v3.24.3
Investments
 9 Months Ended
Sep. 30, 2024
Investments, Debt and Equity Securities [Abstract]  
Investments Investments
Available-for-sale fixed maturities at September 30, 2024 and December 31, 2023 included the following:
September 30, 2024
(In thousands)Amortized
Cost		Allowance for Expected Credit LossesGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Fixed maturities, available-for-sale
U.S. Treasury obligations$261,442 $— $701 $10,842 $251,301 
U.S. Government-sponsored enterprise obligations16,575 — 20 571 16,024 
State and municipal bonds482,509 — 4,807 19,537 467,779 
Corporate debt1,850,831 2,608 10,442 88,245 1,770,420 
Residential mortgage-backed securities534,605 201 5,118 45,427 494,095 
Agency commercial mortgage-backed securities8,022 — 14 785 7,251 
Other commercial mortgage-backed securities212,274 406 548 12,027 200,389 
Other asset-backed securities483,457 188 3,747 8,143 478,873 
$3,849,715 $3,403 $25,397 $185,577 $3,686,132 
 December 31, 2023
(In thousands)Amortized
Cost		Allowance for Expected Credit LossesGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Fixed maturities, available-for-sale
U.S. Treasury obligations$259,834 $— $165 $16,474 $243,525 
U.S. Government-sponsored enterprise obligations19,752 — 2 1,030 18,724 
State and municipal bonds482,367 — 1,885 29,871 454,381 
Corporate debt1,883,308 — 4,025 136,759 1,750,574 
Residential mortgage-backed securities481,267 211 2,876 53,795 430,137 
Agency commercial mortgage-backed securities9,369 — 5 987 8,387 
Other commercial mortgage-backed securities210,469 151 60 20,904 189,474 
Other asset-backed securities412,354 193 1,104 14,870 398,395 
$3,758,720 $555 $10,122 $274,690 $3,493,597 
The recorded cost basis and estimated fair value of available-for-sale fixed maturities at September 30, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In thousands)Amortized
Cost		Due in one
year or less		Due after
one year
through
five years		Due after
five years
through
ten years		Due after
ten years		Total Fair
Value
Fixed maturities, available-for-sale
U.S. Treasury obligations$261,442 $36,542 $181,615 $30,406 $2,738 $251,301 
U.S. Government-sponsored enterprise obligations16,575 6,471 7,016 523 2,014 16,024 
State and municipal bonds482,509 39,434 154,088 155,687 118,570 467,779 
Corporate debt1,850,831 176,203 911,876 573,680 108,661 1,770,420 
Residential mortgage-backed securities534,605 494,095 
Agency commercial mortgage-backed securities8,022 7,251 
Other commercial mortgage-backed securities212,274 200,389 
Other asset-backed securities483,457 478,873 
$3,849,715 $3,686,132 
Excluding obligations of the U.S. Government, U.S. Government-sponsored enterprises and a U.S. Government obligations money market fund, no investment in any entity or its affiliates exceeded 10% of shareholders’ equity at September 30, 2024.
Cash and securities with a carrying value of $52.5 million at September 30, 2024 were on deposit with various state insurance departments to meet regulatory requirements. ProAssurance also held securities with a carrying value of $71.5 million at September 30, 2024 that are pledged as collateral security for advances under the Company's borrowing relationships with FHLBs.
As a member of Lloyd's, ProAssurance is required to maintain capital at Lloyd's, referred to as FAL, to support the Company's previous participation in underwriting years that remain open at Syndicate 1729. At September 30, 2024, the fair value of ProAssurance's FAL investments was $15.5 million and were comprised of cash and cash equivalents and investment securities, primarily available-for-sale fixed maturities, on deposit with Lloyd's, in order to satisfy these FAL requirements. During the second quarter of 2024, the Company received a return of approximately $5.2 million of cash from its FAL balances due to lower capital requirements for the 2023 underwriting year.
Investments Held in a Loss Position
The following tables provide summarized information with respect to investments held in an unrealized loss position at September 30, 2024 and December 31, 2023, including the length of time the investment had been held in a continuous unrealized loss position.
