprised of a diverse group of highly-qualified individuals, we are committed to advertising job openings and sourcing candidates through broad-reaching techniques. We are committed to this strategy starting with our Board and extending through all levels within our organization.
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.
Competitive distinctions include pricing, size, name recognition and reputation, service quality, market commitment, market conditions, breadth and flexibility of coverage, method of sale, new technologies, 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 the Specialty P&C segment, our largest segment.
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.
At December 31, 2024, we had 1,036 employees, none of whom were represented by a labor union. We consider our employee relations to be good. 18 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.
We have established lines of communication between our Audit Committee, our independent auditor, internal auditor and management that enable our Audit Committee to perform its oversight function. 21 Table of Contents
We have established lines of communication between our Audit Committee, our independent auditor, internal auditor and management that enable our Audit Committee to perform its oversight function.
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.
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 14, 2025.
To further illustrate the significance of our commitment to our team members and being the employer of choice, the Board regularly reviews the Company’s human capital management strategies and outcomes including matters related to diversity, equity and inclusion, talent management and development, talent acquisition and team member engagement. We are committed to facilitating and fostering team member engagement.
To further illustrate the significance of our commitment to our team members and being the Employer of Choice, the Board regularly reviews the Company’s human capital management strategies and outcomes, including matters related to the Company's culture, talent management and development, talent acquisition and team member engagement and satisfaction. We are committed to facilitating and fostering team member engagement.
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.
In our Specialty P&C segment, we had net written premium of $39.3 million in 2024, $38.1 million in 2023 and $39.2 million in 2022 associated with international insurance exposures, primarily related to our strategic partnership with an international medical professional liability insurer and, to a lesser extent, exposures from our participation in Lloyd's Syndicates 1729 and 6131.
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.
In 2024, our top ten largest brokers generated approximately 45% of our Medical Technology Liability gross written premium, with no one broker representing more than 11%. We work with licensed property and casualty insurance brokerages across the country and do not require an appointment except where required by law.
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.
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. 13 Table of Contents Rating Agency Our claims paying ability is regularly evaluated and rated by AM Best.
In every case, surplus subsequent to the payment of any dividends must be reasonable in relation to an insurance company’s outstanding liabilities and must be adequate to meet its financial needs. State insurance holding company regulations generally require domestic insurers to obtain prior approval of extraordinary dividends.
Generally, dividends may be paid only out of unassigned earned surplus. In every case, surplus subsequent to the payment of any dividends must be reasonable in relation to an insurance company’s outstanding liabilities and must be adequate to meet its financial needs. State insurance holding company regulations generally require domestic insurers to obtain prior approval of extraordinary dividends.
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.
We expect that additional states will continue to adopt data security and data privacy laws and regulations. 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.
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.
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.
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.
The CPRA amends and expands the CCPA. • Delaware enacted the Delaware Personal Data Privacy Act, effective January 1, 2025. • The District of Columbia enacted the Security Breach Protection Amendment Act of 2020, effective June 17, 2020. • 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, 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.
Our SPCs at Inova Re can provide a unique captive solution for some insureds which are large enough to have credible claims data, yet too small to have their own captive arrangement. The workers’ compensation industry is highly competitive in the geographic markets in which we operate.
Our SPCs at Inova Re can provide a unique captive solution for insureds large enough to have credible claims data, yet too small to have their own captive arrangement. The workers’ compensation industry is highly competitive.
Additional detailed information regarding premium by individual product type within each of our insurance segments is provided in Item 7, Management's Discussion and Analysis, in the Results of Operations section, under the headings "Premiums Written" or "Premiums." Our insurance exposures are primarily within the U.S.
We eliminate this inter-segment revenue. Additional detailed information regarding premium by individual product type within each of our insurance segments is provided in Item 7, Management's Discussion and Analysis, in the Results of Operations section, under the heading "Premiums Written." Our insurance exposures are primarily within the U.S.
We carefully monitor use of our capital and consider various options for capital deployment, such as business expansion by our existing subsidiaries, opportunities that arise for mergers or acquisitions, share repurchases and payment of dividends. • Manage claims effectively.
We carefully monitor use of our capital and consider various options for capital deployment, such as business expansion by our existing subsidiaries, opportunities that arise for mergers or acquisitions, investment portfolio diversification to maximize yield and share repurchases. • Manage claims effectively.
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 help us move toward our long-term profit targets over the life of the insurance cycle.
States have also enacted legislation, typically based in whole or in part on NAIC model laws, which regulates insurance holding company systems, including acquisitions, the payment of dividends, the terms of affiliate transactions, enterprise risk and solvency management and other related matters. Applicable state insurance laws, rather than federal bankruptcy laws, apply to the liquidation or reorganization of insurance companies.
States have also enacted legislation, typically based in whole or in part on NAIC model laws, which regulates insurance holding company systems, including acquisitions, the payment of dividends, the terms of affiliate transactions, enterprise risk and solvency management and other related matters.
The Governance section of our website provides copies of the charters for our governing committees and many of our governing policies. 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.
The Corporate Information section of our website provides copies of the charters for our governing committees and many of our governing policies. Printed copies of these documents may be obtained from our Investor Relations department, by email at InvestorRelations@ProAssurance.com, by mail at P.O. Box 590009, Birmingham, Alabama 35259-0009, or by telephone at (205) 776-3028 or (800) 282-6242.
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.
In developing their claims paying rating, this agency makes an independent evaluation of an insurer’s ability to meet its obligations to policyholders. The following table presents the claims paying rating of our insurance subsidiaries as of February 24, 2025. Rating Agency AM Best (1) (www.ambest.com) ProAssurance Indemnity Company, Inc.
As a result, the underwriting results from our participation in Syndicate 1729 and Syndicate 6131 at Lloyd's London which were previously reported in a separate segment are now reported in our Specialty P&C segment. We normally report results from our involvement in Lloyd's Syndicates on a quarter lag, except when information is available that is material to the current period.
The Specialty P&C segment also includes the underwriting results from our participation in Syndicate 1729 and Syndicate 6131 at Lloyd's London, which is currently in run-off. We normally report results from our involvement in Lloyd's Syndicates on a quarter lag, except when information is available that is material to the current period.
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.
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.
We engage experienced, independent litigation attorneys in each venue to assist with the claims process as we believe this practice aids us in providing a defense that is aggressive, effective and cost-efficient.
We have widely distributed claims management staff with concentrations in key geographic locations to monitor and adjudicate MPL claims. We engage experienced, independent litigation attorneys in each venue to assist with the claims process as we believe this practice aids us in providing a defense that is aggressive, effective and cost-efficient.
Insurance companies are also subject to state and federal legislative and regulatory measures and judicial decisions. These could include new or updated definitions of risk exposure and limitations on business practices.
Applicable state insurance laws, rather than federal bankruptcy laws, apply to the liquidation or reorganization of insurance companies. 14 Table of Contents Insurance companies are also subject to state and federal legislative and regulatory measures and judicial decisions. These could include new or updated definitions of risk exposure and limitations on business practices.
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.
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.
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.
See Note 3 of the Notes to Consolidated Financial Statements for more information on our investments. Competition The marketplace for most of our lines of business is very competitive, though competition does vary among the different product lines and healthcare sectors.
For the 2023 underwriting year, our participation in the results of Syndicate 1729 was unchanged from the 2022 underwriting year at 5%. For Syndicate 6131, we ceased participation beginning with the 2022 underwriting year and due to the quarter lag, was not reflected in our results until the second quarter of 2022.
Effective September 2023, we elected to discontinue our participation in the results of Syndicate 1729 beginning with the 2024 underwriting year and due to the one quarter lag, was not reflected in our results until the second quarter of 2024. For the 2023 underwriting year, our participation in the results of Syndicate 1729 was approximately 5%.
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.
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, 2024, the Company estimates that all of ProAssurance’s insurance subsidiaries will exceed the minimum required risk-based capital levels.
We do this by providing innovative programs and solutions that address the specific needs of our customers and return injured workers to wellness and the dignity of work. • Provide superior customer service.
We do this by providing innovative programs and solutions that address the specific needs of our customers and return injured workers to wellness and the dignity of work. • Provide superior customer service. Our goal is to deliver an exceptional service experience that is consistent, responsive and provides value to customers through a regional business model.
The vast majority of these insureds and the products they manufacture and/or distribute are regulated by the U.S. Food and Drug Administration or similar regulatory authorities in foreign jurisdictions.
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 vast majority of these insureds and the products they manufacture and/or distribute are regulated by the U.S. Food and Drug Administration or similar regulatory authorities in foreign jurisdictions.
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.
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.
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.
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 June 2018, California adopted the California Consumer Privacy Act of 2018, which provided comprehensive data privacy protections to California residents.
Regulation of Dividends and Other Payments from Our Operating Subsidiaries Our U.S. operating subsidiaries are subject to various state statutory and regulatory restrictions that limit the amount of dividends or distributions an insurance company may pay to its shareholders, including our insurance holding company, without prior regulatory approval. Generally, dividends may be paid only out of unassigned earned surplus.
Insurance regulators periodically examine each insurer’s adherence to SAP, financial condition and compliance with insurance department rules and regulations. 15 Table of Contents Regulation of Dividends and Other Payments from Our Operating Subsidiaries Our U.S. operating subsidiaries are subject to various state statutory and regulatory restrictions that limit the amount of dividends or distributions an insurance company may pay to its shareholders, including our insurance holding company, without prior regulatory approval.
Workers' Compensation Insurance Segment Our Workers' Compensation Insurance segment offers workers' compensation products primarily in 19 core states in the East, South and Midwest regions of the continental U.S. 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.
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.
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.
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 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.
Types of policies offered include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies and deductible policies. • Alternative market workers' compensation solutions are 100% ceded, less a ceding commission, 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.
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.
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. Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials.
We have also provided capital to Syndicate 1729 at Lloyd's of London to support our previous participation in underwriting years that remain open. Effective September 2023, we elected to discontinue our participation in the results of Syndicate 1729 beginning with the 2024 underwriting year.
For Syndicate 6131, we ceased participation beginning with the 2022 underwriting year which was not reflected in our results until the second quarter of 2022. We have also provided capital to Syndicate 1729 at Lloyd's of London to support our previous participation.
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.
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.
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.
We continue to leverage our wellness platform to support the physical, emotional and financial health of our team members. • 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.
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.
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, are focused on three key strategic areas, including: ◦ building and sustaining a diverse workforce that is inclusive and representative of the insureds we serve and the communities in which we work; ◦ providing learning and engagement opportunities that enables every team member to succeed; enhancing overall morale and performance, while recognizing and addressing the distinct challenges faced by diverse populations; and ◦ fostering a Company culture where every individual can bring their authentic self to work and feels a deep sense of belonging by sustaining an environment that prioritizes inclusivity, respect and shared success. • 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.
We are committed to the pursuit of continuous improvement through careful and constant examination of our business processes which will allow us to improve our competitive position through operational excellence and productivity gains. This is accomplished through leveraging technology and data to improve efficiency, accuracy and business outcomes. • Effectively manage capital.
We are committed to the pursuit of continuous improvement through careful and constant examination of our business processes which will allow us to improve our competitive position through operational excellence and productivity gains. We are investing in innovation solutions, including artificial intelligence and process automation, to enhance risk selection, decision making and workflows.
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.
The ceding commission charged to the SPCs consists of an amount for fronting fees, cell rental fees, commissions, premium taxes, claims administration fees and risk management fees. All of our workers' compensation products are distributed through appointed independent agents. We utilize an individual account underwriting strategy for our workers' compensation business that is focused on selecting quality accounts.
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.
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. 11 Table of Contents Workers' Compensation Insurance Segment Our Workers' Compensation Insurance segment offers workers' compensation products in 19 core states in the East, South and Midwest regions of the continental U.S.
(2) Effective December 31, 2023, ProAssurance Casualty Company merged into ProAssurance Indemnity Company, Inc. (3) Rating provided is the rating applicable to all Lloyd's syndicates. Our ability to service current debt and potential debt is regularly evaluated and rated by two rating agencies: AM Best and Fitch.
(2) Rating provided is the rating applicable to all Lloyd's syndicates. Our ability to service current debt and potential debt is regularly evaluated and rated by AM Best. In 2024, AM Best maintained ProAssurance's debt rating of "A+" with a stable outlook.
We defend our Medical Technology Liability claims vigorously, with a negotiated settlement being the most frequent means of resolution. Lloyd's Syndicates Our Lloyd's Syndicates business includes the results from our participation in Syndicate 1729 and Syndicate 6131 at Lloyd's of London (approximately 2% of our 2023 gross premiums written).
We defend our Medical Technology Liability claims vigorously, with a negotiated settlement being the most frequent means of resolution.
We regularly monitor and evaluate turnover metrics to ensure we are responsive to the evolving, competitive market for top talent.
To support those objectives, we conduct quarterly “Pulse” surveys that gain real-time feedback from our team members on key issues. We regularly monitor and evaluate turnover metrics to ensure we are responsive to the evolving, competitive market for top talent.
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.
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. This segment focuses on supporting the operations of our insurance subsidiaries through strategically managing our investment portfolio and providing certain administrative services.
Our investment portfolio consists primarily of investment-grade, fixed-maturity securities of short-to medium-term duration. • Maintain financial stability . We are committed to maintaining financial strength and adequate capital.
Our investment strategy is designed to emphasize the preservation of our capital and provide adequate liquidity for the prompt payment of claims. Our investment portfolio consists primarily of investment-grade, fixed-maturity securities of short-to medium-term duration.
Our industry leading claims professionals bring extensive industry and insurance experience, along with local jurisdictional knowledge to resolve claims in a cost effective manner. • Emphasize risk management. We actively manage our enterprise risk by maintaining strong internal controls.
Our industry leading claims professionals bring extensive industry and insurance experience, along with local jurisdictional knowledge to resolve claims in a cost effective manner. Additionally, we aim to utilize data analytics and artificial intelligence to enhance outcomes, improve decision making and lighten administrative burdens for claims professionals. • Strategically manage our investment portfolio.
We maintain a regional business model which permits us to consistently provide a high level of services to customers on a local basis. We maintain regional claim management offices where our internal claims personnel investigate and monitor the adjudication of our professional liability claims.
We also are involved in professional societies and related organizations and support legislation that will have a positive effect on healthcare liability issues. We maintain a regional business model which permits us to consistently provide a high level of services to customers on a local basis.
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.
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. Our insurance subsidiaries are primarily domiciled in the U.S. Our states of domicile include Alabama, California, Delaware, Illinois, Missouri, Pennsylvania, Texas and Vermont.
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.
We utilize independent agencies and brokers as well as an internal business development team to write our MPL business. For the year ended December 31, 2024, approximately 66% of our MPL gross premiums written were produced through independent insurance agencies or brokers.
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 debt rating reflects the agency’s independent evaluation of our ability to meet our obligation to holders of our debt, if any. While the debt rating may be of greater interest to investors than our claims paying rating, this rating is not an evaluation of our equity securities nor a recommendation to buy, hold or sell our equity securities.
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.
Total gross premiums written in this segment in our alternative market captive cell program were approximately $4.2 million, $6.7 million and $11.8 million during 2024, 2023 and 2022, respectively. Underwriting MPL contemplates many factors including, but not limited to, the specific exposures, loss history, coverage scope/terms, level of the insured's retention, policy limits and operational venues.
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.
Strategic vendor relationships have been established to reduce medical claim costs and include preferred provider, physical therapy, prescription drug and catastrophic medical services. We continue to implement and invest in innovation solutions, such as artificial intelligence along with underwriting and claims data analytics, to address various aspects of escalating medical costs and support operational decisions.
We market our insurance products through our business development team and through our agents as well as direct mailings and advertising in industry-related publications. We also are involved in professional societies and related organizations and support legislation that will have a positive effect on healthcare and legal liability issues.
In marketing our MPL products we emphasize our financial strength, breadth of product offerings and excellent claims, underwriting and risk management services. We market our insurance products through our business development team and through our agents as well as direct mailings and advertising in industry-related publications.
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We believe NORCAL has contributed value to our customers and enhanced our culture.
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Our Strategy Our strategy is to provide best-in-class risk solutions for the markets in which we operate through superior relationships with our distribution partners. This is accomplished by fostering an Employer of Choice culture for our team members.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere is no precise method for evaluating the impact of any specific factor on the adequacy of reserves, and actual results are likely to differ from original estimates. We evaluate our reserves each period and increase or decrease reserves as necessary based on our estimate of future claims payments.
Biggest changeOur 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. There is no precise method for evaluating the impact of any specific factor on the adequacy of reserves, and actual results are likely to differ from original estimates.
To manage our exposure to variability in cash flows of forecasted interest payments attributable to variability in the selected base rates on borrowings under both the amended Revolving Credit Agreement and Term Loan, ProAssurance entered into two forward-starting interest rate swap agreements on May 2, 2023, each with an effective date of December 29, 2023 and maturity date of March 31, 2028.
To manage our exposure to variability in cash flows of forecasted interest payments attributable to variability in the selected base rates on borrowings under both the Revolving Credit Agreement and Term Loan, ProAssurance entered into two forward-starting interest rate swap agreements on May 2, 2023, each with an effective date of December 29, 2023 and maturity date of March 31, 2028.
Awards above policy limits are possible whenever a case is taken to trial. These actions have the potential to have a material and adverse effect on our financial condition and results of operations. If we are unable to maintain favorable financial strength ratings, it may be more difficult for us to write new business or renew our existing business.
Awards above policy limits are possible whenever a case is taken to trial. These actions have the potential to have a material and adverse effect on our financial condition and results of operations. If we are unable to maintain a favorable financial strength rating, it may be more difficult for us to write new business or renew our existing business.
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.
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 2024, 2023 or 2022. Our practice is to accrue for insurance insolvencies when notified of assessments.
Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit our vendors’ ability to maintain an adequate level of service and experience.
In addition, our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit our vendors’ ability to maintain an adequate level of service and experience.
These estimates require us to make significant judgments regarding a number of factors, including, among others, the applicability of various federal and state laws, the interpretations given to those tax laws by taxing authorities, courts and the Company, the timing of future income and deductions, and our expected levels and sources of future taxable income.
These estimates require us to make significant judgments regarding a number of factors, including, among others, the applicability of various federal and state laws, the interpretations given to those tax laws by taxing authorities, courts and the Company, the timing of future income and deductions, our tax planning strategies and our expected levels and sources of future taxable income.
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.
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 a favorable claims paying rating with AM Best.
We could be adversely affected by the acquisition due to unanticipated performance issues and additional expense, unforeseen or adverse changes in liabilities, including liabilities arising from events prior to the acquisition or that were unknown to us at the time of the acquisition, transaction-related charges, diversion of management time and resources to integration challenges, loss of key team members, regulatory requirements, exposure to tax liabilities, exposure to pension liabilities, amortization of expenses related to intangibles, and charges for impairment of assets or goodwill.
We could be adversely affected by the acquisition due to unanticipated performance issues and additional expense, unforeseen or adverse changes in liabilities, including liabilities arising from events prior to the 28 Table of Contents acquisition or that were unknown to us at the time of the acquisition, transaction-related charges, diversion of management time and resources to integration challenges, loss of key team members, regulatory requirements, exposure to tax liabilities, exposure to pension liabilities, amortization of expenses related to intangibles, and charges for impairment of assets or goodwill.
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.
At December 31, 2024 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.
These regulations may impede or impose burdensome conditions on rate changes or other actions that we may desire to take in order to enhance our results of operations. In addition, we may incur significant costs in the course of complying with regulatory requirements.
These regulations may impede or impose burdensome conditions on rate changes or other actions that we may desire to take in order to benefit our results of operations. In addition, we may incur significant costs in the course of complying with regulatory requirements.
Issues in the development and use of artificial intelligence, including machine learning, generative artificial intelligence tools and large language models may result in reputational harm, liability or other adverse consequences to our business operations as well as to certain of our insureds.
Issues in the development and use of artificial intelligence, including machine learning, generative artificial intelligence tools and large language models may result in reputational harm, liability, security threats or other adverse consequences to our business operations as well as to certain of our insureds.