September 30, 2024
 TotalLess than 12 months12 months or longer
 FairUnrealizedFairUnrealizedFairUnrealized
(In thousands)ValueLossValueLossValueLoss
Fixed maturities, available-for-sale
U.S. Treasury obligations$198,432 $10,842 $27,703 $1,292 $170,729 $9,550 
U.S. Government-sponsored enterprise obligations13,331 571 3,592 108 9,739 463 
State and municipal bonds331,314 19,537 61,506 3,114 269,808 16,423 
Corporate debt1,273,208 88,245 342,657 25,164 930,551 63,081 
Residential mortgage-backed securities309,441 45,427 115,007 13,302 194,434 32,125 
Agency commercial mortgage-backed securities6,805 785 1,936 278 4,869 507 
Other commercial mortgage-backed securities164,264 12,027 73,422 4,891 90,842 7,136 
Other asset-backed securities170,802 8,143 57,889 2,623 112,913 5,520 
$2,467,597 $185,577 $683,712 $50,772 $1,783,885 $134,805 

December 31, 2023
 TotalLess than 12 months12 months or longer
 FairUnrealizedFairUnrealizedFairUnrealized
(In thousands)ValueLossValueLossValueLoss
Fixed maturities, available-for-sale
U.S. Treasury obligations$213,634 $16,474 $32,925 $1,364 $180,709 $15,110 
U.S. Government-sponsored enterprise obligations18,428 1,030 4,128 242 14,300 788 
State and municipal bonds378,313 29,871 48,960 2,287 329,353 27,584 
Corporate debt1,524,940 136,759 84,221 5,054 1,440,719 131,705 
Residential mortgage-backed securities313,082 53,795 74,463 10,271 238,619 43,524 
Agency commercial mortgage-backed securities7,955 987 212 1 7,743 986 
Other commercial mortgage-backed securities184,416 20,904 18,092 1,140 166,324 19,764 
Other asset-backed securities293,447 14,870 30,115 867 263,332 14,003 
$2,934,215 $274,690 $293,116 $21,226 $2,641,099 $253,464 
As of September 30, 2024, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 2,105 debt securities (52.3% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 1,182 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $4.4 million and $2.7 million, respectively. The securities were evaluated for impairment as of September 30, 2024.
As of December 31, 2023, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 2,531 debt securities (65.6% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 1,319 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $5.0 million and $3.2 million, respectively. The securities were evaluated for impairment as of December 31, 2023.
Each quarter, ProAssurance performs a detailed analysis for the purpose of assessing whether any of the securities it holds in an unrealized loss position has suffered an impairment due to credit or non-credit factors. A detailed discussion of the factors considered in the assessment is included in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2023 report on Form 10-K.
Fixed maturity securities held in an unrealized loss position at September 30, 2024, excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue. Expected future cash flows of asset-backed securities, excluding those issued by GNMA, FNMA and FHLMC, held in an unrealized loss position were estimated as part of the September 30, 2024 impairment evaluation using the most recently available six-month historical performance data for the collateral (loans) underlying the security or, if historical data was not available, sector based assumptions, and equaled or exceeded the current amortized cost basis of the security.
The following tables present a roll forward of the allowance for expected credit losses on available-for-sale fixed maturities for the three and nine months ended September 30, 2024 and 2023.