Additionally, our loss reserves may be impacted by social inflation, which is generally described as the rising costs of insurance claims resulting from factors including, but not limited to, increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, jury behavior, and larger compensatory jury awards and non-economic damages.
Additionally, our loss reserves may be impacted by social inflation, which is generally described as the rising costs of insurance claims resulting from factors including, but not limited to, increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, jury behavior, third-party litigation financing and larger compensatory jury awards and non-economic damages.
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.
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 2024, 2023 or 2022.
The Company is dependent upon its technology infrastructure and that of certain third parties to operate and report financial and other Company information accurately and timely. ProAssurance collects, uses, stores or transmits an increasingly large amount of confidential, proprietary, personal, legally protected, and other information in connection with the operation of our business.
The Company is dependent upon its technology infrastructure and that of certain third parties to operate and report financial and other Company information accurately and timely. ProAssurance collects, uses, stores or transmits an increasingly 29 Table of Contents large amount of confidential, proprietary, personal, legally protected, and other information in connection with the operation of our business.
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.
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.
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.
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.
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.
We determine the fair value of our investments using quoted exchange or over-the-counter prices, when available. At December 31, 2024, we valued approximately 7% of our investments in this manner.
Our amended Revolving Credit Agreement, which expires in April 2028, permits borrowings of up to $300 million and also includes an additional $125 million delayed draw term loan ("Term Loan").
Our Revolving Credit Agreement, which expires in April 2028, permits borrowings of up to $300 million and includes an additional $125 million delayed draw term loan ("Term Loan").
If we, our vendors, or our third-party partners experience an actual or perceived breach of privacy or security incident because of the use of artificial intelligence, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed.
If we, our vendors, or our third-party partners experience an actual or perceived breach of privacy or security incident related to the use of artificial intelligence, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed.
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, 2024, 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 indefinite lived intangible assets or long-lived assets, which could have a material adverse effect on our results of operations and financial condition.
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.
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, 2024, approximately 85% of our investments were valued in this manner.
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.
Moreover, on a combined basis, Pennsylvania, California and Alabama accounted for 34% of our direct premiums written for the year ended December 31, 2024. 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.
The modeled outputs and related analyses from both proprietary and third parties are subject to various assumptions, uncertainties, model design errors and the inherent limitations of any statistical analysis, including those arising from the use of historical internal and industry data and assumptions.
The modeled outputs and related analyses from both proprietary and third parties are subject to various assumptions, uncertainties, model design errors and the 21 Table of Contents inherent limitations of any statistical analysis, including those arising from the use of historical internal and industry data and assumptions.
A downgrade or involuntary withdrawal of any such rating could limit or prevent us from writing desirable business. See previous discussion under the heading "Rating Agencies" for a table presenting the claims paying ratings of our principal insurance operations.
A downgrade or involuntary withdrawal of any such rating could limit or prevent us from writing desirable business. See previous discussion under the heading "Rating Agency" for a table presenting the claims paying rating of our principal insurance operations.
After the caps reach $750,000/$1.0 million in 2033, they will increase by 2% per annum thereafter effective January 1, 2034. This amendment could have a material adverse effect on our financial condition, results of operations and cash flows given our concentration in California.
After the caps reach $750,000/$1.0 million in 2033, they will increase by 2% per annum thereafter effective January 1, 2034. These increases could have a material adverse effect on our financial condition, results of operations and cash flows given our concentration in California.
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.
The agreement requires that our consolidated debt to capital ratio (0.26 to 1.0 at December 31, 2024) 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.
However, because the rights and preferences of any series of preferred stock may be set by the Board in its sole discretion, the rights and preferences of any such preferred stock may be superior to those of our common stock and thus may adversely affect the rights of the holders of common stock.
However, because the rights and preferences of any series of preferred stock may be set by the Board in its sole discretion, the rights and 27 Table of Contents preferences of any such preferred stock may be superior to those of our common stock and thus may adversely affect the rights of the holders of common stock.
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.
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, Alabama, Florida, and Texas represented 45% of our direct premiums written for the year ended December 31, 2024.
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.
At December 31, 2024, approximately 5% 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.
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.
Most states also regulate insurance holding companies like us in a variety of matters such as 26 Table of Contents acquisitions, solvency and risk assessment, changes of control and the terms of affiliated transactions.
We develop and incorporate artificial intelligence technology in certain of our services and plan to develop and incorporate additional artificial intelligence technology in future services.
We develop and incorporate artificial intelligence technology in certain of our processes and plan to develop and incorporate additional artificial intelligence technology in future processes.
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.
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, 2024 approximately 26% of our investment portfolio was invested in mortgage and asset-backed securities.
As such, we are still exposed to adverse loss development on certain large claims in open years of account in which we participated, primarily catastrophe related losses. Further, we are obligated to maintain FAL to support those open year of accounts and risk-based capital requirements which are assessed periodically by Lloyd's and subject to variation.
As such, we are still exposed to adverse loss development on certain large claims in open underwriting years in which we participated, primarily catastrophe and aviation related losses. Further, we are obligated to maintain FAL to support those open underwriting years and risk-based capital requirements which are assessed periodically by Lloyd's and subject to variation.
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.
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, result of rating review and the inclusion in certain bond indices of past and future issues.
As of December 31, 2023, we currently have no preferred stock outstanding.
As of December 31, 2024, we currently have no preferred stock outstanding.
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).
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, 2024 the fair value of our state/municipal portfolio was $446.6 million (amortized cost basis of $471.0 million).
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.
At December 31, 2024, our receivable from reinsurers on unpaid losses and loss adjustment expenses was $409 million, our receivable from reinsurers on paid losses and loss adjustment expenses was $18 million and our expected credit losses associated with our reinsurance receivables (related to both paid and unpaid losses) were nominal in amount.
Independent rating agencies assess and rate the claims-paying ability and the financial strength of insurers based upon criteria established by the agencies. Periodically the rating agencies evaluate us to confirm that we continue to meet the criteria of previously assigned ratings.
Independent rating agencies assess and rate the claims-paying ability and the financial strength of insurers based upon criteria established by the agencies. Periodically AM Best evaluates us to confirm that we continue to meet the criteria of our previously assigned rating.
Claims-paying ratings are used by agents, brokers and customers as an important means of assessing the financial strength and quality of insurers. If our financial position deteriorates or the rating agencies significantly change the rating criteria that are used to determine ratings, we may not maintain our favorable financial strength ratings from the rating agencies.
Claims-paying ratings are used by agents, brokers and customers as an important means of assessing the financial strength and quality of insurers. If our financial position deteriorates or AM Best significantly changes the rating criteria used to determine the rating, we may not maintain our favorable financial strength rating from this rating agency.
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.
There is no guarantee 24 Table of Contents 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.
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.
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.
While these ratings may be of greater interest to investors than our claims paying ratings, these are not ratings of our equity securities nor a recommendation to buy, hold or sell our equity securities.
While this rating may be of greater interest to investors than our claims paying rating, this is not a rating of our equity securities nor a recommendation to buy, hold or sell our equity securities.
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.
A rating 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 Fitch, S&P and Moody's ratings for the purpose of issuing registered public debt but no longer require or receive public ratings from these rating agencies.
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.
The value of financial instruments in our portfolio 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.
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.
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.
Conversely, the values of fixed-rate investment securities generally fluctuate inversely with changes in interest rates. Recently, the significant rise in interest rates have reduced the market value of our existing fixed maturity portfolio, thereby impacting our financial position and book value per share.
Conversely, the values of fixed-rate investment securities generally fluctuate inversely with changes in interest rates. Since 2022, the significant rise in interest rates has reduced the market value of our existing fixed maturity portfolio impacting our book value per share.
We utilize cash flow hedge instruments to mitigate this risk, however our hedge instruments could be ineffective. We utilize derivative instruments as part of our risk management strategy to reduce the market risk related to fluctuations in future interest rates associated with a portion of our variable-rate debt.
We utilize derivative instruments as part of our risk management strategy to reduce the market risk related to fluctuations in future interest rates associated with a portion of our variable-rate debt.
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.
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.
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.
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. 20 Table of Contents The process of estimating loss reserves is complex and highly judgmental.
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.
If our operating 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 May 2022, California's Governor signed an amendment to MICRA which substantially changed many aspects of MICRA, including, but not limited to, an increase in the cap on non-economic damages and an increase in caps on attorney's fees.
In 1975, California enacted MICRA which, among other things, established a $250,000 cap on non-economic damages in medical cases. In May 2022, California's Governor signed an amendment to MICRA which substantially changed many aspects of MICRA, including, but not limited to, an increase in the cap on non-economic damages and an increase in caps on attorney's fees.
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.
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.
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.
We face competition from other insurance companies for their services and allegiance. 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 open underwriting years in certain Lloyd's Syndicates we are subject to certain risks which could affect us.
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.
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.
Competition in the property and casualty insurance business is based on many factors, including premiums charged and other terms and conditions of coverage, services provided, financial ratings assigned by independent rating agencies, claims services, reputation, geographic scope, local presence, agent and client relationships, financial strength and the experience of the insurance company in the line of insurance to be written.
Also, there are many opportunities for self-insurance and for participation in an alternative risk transfer mechanism, such as a captive insurer or a risk retention group. 19 Table of Contents Competition in the property and casualty insurance business is based on many factors, including premiums charged and other terms and conditions of coverage, services provided, financial ratings assigned by independent rating agencies, claims services, reputation, geographic scope, local presence, agent and client relationships, financial strength and the experience of the insurance company in the line of insurance to be written.
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.
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 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.
In addition to the evaluation of our claims-paying ability, AM Best evaluates and rates our ability to service current and potential debt. This debt rating reflects the agency’s independent evaluation of our ability to meet our obligation to holders of our debt, if any.
In addition, rules and regulations have recently been introduced, or are being considered, in the areas of information security and Environmental, Social, and Governance ("ESG"), which may also affect our business. Also, certain states sponsor insurance entities which affect the amount and type of liability coverages purchased in the sponsoring state.
In addition, rules and regulations have recently been introduced in the area of information security, which may also affect our business (see further discussion that follows in Item 1C "Cybersecurity"). Also, certain states sponsor insurance entities which affect the amount and type of liability coverages purchased in the sponsoring state.
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.
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.
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.
Our disaster preparedness relies on team members working 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.
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.
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.
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.
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.
Our business could be adversely affected by the loss or consolidation of independent agents, agencies, brokers or brokerage firms. We heavily depend on the services of independent agents and brokers in the marketing of our insurance products. We face competition from other insurance companies for their services and allegiance.
See previous discussion under the heading "Rating Agency" for additional information on our debt rating. 22 Table of Contents Our business could be adversely affected by the loss or consolidation of independent agents, agencies, brokers or brokerage firms. We heavily depend on the services of independent agents and brokers in the marketing of our insurance products.
Further, a significant jury award or series of awards against one or more of our insureds could require us to pay large sums of money in excess of our reserved amounts.
Our loss reserves also may be affected by court decisions that expand liability of our policies after they have been issued. Further, a significant jury award or series of awards against one or more of our insureds could require us to pay large sums of money in excess of our reserved amounts.
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.
Prior to the 2024 and 2022 underwriting years, we participated in the results of Syndicate 1729 and Syndicate 6131, respectively. Lloyd's of London generally operates on a three year accounting system for final distribution of results generated by each underwriting year; however certain underwriting years can remain open after the three year period.
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. 33 Table of Contents
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. If any of these events were to occur, it could have a material, adverse effect on our business and reputation.
Regulatory and Compliance Changes due to financial reform legislation could have a material effect on our operations. The U.S. federal government generally has not directly regulated the insurance industry except for certain areas of the market, such as insurance for flood, nuclear and terrorism risks.
The U.S. federal government generally has not directly regulated the insurance industry except for certain areas of the market, such as insurance for flood, nuclear and terrorism risks. However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry.
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.
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.
Due to uncertainties inherent in the jury system, any case that is litigated to a jury verdict has the potential to incur a loss that has a material adverse effect on our results of operations.
Due to uncertainties inherent in the jury system, in the unlikely event that we incur a jury verdict in excess of our reinsurance agreements and other protections we have in place, for which we are required to pay, we may incur a loss that could have a material adverse effect on our results of operations.
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.
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." 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.
As we have both the intent and ability to hold the vast majority of these investments until maturity, we consider this negative impact to be temporary. Our investments are subject to credit, prepayment and other risks.
While the Federal Reserve recently reduced interest rates in the second half of 2024 and more interest rate cuts are expected in 2025, interest rates remain elevated as compared to current book yields. 23 Table of Contents As we have both the intent and ability to hold the vast majority of these investments until maturity, we consider this negative impact to be temporary.
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.
As of December 31, 2024 we had a net deferred tax asset of approximately $163.9 million and a net federal income tax payable of approximately $1.0 million, which included a nominal liability for unrecognized current tax benefits. 25 Table of Contents Regulatory and Compliance Changes due to financial reform legislation could have a material effect on our operations.
However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry. The Dodd-Frank Act was enacted in July 2010 and established additional regulatory oversight of financial institutions (see previous discussion under the heading "Insurance Regulatory Matters").
The Dodd-Frank Act was enacted in July 2010 and established additional regulatory oversight of financial institutions (see previous discussion under the heading "Insurance Regulatory Matters"). 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.
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.
Our disaster preparedness encompasses our Business Continuity Plan, Disaster Recovery Plan, Operations Plan and Pandemic Response Plan. 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.
In November 2023, we refinanced our expiring $250 million Senior Notes with a $125 million draw on our amended Revolving Credit Agreement as well as funded the $125 million Term Loan with an interest rate of 5.3% and 5.5%, respectively. See Note 10 of the Notes to Consolidated Financial Statements for additional information.
Our outstanding debt at December 31, 2024 includes a Revolving Credit Agreement, Term Loan and Contribution Certificates. See Note 10 of the Notes to Consolidated Financial Statements for additional information.
As these trends continue most physicians no longer practice medicine as owners of an independent practice. Also, there are many opportunities for self-insurance and for participation in an alternative risk transfer mechanism, such as a captive insurer or a risk retention group.
As these trends continue most physicians no longer practice medicine as owners of an independent practice.
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.
We evaluate our reserves each period and increase or decrease reserves as necessary based on our estimate of future claims payments. 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.
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The effect of COVID-19 on recent historical trends regarding timing and severity of claims may also impact certain of these factors and our ultimate estimation of losses; however, the extent to which COVID-19 impacts these factors is highly uncertain and cannot be predicted.
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Our largest liability is our reserve for losses and loss adjustment expenses.
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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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company also evaluates the integrity and security of the technology infrastructure of certain third parties that access, process or store data that the Company considers to be sensitive, significant, or legally protected. ProAssurance reviews and assesses its third-party providers' cybersecurity controls, as appropriate, and makes changes to the Company's business processes to manage these risks.
Biggest changeThe Company's guidelines explain how to protect the Company from risks that can arise if legally protected, proprietary or confidential information is shared with these tools. The Company also evaluates the integrity and security of the technology infrastructure of certain third parties that access, process or store data that the Company considers to be sensitive, significant or legally protected.
To date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the Company. Please refer to Item 1A, Risk Factors under the heading "Technology, Data Security and Privacy" for additional information on our cybersecurity threats. 34 Table of Contents
To date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the Company. Please refer to Item 1A, Risk Factors under the heading "Technology, Data Security and Privacy" for additional information on our cybersecurity threats. 31 Table of Contents
This process includes assessing, identifying and managing material risks related to cybersecurity. ProAssurance's Information Systems Security department, with assistance from third-party security vendors, regularly monitors the Company's systems for indicators of attack or compromise to mitigate the risk of cyberattacks.
This process includes assessing, identifying and managing material risks related to cybersecurity. ProAssurance's Information Systems Security department, with assistance from third-party security vendors, continually monitors the Company's systems for indicators of attack or compromise to mitigate the risk of cyberattacks.
Upon determination that the Company has experienced a material cybersecurity incident, the Company will disclose the incident within four business days as required by regulation. Our Board is also notified of any material cybersecurity incidents immediately upon determination of materiality.
Upon determination that the Company has experienced a material cybersecurity incident, the Company will disclose the incident within four business days as required by regulation. Our Board will also be notified of any material cybersecurity incidents immediately upon determination of materiality.
The Company continually enhances its cyber and information security in order to identify and neutralize emerging threats and improve its ability to prevent, detect and respond to attempts to gain unauthorized access to the Company's data and systems.
The Company regularly enhances its cyber and information security in order to identify and neutralize emerging threats and improve its ability to prevent, detect and respond to attempts to gain unauthorized access to the Company's data and systems.
This training informs all team members of the processes and procedures to follow in the case they encounter a possible cybersecurity threat. This training is reinforced through periodic simulated phishing tests.
This training informs all team members of the processes and procedures to follow in the case they encounter a possible cybersecurity threat. This training is reinforced through periodic simulated phishing tests. Further, all team members are required to read and acknowledge the Company's guidelines for the use of publicly available generative artificial intelligence tools.
Our Vice President of Information Security oversees ProAssurance's information security and data privacy programs and is responsible for establishing and implementing our security strategy alongside our General Counsel, to whom the Vice President of Information Security reports directly. Our Vice President of Information Security has been with ProAssurance since 1998 and has over 25 years of IT and cybersecurity experience.
Our Vice President of Information Security regularly attends and presents to our Audit Committee on material cybersecurity risks and mitigating procedures. Our Vice President of Information Security oversees ProAssurance's information security and data privacy programs and is responsible for establishing and implementing our security strategy alongside our General Counsel, to whom the Vice President of Information Security reports directly.
The Company has a formal process in place for identifying, handling and disclosing of material cybersecurity incidents. The Company's Security Oversight Committee ("SOC") includes our Chief Financial Officer, General Counsel, Vice President of Information Security, and representatives from our Internal Audit, Legal, Compliance and Information Systems departments.
The Company's Security Oversight Committee includes our Chief Financial Officer, General Counsel, Vice President of Information Security and representatives from our Internal Audit, Legal, Compliance and Information Systems departments. The purpose of the SOC is to develop and review the Information Security policies, standards and guidelines for the Company that manage Cyber Risk.
Governance While our Board is responsible for ensuring that our entire ERM process is in place and functioning, our Audit Committee has the primary oversight responsibility for risks relating to cybersecurity. Our Vice President of Information Security regularly attends and presents to our Audit Committee on material cybersecurity risks and mitigating procedures.
ProAssurance reviews and assesses its third-party providers' cybersecurity controls, as appropriate, and makes changes to the Company's business processes to manage these risks. Governance While our Board is responsible for ensuring that our entire ERM process is in place and functioning, our Audit Committee has the primary oversight responsibility for risks relating to cybersecurity.
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The purpose of the SOC is to develop and review the Information Security policies, standards and guidelines for the Company that manage Cyber Risk.
Added
Our Vice President of Information Security has been with ProAssurance since 1998 and has over 26 years of IT and cybersecurity experience. The Company has a formal process in place for identifying, handling and disclosing of material cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. We own three office properties, all of which are unencumbered: Square Footage of Properties Property Location Occupied by ProAssurance Leased or Available for Lease Total Birmingham, AL* 120,000 45,000 165,000 Franklin, TN 25,000 78,000 103,000 Okemos, MI 53,000 — 53,000 * Corporate Headquarters
Biggest changeWe own three office properties, all of which are unencumbered: Square Footage of Properties Property Location Occupied by ProAssurance Leased or Available for Lease Total Birmingham, AL (1) 120,000 45,000 165,000 Franklin, TN (2) 25,000 78,000 103,000 Okemos, MI 53,000 — 53,000 (1) Corporate Headquarters (2) In January 2025, ProAssurance accepted an offer for the sale of the Franklin, TN property to a third-party for approximately $19.5 million.
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The sale is expected to close during March 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRand previously served as Chief Operating Officer, Chief Financial Officer, Executive Vice President and Senior Vice President since joining ProAssurance in 2004. Mr. Rand also has previously served as President of our Medmarc subsidiary from 2016 to 2018. Prior to joining ProAssurance, Mr. Rand was Chief Accounting Officer and Head of Corporate Finance for PartnerRe Ltd.