Three Months Ended September 30, 2024
(In thousands)Corporate DebtResidential mortgage-backed securitiesOther commercial mortgage-backed securitiesOther asset-backed securitiesTotal
Balance, at July 1, 2024
$1,210 $203 $— $189 $1,602 
Additional credit losses related to securities for which:
No allowance for credit losses has been previously recognized1,398 — 406 — 1,804 
Reductions related to:
Securities sold during the period— (2)— (1)(3)
Balance, at September 30, 2024
$2,608 $201 $406 $188 $3,403 
Nine Months Ended September 30, 2024
(In thousands)Corporate DebtResidential mortgage-backed securitiesOther commercial mortgage-backed securitiesOther asset-backed securitiesTotal
Balance, at December 31, 2023$— $211 $151 $193 $555 
Additional credit losses related to securities for which:
No allowance for credit losses has been previously recognized2,138 — 406 — 2,544 
An allowance for credit losses was recorded in a previous period470 — — — 470 
Reductions related to:
Securities sold during the period— (10)(151)(5)(166)
Balance, at September 30, 2024$2,608 $201 $406 $188 $3,403 
Three Months Ended September 30, 2023
(In thousands)Residential mortgage-backed securitiesOther commercial mortgage-backed securitiesOther asset-backed securitiesTotal
Balance, at July 1, 2023$223 $— $196 $419 
Additional credit losses related to securities for which:
No allowance for credit losses has been previously recognized— 151 — 151 
Reductions related to:
Securities sold during the period(7)— (3)(10)
Balance, at September 30, 2023$216 $151 $193 $560 
Nine Months Ended September 30, 2023
(In thousands)Residential mortgage-backed securitiesOther commercial mortgage-backed securitiesOther asset-backed securitiesTotal
Balance, at December 31, 2022$229 $— $198 $427 
Additional credit losses related to securities for which:
No allowance for credit losses has been previously recognized— 151 — 151 
Reductions related to:
Securities sold during the period(13)— (5)(18)
Balance, at September 30, 2023$216 $151 $193 $560 
Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows:
Three Months Ended September 30Nine Months Ended September 30
(In millions)2024202320242023
Proceeds from sales (exclusive of maturities and paydowns)$39.4 $8.0 $97.7 $31.4 
Purchases$186.5 $127.3 $650.6 $261.5 
Net Investment Income
Net investment income (loss) by investment category was as follows:
Three Months Ended
September 30		Nine Months Ended
September 30
(In thousands)2024202320242023
Fixed maturities$34,092 $28,402 $99,150 $83,680 
Equities1,197 1,158 3,253 3,070 
Short-term investments, including Other3,167 4,473 9,718 11,857 
BOLI1,101 668 2,087 1,784 
Investment fees and expenses(2,285)(1,947)(6,481)(5,677)
Net investment income$37,272 $32,754 $107,727 $94,714 
Investment in Unconsolidated Subsidiaries
ProAssurance's investment in unconsolidated subsidiaries were as follows:
 September 30, 2024Carrying Value
(In thousands)Percentage
Ownership		September 30,
2024		December 31,
2023
Qualified affordable housing project tax credit partnershipsSee below$298 $666 
All other investments, primarily investment fund LPs/LLCs
See below271,192 276,090 
$271,490 $276,756 
Qualified affordable housing project tax credit partnership interests held by ProAssurance generate investment returns by providing tax benefits to fund investors in the form of tax credits and project operating losses. The carrying value of these investments reflects ProAssurance's total commitments (both funded and unfunded) to the partnerships, less any amortization. At September 30, 2024 and December 31, 2023, ProAssurance did not have an ownership percentage greater than 20% in any tax credit partnership interests. Since ProAssurance has the ability to exert influence over the partnerships but does not control them, all are accounted for using the equity method. See further discussion of the entities in which ProAssurance holds passive interests in Note 11.
ProAssurance holds interests in investment fund LPs/LLCs and other equity method investments and LPs/LLCs which are not considered to be investment funds. ProAssurance's ownership percentage relative to three and four of the LPs/LLCs is greater than 25% at September 30, 2024 and December 31, 2023, respectively, which is likely to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $14.0 million at September 30, 2024 and $23.0 million at December 31, 2023. ProAssurance's ownership percentage relative to the remaining investments and LPs/LLCs is less than 25%; these interests had a carrying value of $257.2 million at September 30, 2024 and $253.1 million at December 31, 2023. ProAssurance does not have the ability to exert control over any of these funds.