Biggest changeRand also has previously served as President of our Medmarc subsidiary from 2016 to 2018. Prior to joining ProAssurance, Mr. Rand was Chief Accounting Officer and Head of Corporate Finance for PartnerRe Ltd. Prior to that time, Mr. Rand served as the Chief Financial Officer of Atlantic American Corporation. (Age 58) Noreen L. Dishart Ms.
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.
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 60) Kevin M. Shook Mr.
(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.
(Age 55) 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.
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.
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 21 years. Mr. Shook has over 31 years of insurance industry experience, including 10 years with PricewaterhouseCoopers where he primarily served companies within the insurance industry.
While the outcome of all legal actions is not presently determinable, management and its legal counsel are of the opinion that these actions will not have a material adverse effect on our financial position or results of operations.
While the outcome of all legal actions is not presently determinable, management and its legal counsel are of the opinion that these actions will not have a material adverse effect on our financial position or results of operations. See Note 8 of the Notes to Consolidated Financial Statements included herein.
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.
Both our Code of Ethics and Conduct and our Share Ownership Guidelines are available on the Corporate Information section of our website. Printed copies of these documents may be obtained from our Investor Relations department by email at InvestorRelations@ProAssurance.com, by mail at P.O. Box 590009, Birmingham, Alabama 35259-0009, or by telephone at (205) 776-3028 or (800) 282-6242. ITEM 4.
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.
Lisenby is a member of the Alabama State Bar and the United States Supreme Court Bar and is a Chartered Property Casualty Underwriter. (Age 56) 32 Table of Contents Karen M. Murphy Ms. Murphy was appointed President of Life Sciences and to the Executive Leadership team in 2023. Ms.
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.
Francis Mr. Francis was appointed President of Medical Professional Liability and to the Executive Leadership Team in 2023. Mr. Francis began his career in medical 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.
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.
Prior to rejoining ProAssurance, Mr. Francis was Chief Operating Officer of The Doctor’s Company. (Age 62) Dana S. 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.
Dishart 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.
Dishart 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 39 years of experience in Human Resources including positions with Johnson & Johnson/Merck. (Age 61) Robert D.
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.
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. Following is a brief description of each executive officer of ProAssurance, including their principal occupation, and relevant background with ProAssurance and former employers.
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 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. Prior to joining ProAssurance, Mr. Lisenby practiced law privately in Birmingham, Alabama. Mr.
Following is a brief description of each executive officer of ProAssurance, including their principal occupation, and relevant background with ProAssurance and former employers. Edward L. Rand, Jr. Mr. Rand was appointed as our Chief Executive Officer in 2019 and has served as President since 2018. Mr.
Edward L. Rand, Jr. Mr. Rand was appointed as our Chief Executive Officer in 2019 and has served as President since 2018. Mr. Rand previously served as Chief Operating Officer, Chief Financial Officer, Executive Vice President and Senior Vice President since joining ProAssurance in 2004. Mr.
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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.
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Prior to that time, Ms. Hendricks served PICA as Vice President of Finance and Corporate Controller. Prior to joining PICA in 2001, Ms. Hendricks held various finance and data analysis positions with American General Life & Accident Insurance Company. (Age 57) Jeffrey P. Lisenby Mr.
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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.
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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 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
Biggest changeItem 4. Mine Safety Disclosures 33 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 89 Item 8. Financial Statements and Supplementary Data 91

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, 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.
Biggest changeOther outstanding share units have no exercise price. 33 Table of Contents Issuer 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, 2024 — N/A — $55,902 November 1 - November 30, 2024 — N/A — $55,902 December 1 - December 31, 2024 — 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 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.
ProAssurance’s common stock currently trades on the NYSE under the symbol “PRA.” For information regarding dividends paid to shareholders in 2023 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, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information regarding ProAssurance’s equity compensation plans as of December 31, 2024.
This is ProAssurance's only plan for the repurchase of common shares, and the plan has no expiration date. 37 Table of Contents
This is ProAssurance's only plan for the repurchase of common shares, and the plan has no expiration date.
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.
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 1,577,413 $— * 1,668,466 Equity compensation plans not approved by security holders — — — * No outstanding options as of December 31, 2024.
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 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. At February 20, 2025, ProAssurance Corporation had 3,767 stockholders of record and 51,156,821 shares of common stock outstanding.
Removed
Other outstanding share units have no exercise price.

Item 7. Management's Discussion & Analysis

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

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Biggest changeHowever, the nature of the risks insured and volatility of the loss experience in this line of business has produced more variable loss development, as presented in the following table: ($ in thousands) 2023 2022 2021 Accident Years Estimated Ultimate Losses, Net of Reinsurance, December 31, 2023 Reserve Development (favorable) unfavorable % of Known Claims Closed Reserve Development (favorable) unfavorable % of Known Claims Closed Reserve Development (favorable) unfavorable % of Known Claims Closed 2023 $ 18,864 N/A 28.0 % N/A N/A N/A N/A 2022 $ 16,235 $ (1,448) 59.6 % N/A 16.8 % N/A N/A 2021 $ 12,498 $ (1,647) 73.0 % $ (2,759) 53.3 % N/A 32.0 % 2020 $ 11,126 $ (1,442) 80.1 % $ (1,921) 70.6 % $ (248) 59.2 % 2019 $ 13,481 $ 1,235 61.3 % $ (1,337) 55.3 % $ 722 47.5 % 2018 $ 9,053 $ 499 89.5 % $ (252) 86.4 % $ (3,091) 85.1 % 2017 $ 6,911 $ (1,056) 99.0 % $ 1,950 97.1 % $ (2,192) 94.1 % 2016 $ 8,629 $ (517) 99.5 % $ 535 98.4 % $ (2,126) 97.3 % 2015 $ 7,919 $ 703 99.4 % $ (767) 97.6 % $ (638) 97.0 % 2014 $ 7,828 $ (1,302) 100.0 % $ (244) 99.6 % $ (317) 99.6 % Prior to 2014 $ 598,875 $ 976 $ (205) $ (234) • Approximately $4.5 million of the $4.0 million total net favorable development recognized in 2023 related to the 2020 through 2022 accident years.
Biggest changeIn addition, we recognized favorable prior year reserve development of $9.0 million in 2022 related to the 2020 accident year associated with the remaining reduction to our previous COVID-19 IBNR reserve due to the fact that early first notices of potential claims did not turn into claims. • Not included in the table above, is $5.3 million, $8.3 million and $10.8 million of amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve which is recorded as a reduction to prior accident year net losses and loss adjustment expenses in 2024, 2023 and 2022, respectively. • Not included in the above table is $0.3 million, $1.3 million and $0.7 million of unfavorable development recognized in 2024, 2023 and 2022, respectively, in our Segregated Portfolio Cell Reinsurance segment related to the medical professional liability coverages assumed by the SPCs at Inova Re and Eastern Re, as previously discussed. 41 Table of Contents Medical Technology Liability The nature of the risks insured and volatility of the loss experience in the Medical Technology Liability line of business has produced more variable loss development, as presented in the following table: ($ in thousands) 2024 2023 2022 Accident Years Estimated Ultimate Losses, Net of Reinsurance, December 31, 2024 Reserve Development (favorable) unfavorable % of Known Claims Closed Reserve Development (favorable) unfavorable % of Known Claims Closed Reserve Development (favorable) unfavorable % of Known Claims Closed 2024 $ 18,587 N/A 49.8 % N/A N/A N/A N/A 2023 $ 17,255 $ (1,609) 55.3 % N/A 28.0 % N/A N/A 2022 $ 14,093 $ (2,141) 80.2 % $ (1,448) 59.6 % N/A 16.8 % 2021 $ 13,334 $ 836 77.2 % $ (1,647) 73.0 % $ (2,759) 53.3 % 2020 $ 10,028 $ (1,098) 84.0 % $ (1,442) 80.1 % $ (1,921) 70.6 % 2019 $ 12,528 $ (953) 62.2 % $ 1,235 61.3 % $ (1,337) 55.3 % 2018 $ 9,239 $ 186 89.5 % $ 499 89.5 % $ (252) 86.4 % 2017 $ 6,846 $ (65) 99.0 % $ (1,056) 99.0 % $ 1,950 97.1 % 2016 $ 8,802 $ 173 99.5 % $ (517) 99.5 % $ 535 98.4 % 2015 $ 8,278 $ 359 99.4 % $ 703 99.4 % $ (767) 97.6 % Prior to 2015 $ 606,516 $ (188) $ (326) $ (449) • Approximately $3.8 million of the $4.5 million total net favorable development recognized in 2024 related to the 2022 and 2023 accident years.
Excess of Loss Reinsurance Agreements We generally reinsure risks under treaties (our excess of loss reinsurance agreements) pursuant to which the reinsurers agree to assume all or a portion of all risks that we insure above our individual risk retention levels, up to the maximum individual limits offered. Generally, these agreements are negotiated and renewed annually.
Excess of Loss Reinsurance Agreements We generally reinsure risks under treaties (our excess of loss reinsurance agreements) pursuant to which the reinsurers agree to assume all or a portion of all risks that we insure above our individual risk retention levels, up to the maximum individual limits offered. These agreements are negotiated and renewed annually.
This ratio measures the net worth of the Company to shareholders on a per share basis. 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.
This ratio measures the net worth of the Company to shareholders on a per share basis. Non-GAAP adjusted book value per share is a Non-GAAP measure widely used within the insurance sector and is calculated as total shareholders’ equity, excluding AOCI, 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 recognized $5.1 million of net investment gains for the year ended December 31, 2023 driven by unrealized holding gains resulting from changes in the fair value of our convertible securities, death benefit proceeds from BOLI contracts and, to a lesser extent, unrealized holding gains resulting from changes in the fair value of our equity investments.
We recognized $5.1 million of net investment gains for the year ended December 31, 2023 driven by unrealized holding gains resulting from changes in the fair value of our convertible securities and equity investments and, to a lesser extent, death benefit proceeds from BOLI contracts.
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.
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; • 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 are committed to a rate structure that will allow us to fulfill our obligations to our insureds while generating competitive long-term returns for our shareholders. Our pricing continues to be based on expected losses as indicated by our historical loss data and available industry loss data.
(2) We are committed to a rate structure that will allow us to fulfill our obligations to our insureds while generating competitive long-term returns for our shareholders. Our pricing continues to be based on expected losses as indicated by our historical loss data and available industry loss data.
In calculating Non-GAAP operating income (loss), we exclude the effects of items that do not reflect normal operating results. We believe Non-GAAP operating income (loss) presents a useful view of the performance of our insurance operations; however, it should be considered in conjunction with net income (loss) computed in accordance with GAAP.
In calculating Non-GAAP operating income (loss), we exclude the effects of items that do not reflect normal operating results. We believe Non-GAAP operating income (loss) presents a useful view of the performance of our core insurance operations; however, it should be considered in conjunction with net income (loss) computed in accordance with GAAP.
Non-GAAP operating ROE measures the overall after-tax profitability of our insurance operations and shows how efficiently capital is being used; however, it should be considered in conjunction with ROE computed in accordance with GAAP.
Non-GAAP operating ROE measures the overall after-tax profitability of our core insurance operations and shows how efficiently capital is being used; however, it should be considered in conjunction with ROE computed in accordance with GAAP.
Non-GAAP operating ROE measures the overall after-tax profitability of our insurance operations and shows how efficiently capital is being used; however, it should be considered in conjunction with ROE computed in accordance with GAAP.
Non-GAAP operating ROE measures the overall after-tax profitability of our core insurance operations and shows how efficiently capital is being used; however, it should be considered in conjunction with ROE computed in accordance with GAAP.
Loss costs within this segment are impacted by many factors including but not limited to the nature of the claim, including whether or not the claim is an individual or a mass tort claim, the personal situation of the claimant or the claimant's family, the outcome of jury trials, the legislative and judicial climate where any potential litigation may occur, general economic and social trends and the trend of healthcare costs.
Loss costs within this segment are impacted by many factors including but not limited to the nature of the claim, including whether or not the claim is an individual or a mass tort claim, the personal situation of the claimant or the claimant's family, the outcome of jury trials including the impacts of social inflation, the legislative and judicial climate where any potential litigation may occur, general economic and social trends and the trend of healthcare costs.
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.
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, 2024) 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 (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.
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, 2024) 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.
See further discussion regarding our estimates of ultimate net losses in this section under the heading "Reserve for Losses and Loss Adjustment Expenses" in the Critical Accounting Estimates section.
See further discussion regarding our estimates of ultimate net losses under the heading "Reserve for Losses and Loss Adjustment Expenses" in the Critical Accounting Estimates section.
The ceded premiums ratio was as follows: Year Ended December 31 2023 2022 Change Ceded premiums ratio 8.7 % 8.5 % 0.2 pts Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed) (0.3 %) (0.3 %) — pts Ratio, current accident year 9.0 % 8.8 % 0.2 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 2024 2023 Change Ceded premiums ratio 8.7 % 8.7 % — pts Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed) 0.2 % (0.3 %) 0.5 pts Ratio, current accident year 8.5 % 9.0 % (0.5 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 portion of the risk that is not ceded to an SPC is retained in our Specialty P&C segment and may also be reinsured under our standard healthcare professional liability reinsurance program, depending on the policy limits provided. The remaining premium written in our alternative market business is 100% ceded to unaffiliated captive insurers.
The portion of the risk that is not ceded to an SPC is retained in our Specialty P&C segment and may also be reinsured under our standard medical professional liability reinsurance program, depending on the policy limits provided. The remaining premium written in our alternative market business is 100% ceded to unaffiliated captive insurers.
Factors that have contributed to the variation in loss development are primarily related to the extended period of time required to resolve professional liability claims and include the following: • The HCPL legal environment deteriorated in the late 1990’s and severity began to increase at a greater pace than anticipated in our rates and reserve estimates.
Factors that have contributed to the variation in loss development are primarily related to the extended period of time required to resolve professional liability claims and include the following: • The MPL legal environment deteriorated in the late 1990’s and severity began to increase at a greater pace than anticipated in our rates and reserve estimates.
Over the past several years the most influential factor affecting the analysis of our HCPL reserves and the related development recognized has been an observed increase in claim severity for the broader medical professional liability industry as well as higher initial loss expectations on incurred claims.
Over the past several years the most influential factor affecting the analysis of our MPL reserves and the related development recognized has been an observed increase in claim severity for the broader medical professional liability industry as well as higher initial loss expectations on incurred claims.
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.
In addition to the interest and dividends we will receive from our investments, we anticipate that between $100 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.
Non-GAAP Operating ROE Non-GAAP operating ROE is a financial measure that is calculated as Non-GAAP operating income (loss) for the period divided by the average of beginning and ending total GAAP shareholders’ equity. As previously discussed, in calculating Non-GAAP operating income (loss), we have excluded the effects of certain items that do not reflect normal results.
Non-GAAP Operating ROE Non-GAAP operating ROE is a financial measure that is calculated as Non-GAAP operating income (loss) divided by the average of beginning and ending total shareholders’ equity. As previously discussed, in calculating Non-GAAP operating income (loss), we have excluded the effects of certain items that do not reflect normal results.
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.
The following discussion generally focuses on the change in financial condition, results of operations and cash flows for the year ended December 31, 2024 as compared to the year ended December 31, 2023 and should be read in conjunction with the Consolidated Financial Statements and Notes to those statements which accompany this report.
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.
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. Investment Valuations We record the majority of our investments at fair value as shown in the table below.
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, 2023 as compared to the year ended December 31, 2022, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2023 report on Form 10-K.
Management’s assessment of the need for these valuation allowances at December 31, 2023 included an analysis of the available sources of income. See further discussion on ProAssurance’s deferred tax assets in Note 5 of the Notes to Consolidated Financial Statements. U.S.
Management’s assessment of the need for these valuation allowances at December 31, 2024 included an analysis of the available sources of income. See further discussion on ProAssurance’s deferred tax assets in Note 5 of the Notes to Consolidated Financial Statements. U.S.
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, 2023 as compared to the year ended December 31, 2022, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2023 report on Form 10-K.
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.
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) divided by the average of beginning and ending total shareholders’ equity.
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.
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, 2024, our reserve is comprised almost entirely of long-tail exposures.
Net favorable prior accident year reserve development recognized in 2022 was partially offset by unfavorable development recognized in our HCPL line of business, excluding NORCAL, driven by higher than anticipated loss severity trends, which emerged primarily in the fourth quarter of 2022.
Net favorable prior accident year reserve development recognized in 2022 was partially offset by unfavorable development recognized in our MPL line of business, excluding NORCAL, driven by higher than anticipated loss severity trends, which emerged primarily in the fourth quarter of 2022.
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 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, 2024 and 2023.
However, because severity is an explicit component of our HCPL pricing process we can better isolate the impact that changing severity can have on our loss costs and loss ratios in regards to our pricing models for this business component.
However, because severity is an explicit component of our MPL pricing process we can better isolate the impact that changing severity can have on our loss costs and loss ratios in regards to our pricing models for this business component.
Our loss reserves may be impacted by social inflation, which is generally described as the rising costs of insurance claims resulting from factors including, but not limited to, increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, jury behavior, and larger compensatory jury awards and non-economic damages.
Our loss reserves may be impacted by social inflation, which is generally described as the rising costs of insurance claims resulting from factors including, but not limited to, increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, jury behavior, third-party litigation financing, and larger compensatory jury awards and non-economic damages.
While the terms of the management agreement were generally consistent between 2023 and 2022, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.
While the terms of the management agreement were generally consistent between 2024 and 2023, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.
While the terms of the arrangement were generally consistent between 2023 and 2022, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.
While the terms of the arrangement were generally consistent between 2024 and 2023, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.
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.
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. 35 Table of Contents • 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.
Internal Revenue Code and are subject to U.S. federal income tax; therefore, tax expense allocated to our Corporate segment also includes tax expense incurred from any SPC at Inova Re in which we have a participation interest of 80% or greater as those SPCs are required to be included in our consolidated tax return.
Internal Revenue Code and are subject to U.S. federal income tax; therefore, tax expense allocated to our Corporate segment also includes tax expense incurred from any SPC at Inova Re in which we have a participation interest of 80% or greater as those SPCs are required to be included in our consolidated tax 87 Table of Contents return.
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.
See previous discussions in this section under the heading "Executive Summary of Operations" and further discussion in our Segment 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.
At December 31, 2023, these investments represented approximately 3% of total investments, and are detailed in the following table. Additional information about these investments is provided in Note 2 and Note 3 of the Notes to Consolidated Financial Statements.
At December 31, 2024, these investments represented approximately 3% of total investments and are detailed in the following table. Additional information about these investments is provided in Note 2 and Note 3 of the Notes to Consolidated Financial Statements.
Large HCPL risks that are above the limits of our basic reinsurance treaties may be reinsured on a facultative basis, whereby the reinsurer agrees to insure a particular risk up to a designated limit.
Large MPL risks that are above the limits of our basic reinsurance treaties may be reinsured on a facultative basis, whereby the reinsurer agrees to insure a particular risk up to a designated limit.
Financing Activities and Related Cash Flows Treasury Shares Treasury share activity for 2023, 2022 and 2021 was as follows: (Share amounts in thousands) 2023 2022 2021 Treasury shares at the beginning of the period 9,464 9,325 9,325 Shares reacquired, at cost of $50.5 million and $3.3 million for 2023 and 2022, respectively 3,143 139 — Treasury shares at the end of the period 12,607 9,464 9,325 We did not repurchase any common shares subsequent to December 31, 2023, and as of February 22, 2024, our remaining Board authorization was approximately $55.9 million.
Financing Activities and Related Cash Flows Treasury Shares Treasury share activity for 2024, 2023 and 2022 was as follows: (Share amounts in thousands) 2024 2023 2022 Treasury shares at the beginning of the period 12,607 9,464 9,325 Shares reacquired, at cost of $50.5 million and $3.3 million for 2023 and 2022, respectively — 3,143 139 Treasury shares at the end of the period 12,607 12,607 9,464 We did not repurchase any common shares subsequent to December 31, 2024, and as of February 20, 2025, our remaining Board authorization was approximately $55.9 million.
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.
Growth in book value per share 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 total shareholders’ equity, excluding AOCI, divided by the total number of common shares outstanding at the balance sheet date.
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.
See further discussion in Note 5 of the Notes to Consolidated Financial Statements. 47 Table of Contents 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 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.