Equity in Earnings (Loss) of Unconsolidated Subsidiaries
Equity in earnings (loss) of unconsolidated subsidiaries included losses from tax credit partnerships. Investment results recorded reflect ProAssurance's allocable portion of partnership operating results. Tax credits reduce income tax expense in the period they are utilized. The results recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows:
Three Months Ended
September 30		Nine Months Ended
September 30
(In thousands)2024202320242023
Qualified affordable housing project tax credit partnerships
Losses (gains) recorded
$451 $429 $163 $2,294 
Tax credits recognized$8 $401 $24 $473 
ProAssurance accounts for its tax credit partnership investments under the equity method of accounting and records its allocable portion of the operating losses of the underlying properties based on estimates provided by the partnerships. For the Company's qualified affordable housing project tax credit partnerships, it adjusts its estimates of their allocable portion of operating losses periodically as actual operating results of the underlying properties become available. The primary benefits of tax credits and tax-deductible operating losses from the historic tax credit partnerships are earned in a short period with potential for additional cash flows extending over several years. For the three and nine months ended September 30, 2024, the Company generated a nominal amount of tax credits from its tax credit partnership investments as compared to $0.4 million and $0.5 million for the same respective periods of 2023, which were deferred and are expected to be utilized in future periods. As of September 30, 2024, the Company had approximately $52.8 million of available tax credit carryforwards generated from its investments in tax credit partnerships which they expect to utilize in future periods.
Net Investment Gains (Losses)
Realized investment gains and losses are recognized on the first-in, first-out basis. The following table provides detailed information regarding net investment gains (losses):
Three Months Ended
September 30		Nine Months Ended
September 30
(In thousands)2024202320242023
Total impairment losses:
Corporate debt$(1,398)$— $(2,710)$(2,984)
Asset-backed securities(403)(141)(592)(133)
Portion of impairment losses recognized in other comprehensive income before taxes:
Corporate debt— — 102 — 
Net impairment losses recognized in earnings
(1,801)(141)(3,200)(3,117)
Gross realized gains, available-for-sale fixed maturities484 254 1,156 793 
Gross realized (losses), available-for-sale fixed maturities(1,567)(285)(3,636)(1,509)
Net realized gains (losses), trading fixed maturities5 5 18 (101)
Net realized gains (losses), equity investments176 154 2,115 254 
Net realized gains (losses), other investments(245)(683)(826)(2,570)
Change in unrealized holding gains (losses), trading fixed maturities (5)(71)165 81 
Change in unrealized holding gains (losses), equity investments4,979 (4,578)1,762 (1,962)
Change in unrealized holding gains (losses), convertible securities, carried at fair value 267 (588)873 3,473 
Other(1)
(41)3,231 6,719 7,814 
Net investment gains (losses)$2,252 $(2,702)$5,146 $3,156 
(1) Includes a gain of $6.5 million related to the decrease in the contingent consideration liability during the 2024 nine-month period. For the 2023 three- and nine-month periods, includes a gain of $1.5 million and $4.5 million, respectively, related to the decrease in the contingent consideration liability. See further discussion on the contingent consideration in Note 2 and Note 7 and discussion on the Company's accounting policy in Note 1 in its December 31, 2023 report on Form 10-K.
For the three and nine months ended September 30, 2024, ProAssurance recognized $1.8 million and $3.3 million of credit-related impairment losses in earnings, respectively, primarily related to four corporate bonds in the real estate sector. ProAssurance recognized a nominal amount of non-credit impairment losses in OCI for the nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, ProAssurance recognized a nominal amount and $3.1 million of credit-related impairment losses in earnings, respectively, related to a mortgage-backed security and, for the 2023 nine-month period, two corporate bonds in the financial sector.
The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the impairment was recorded in OCI.
Three Months Ended
September 30		Nine Months Ended
September 30
(In thousands)2024202320242023
Balance beginning of period$1,267 $57 $57 $57 
Additional credit losses recognized during the period, related to securities for which:
No impairment has been previously recognized— — 740 — 
Impairment has been previously recognized— — 470 — 
Balance September 30
$1,267 $57 $1,267 $57