See further discussion of share repurchases and debt 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.
As claims frequency declined, the number of reported claims related to these coverages was less than originally expected. • Beginning in 2017, we identified potential higher severity trends in the broader HCPL industry.
As claims frequency declined, the number of reported claims related to these coverages was less than originally expected. • Beginning in 2017, we identified potential higher severity trends in the broader MPL industry.
Foreign currency exchange rate changes are primarily related to foreign currency denominated loss reserves associated with premium assumed from an international medical professional liability insured in our Specialty P&C segment.
Foreign currency exchange rate movements are primarily related to foreign currency denominated loss reserves associated with premium assumed from an international medical professional liability insured in our Specialty P&C segment.
As a result, we strengthened our Specialty reserves through the recognition of net unfavorable development on prior accident years and a higher current accident year net loss ratio in our Specialty P&C segment in 2019. • The loss environment in our HCPL line of business in our Specialty P&C segment continues to be challenging in some jurisdictions, as claim costs are pressured by social inflation and higher than anticipated loss severity trends which started to emerge in the fourth quarter of 2022.
As a result, we strengthened our Specialty reserves through the recognition of net unfavorable development on prior accident years and a higher current accident year net loss ratio in our Specialty P&C segment in 2019. • The loss environment in our MPL line of business in our Specialty P&C segment continues to be challenging in many jurisdictions, as claim costs are pressured by social inflation and higher than anticipated loss severity trends which started to emerge in the fourth quarter of 2022.
The following table presents additional information about the loss development for our professional liability line of business, excluding loss development for HCPL coverages assumed by the SPCs at Inova Re and Eastern Re.
The following table presents additional information about the loss development for our professional liability line of business, excluding loss development for MPL coverages assumed by the SPCs at Inova Re and Eastern Re.
These trends were also reflected in increases in estimates of ultimate losses for open HCPL claims for earlier accident years, which resulted in a lower amount of favorable development recognized in 2018 and 2017 as compared to prior years. • During 2019 the loss experience in our Specialty line of business in our Specialty P&C segment deteriorated further, particularly in regard to the reserves we established for a large national healthcare account that experienced losses far exceeding the assumptions we made when underwriting the account, beginning in 2016.
These trends were also reflected in increases in estimates of ultimate losses for open MPL claims for earlier accident years, which resulted in a lower amount of favorable development recognized in 2018 and 2017 as compared to prior years. • During 2019 the loss experience in our Specialty book in our Specialty P&C segment deteriorated further, particularly in regard to the reserves we established for a large national healthcare account that experienced losses far exceeding the assumptions we made when underwriting the account, beginning in 2016.
The contingent consideration associated with the NORCAL acquisition is dependent upon the after-tax development of NORCAL’s 2020 and prior accident year reserves from December 31, 2020 to December 31, 2023.
The contingent consideration associated with the NORCAL acquisition was dependent upon the after-tax development of NORCAL’s 2020 and prior accident year reserves from December 31, 2020 to December 31, 2023.
(8) Our Medical Technology Liability business is marketed throughout the U.S.; coverage is offered on a primary and excess basis, within specified limits, to manufacturers and distributors of medical technology and life sciences products including entities conducting human clinical trials.
(3) Our Medical Technology Liability business is marketed throughout the U.S.; coverage is offered on a primary or excess basis, within specified limits, to manufacturers and distributors of medical technology and life sciences products including entities conducting human clinical trials.
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.
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. 42 Table of Contents Workers' Compensation Claims in our workers’ compensation line of business have historically closed at a faster rate than in our MPL or Medical Technology Liability lines of business.
Long-tailed insurance is characterized by the extended period of time typically required both to assess the viability of a claim and potential damages, if any, and to reach a resolution of the claim. The claims resolution process may extend to more than five years.
Long-tailed insurance is characterized by the extended period of time typically required both to assess the viability of a claim and potential 36 Table of Contents damages, if any, and to reach a resolution of the claim. The claims resolution process may extend to more than five years.
Over time, an SPC's retained profits are considered in the determination of the collateral amount required to be provided by the cell's external participants. 63 Table of Contents Taxes We are subject to the tax laws and regulations of the U.S., Cayman Islands and U.K.
Over time, an SPC's retained profits are considered in the determination of the collateral amount required to be provided by the cell's external participants. Taxes We are subject to the tax laws and regulations of the U.S., Cayman Islands and U.K.
Our insurance subsidiaries, in the aggregate, are permitted to pay dividends of approximately $145 million over the course of 2024 without prior approval of state insurance regulators.
Our insurance subsidiaries, in the aggregate, are permitted to pay dividends of approximately $145 million over the course of 2025 without prior approval of state insurance regulators.
As an eligible employer under the provisions of the CARES Act, NORCAL filed a claim for a payroll tax refund of approximately $3.8 million during the second quarter of 2023, based on eligible wages paid during 2020. As a result of the NORCAL acquisition, we have U.S. federal NOL carryforwards, which were approximately $32.3 million as of December 31, 2023.
As an eligible employer under the provisions of the CARES Act, NORCAL filed a claim for a payroll tax refund of approximately $3.8 million during the second quarter of 2023, based on eligible wages paid during 2020. As a result of the NORCAL acquisition, we have U.S. federal NOL carryforwards, which were approximately $18.9 million as of December 31, 2024.
As of February 22, 2024, $175 million could be made available for use through our Revolving Credit Agreement, as discussed in this section under the heading "Debt." Given the duration of our investments, we do not foresee a shortfall that would require us to meet operating cash needs through additional borrowings.
As of February 20, 2025, $175 million could be made available for use through our Revolving Credit Agreement, as discussed in this section under the heading "Debt." Given the duration of our investments, we do not foresee a shortfall that would require us to meet operating cash needs through additional borrowings.
The effect of exchange rate changes on foreign currency denominated loss reserves are reported in our Corporate segment to be consistent with the reporting of the foreign currency denominated invested assets and associated investment income. 71 Table of Contents Expenses The following table shows our consolidated and segment net loss ratios and net prior accident year reserve development.
The effect of exchange rate movements on foreign currency denominated loss reserves are reported in our Corporate segment to be consistent with the reporting of the foreign currency denominated invested assets and associated investment income. 61 Table of Contents Expenses The following table shows our consolidated and segment net loss ratios and net prior accident year reserve development.
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.
See Note 7 of the Notes to Consolidated Financial Statements for additional information. At December 31, 2024 our gross reserve for losses included case reserves of approximately $2.1 billion and IBNR reserves of approximately $1.2 billion.
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.
At December 31, 2024, 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% 83% 2% 5% 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.
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.
Source: S&P, Copyright ©2025, S&P Global Market Intelligence A detailed listing of our investment holdings as of December 31, 2024 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, https://investor.proassurance.com/corporate-profile/default.aspx.
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.
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 2024 and 2023 by revisions to our estimate of premiums owed to reinsurers related to coverages provided in prior accident years.
Ceded premiums earned during both 2023 and 2022 included prior accident year ceded premium adjustments under swing rated reinsurance agreements (see previous discussion in footnote 4 under the heading "Ceded Premiums Written").
Ceded premiums earned during 2024 and 2023 included prior accident year ceded premium adjustments under swing rated reinsurance agreements (see previous discussion in footnote 4 under the heading "Ceded Premiums Written").
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.
As of December 31, 2024, 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.
No reinsurance balances were written off for credit reasons during the years ended December 31, 2023 or 2022.
No reinsurance balances were written off for credit reasons during the years ended December 31, 2024 or 2023.
The remaining variance in operating cash flows in 2023 as compared to 2022 was composed of individually insignificant components.
The remaining variance in operating cash flows in 2024 as compared to 2023 was composed of individually insignificant components.
The pricing services scrutinize market data for consistency with other relevant market information before including the data in the pricing models. The pricing services disclose the types of pricing models used and the inputs used for each asset class.
The pricing services scrutinize market data for consistency with other relevant market information before including the data in the pricing models. The pricing services disclose the types of pricing models used and the inputs 44 Table of Contents used for each asset class.
Our current HCPL pricing models assume severity trends in the range of 2% to 6% depending on state, territory and specialty. In some portions of our HCPL business we have observed and reflected higher severity trends in our estimates of losses and loss adjustment expenses.
Our current MPL pricing models assume severity trends in the range of 3% to 6% depending on state, territory and specialty. In some portions of our MPL business, we have observed and reflected higher severity trends in our estimates of losses and loss adjustment expenses.
Within our Specialty P&C segment, for our professional liability business (87% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2023; predominately comprised of our HCPL products), we set an initial reserve using a loss ratio approach based upon our evaluation of the current loss environment including frequency, severity, monetary inflation, social inflation and legal trends.
Within our Specialty P&C segment, for our professional liability business (86% of our consolidated gross reserve for losses and loss adjustment expenses as of December 31, 2024; predominately comprised of our MPL products), we set an initial reserve using a loss ratio approach based upon our evaluation of the current loss environment including frequency, severity, monetary inflation, social inflation and legal trends.
We are excluding these costs as they do not reflect normal operating results and are unique and non-recurring in nature. (4) Foreign currency exchange rate gains (losses) relate to the impact of foreign exchange rate movements on foreign currency denominated loss reserves predominately associated with premium assumed from an international medical professional liability insured in our Specialty P&C segment.
We are excluding these costs as they do not reflect normal operating results and are unique and non-recurring in nature. (4) Foreign currency exchange rate movements relate to foreign currency denominated loss reserves predominately associated with premium assumed from an international medical professional liability insured in our Specialty P&C segment.
We did not have any other assets or liabilities that were measured at fair value on a nonrecurring basis at December 31, 2023 or December 31, 2022. Investments - Other Valuation Methodologies Certain of our investments, in accordance with GAAP for the type of investment, are measured using methodologies other than fair value.
We did not have any other assets or liabilities that were measured at fair value on a nonrecurring basis at December 31, 2024 or December 31, 2023. 45 Table of Contents Investments - Other Valuation Methodologies Certain of our investments, in accordance with GAAP for the type of investment, are measured using methodologies other than fair value.
Investing Activities and Related Cash Flows Our investments at December 31, 2023 and December 31, 2022 are comprised as follows: December 31, 2023 December 31, 2022 ($ in thousands) Carrying Value % of Total Investment Carrying Value % of Total Investment Fixed maturities, available for sale: U.S. Treasury obligations $ 243,525 5 % $ 221,608 5 % U.S.
Investing Activities and Related Cash Flows Our investments at December 31, 2024 and December 31, 2023 are comprised as follows: December 31, 2024 December 31, 2023 ($ in thousands) Carrying Value % of Total Investment Carrying Value % of Total Investment Fixed maturities, available-for-sale: U.S. Treasury obligations $ 243,903 5 % $ 243,525 5 % U.S.
As a result of the higher severity environment, we saw our closed-with-indemnity-payment ratio (i.e., the number of suits closed with an indemnity or loss payment as compared to the total number of closed suits) for our claims increase from 28% in 2015 to 35% in 2023.
As a result of the higher severity environment, we saw 40 Table of Contents our closed-with-indemnity-payment ratio (i.e., the number of suits closed with an indemnity or loss payment as compared to the total number of closed suits) for our claims increase from 28% in 2015 to 35% in 2024.
At December 31, 2023, we held cash and liquid investments of approximately $65 million outside our insurance subsidiaries that were available for use without regulatory approval or other restriction.
At December 31, 2024, we held cash and liquid investments of approximately $101 million outside our insurance subsidiaries that were available for use without regulatory approval or other restriction.
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.
The factors that affect the ultimate losses incurred for the workers' compensation and medical professional liability 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, 2024) are consistent with that of our Workers’ Compensation Insurance and Specialty P&C segments, respectively.
Our consolidated gross reserve for losses on a GAAP basis exceeds the combined gross reserves of our insurance subsidiaries on a statutory basis by approximately $0.2 billion, which is principally due to the portion of the GAAP reserve for losses that is reflected for statutory accounting purposes as unearned premiums.
Our consolidated gross reserve for losses on a GAAP basis exceeds the combined gross reserves of our insurance subsidiaries on a statutory basis by approximately $215 million, which is principally due to the portion of the GAAP reserve for losses that is reflected for statutory accounting purposes as unearned premiums.
(3) As previously discussed, as a part of our alternative market solutions, all or a portion of certain healthcare premium written is ceded to SPCs in our Segregated Portfolio Cell Reinsurance segment under either excess of loss or quota share reinsurance agreements, depending on the structure of the individual program.
(2) As previously discussed, as a part of our alternative market solutions, all or a portion of certain medical professional liability premium written is ceded to SPCs in our Segregated Portfolio Cell Reinsurance segment under either excess of loss or quota share reinsurance agreements, depending on the structure of the individual program.
(In millions) Carrying Value GAAP Measurement Method Other investments: Other, principally FHLB capital stock $ 3.2 Principally Cost Investment in unconsolidated subsidiaries: Investments in tax credit partnerships 0.7 Equity Equity method investments, primarily LPs/LLCs 30.6 Equity 31.3 BOLI 78.2 Cash surrender value Total investments - Other valuation methodologies $ 112.7 Impairments We evaluate our available-for-sale investment securities, which at December 31, 2023 and December 31, 2022 consisted entirely of fixed maturity securities, on at least a quarterly basis for the purpose of determining whether declines in fair value below recorded cost basis represent an impairment loss.
(In millions) Carrying Value GAAP Measurement Method Other investments: Other, principally FHLB capital stock $ 5.2 Principally Cost Investment in unconsolidated subsidiaries: Investments in tax credit partnerships 0.2 Equity Equity method investments, primarily LPs/LLCs 33.0 Equity 33.2 BOLI 80.2 Cash surrender value Total investments - Other valuation methodologies $ 118.6 Impairments We evaluate our available-for-sale investment securities, which at December 31, 2024 and December 31, 2023 consisted entirely of fixed maturity securities, on at least a quarterly basis for the purpose of determining whether declines in fair value below recorded cost basis represent an impairment loss.
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 medical 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 52 Table of Contents individual program.
As of February 22, 2024, we also have an additional $125 million in permitted borrowings available under our Revolving Credit Agreement as well as the possibility of a $50 million accordion feature, if successfully subscribed, as discussed in this section under the heading "Debt." During 2023, our operating subsidiaries paid dividends to us of approximately $31 million.
As of February 20, 2025, we also have an additional $125 million in permitted borrowings available under our Revolving Credit Agreement as well as the possibility of a $50 million accordion feature, if successfully subscribed, as discussed in this section under the heading "Debt." During 2024, our operating subsidiaries paid dividends to us of $66 million.
In accordance with GAAP, the impact on the market value of available-for-sale fixed maturities due to changes in foreign currency exchange rates is reflected as part of OCI. Conversely, the impact of changes in foreign currency exchange rates on loss reserves is reflected through net income (loss) as a component of other income.
When we invest in foreign currency denominated available-for-sale fixed maturities, in accordance with GAAP, the change in market value due to changes in foreign currency exchange rates is reflected as part of OCI. Conversely, the impact of changes in foreign currency exchange rates on loss reserves is reflected through net income (loss) as a component of other income (expense).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We believe that we are principally exposed to two types of market risk: interest rate risk and credit risk.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We believe that we are principally exposed to three types of market risk: interest rate risk, credit risk and foreign currency risk. Interest Rate Risk Investments Our fixed maturities portfolio is exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these securities.
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.
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 Revolving Credit Agreement and Term Loan.
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.
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, 2024 and December 31, 2023. 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, 2023 ($ 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, 2024 ($ in millions) (200) (100) Current 100 200 Fair Value: Fixed maturities, available-for-sale: U.S.
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.
At December 31, 2024, 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, 2024 were carried at fair value which approximates their cost basis due to their short-term nature.
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.
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. Credit Risk We have exposure to credit risk primarily as a holder of fixed income securities.
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.
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 $427 million at December 31, 2024 and $467 million at December 31, 2023.
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.
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, 2024, our premiums receivable was approximately $229 million, net of an allowance for expected credit losses of approximately $8 million.
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
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, 2024 our expected credit losses associated with our receivables from reinsurers were nominal in amount.
We 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.
We control this exposure by emphasizing investment grade credit quality in the fixed income securities we purchase. 90 Table of Contents As of December 31, 2024, 93% of our fixed maturity securities were rated investment grade as determined by NRSROs, such as Fitch, Moody’s and Standard & Poor’s.
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.
As of December 31, 2024, the Revolving Credit Agreement and Term Loan have $125 million and $120 million in outstanding borrowings, respectively. Additional information regarding our debt is provided in Note 10 and further information regarding the Interest Rate Swaps in Note 11 of the Notes to Consolidated Financial Statements.
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.
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.
Certain of the securities are held in an unrealized loss position; we do not intend to sell and believe we will not be required to sell any debt security held in an unrealized loss position before its anticipated recovery.
As interest rates rise, market values of fixed income portfolios fall and vice versa. Certain of the securities are held in an unrealized loss position; we do not intend to sell and believe we will not be required to sell any debt security held in an unrealized loss position before its anticipated recovery.
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.
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 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.
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.
Borrowings under our Revolving Credit Agreement and Term Loan accrue interest at a selected SOFR base rate, adjusted by a margin.
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 3.33 3.40 3.51 3.56 3.55 State and municipal bonds 4.04 4.13 4.25 4.41 4.50 Corporate debt 3.18 3.20 3.18 3.13 3.08 Asset-backed securities 2.81 2.96 3.05 3.15 3.19 Total fixed maturities, available-for-sale 3.13 3.19 3.22 3.24 3.23 89 Table of Contents 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.
Treasury obligations $ 236 $ 229 $ 222 $ 215 $ 208 U.S.
Treasury obligations $ 260 $ 252 $ 244 $ 236 $ 229 U.S.
Removed
We have limited exposure to foreign currency risk as we issue few insurance contracts denominated in currencies other than the U.S. dollar and we have few monetary or non-monetary assets or obligations denominated in foreign currencies. Interest Rate Risk Investments Our fixed maturities portfolio is exposed to interest rate risk.
Added
Government-sponsored enterprise obligations 16 15 15 14 14 State and municipal bonds 486 466 446 427 409 Corporate debt 1,832 1,779 1,728 1,679 1,632 Asset-backed securities 1,221 1,185 1,149 1,113 1,077 Total fixed maturities, available-for-sale $ 3,815 $ 3,697 $ 3,582 $ 3,469 $ 3,361 Duration: Fixed maturities, available-for-sale: U.S. Treasury obligations 2.49 2.43 2.38 2.33 2.28 U.S.
Removed
Fluctuations in interest rates have a direct impact on the market valuation of these securities. As interest rates rise, market values of fixed income portfolios fall and vice versa.
Added
Foreign Currency Risk Foreign currency exchange rate movements are primarily related to foreign currency denominated available-for-sale fixed maturities and loss reserves associated with premium assumed from an international medical professional liability insurer in our Specialty P&C segment.
Removed
Government-sponsored enterprise obligations 21 21 20 19 19 State and municipal bonds 476 458 439 422 404 Corporate debt 1,919 1,848 1,781 1,718 1,658 Asset-backed securities 1,072 1,041 1,010 979 949 Total fixed maturities, available-for-sale $ 3,724 $ 3,597 $ 3,472 $ 3,353 $ 3,238 Duration: Fixed maturities, available-for-sale: U.S. Treasury obligations 3.41 3.36 3.30 3.25 3.20 U.S.
Added
Our participation in this program has grown in recent years which has led to greater volatility in our results of operations even with nominal movements in exchange rates given the size of the reserve.
Added
We mitigate foreign currency exchange exposure and manage market risks that arise in the normal course of business by generally matching the currency and duration of associated investments to the corresponding loss reserves as well as utilizing foreign currency forward contracts. Foreign currency forward contracts are typically short-term in nature with a maturity at inception of less than three months.
Added
At December 31, 2024, we had one foreign currency forward contract with a notional amount of €5.0 million ($5.5 million based on December 31, 2024 exchange rates) and a fair value of approximately $0.3 million.
Added
The counterparty to the foreign currency forward contract is a major financial institution which had an investment grade rating of BBB as of December 31, 2024. Additional information regarding our foreign currency forward contracts is provided in Note 11 of the Notes to Consolidated Financial Statements.

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