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Segment Information
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment Information Segment Information
ProAssurance's segments are based on the Company's internal management reporting structure for which financial results are regularly evaluated by the Company's CODM to determine resource allocation and assess operating performance. The Company continually assesses its internal management reporting structure and information evaluated by its CODM to determine whether any changes have occurred that would impact its segment reporting structure. The Company operates in five segments that are organized around the nature of the products and services provided: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, Lloyd's Syndicates and Corporate. A description of each of ProAssurance's five operating and reportable segments follows.
Specialty P&C includes professional liability insurance and medical technology liability insurance. Professional liability insurance is primarily offered to healthcare providers and institutions and, to a lesser extent, to attorneys and their firms. Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials. In addition, the Specialty P&C segment also offers custom alternative risk solutions including loss portfolio transfers and captive cell programs for healthcare professional liability insureds. For the alternative market captive cell programs, the Specialty P&C segment cedes either all or a portion of the premium to certain SPCs in the Company's Segregated Portfolio Cell Reinsurance segment.
Workers' Compensation Insurance includes workers' compensation products provided to employers with 1,000 or fewer employees. The segment's products include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible polices and alternative market solutions. Alternative market products include program design, fronting, claims administration, risk management, SPC rental, asset management and SPC management services. Alternative market program premiums are 100% ceded to either SPCs in the Company's Segregated Portfolio Cell Reinsurance segment or, to a limited extent, to a captive insurer unaffiliated with ProAssurance.
Segregated Portfolio Cell Reinsurance reflects the net operating results (underwriting profit or loss, plus investment results, net of U.S. federal income taxes) of SPCs at Inova Re and Eastern Re, the Company's Cayman Islands SPC operations. Each SPC is owned, fully or in part, by an agency, group or association, and the operating results of the SPCs are due to the participants of that cell. ProAssurance participates to a varying degree in the results of selected SPCs. SPC operating results attributable to external cell participants are reflected as SPC dividend expense (income) in the Segregated Portfolio Cell Reinsurance segment and in ProAssurance's Condensed Consolidated Statements of Income and Comprehensive Income. In addition, the Segregated Portfolio Cell Reinsurance segment includes the SPC investment results as the investments are solely for the benefit of the cell participants, and investment results attributable to external cell participants are reflected in the SPC dividend expense (income). The SPCs assume workers' compensation insurance, healthcare professional liability insurance or a combination of the two from the Company's Workers' Compensation Insurance and Specialty P&C segments.
Lloyd's Syndicates includes operating results from ProAssurance's participation in Lloyd's of London Syndicate 1729 and its 100% participation in Syndicate 6131, which is an SPA that underwrites on a quota share basis with Syndicate 1729. The results of this segment are normally reported on a quarter lag, except when information is available that is material to the current period. Furthermore, investment results associated with the majority of investment assets solely allocated to Lloyd's Syndicate operations and certain U.S. paid administrative expenses are reported concurrently as that information is available on an earlier time frame. For the 2020 underwriting year, ProAssurance decreased its participation in the operating results of Syndicate 1729 to 29% from 61% ; however, due to the quarter lag these changes will not be reflected in the Company's results until the second quarter of 2020. Syndicate 1729 underwrites risks over a wide range of property and casualty insurance and reinsurance lines in both the U.S. and international markets. Syndicate 6131 focuses on contingency and specialty property business, also within the U.S. and international markets.
Corporate includes ProAssurance's investment operations, other than those reported in the Company's Segregated Portfolio Cell Reinsurance and Lloyd's Syndicates segments, interest expense and U.S. income taxes. The segment also includes non-premium revenues generated outside of the Company's insurance entities and corporate expenses.
The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2019 report on Form 10-K and Note 1 herein. ProAssurance evaluates the performance of its Specialty P&C and Workers' Compensation Insurance segments based on before tax underwriting profit or loss, which excludes investment performance. ProAssurance evaluates the performance of its Segregated Portfolio Cell Reinsurance segment based on operating profit or loss, which includes investment results of investment assets solely allocated to SPC operations, net of U.S. federal income taxes. Performance of the Lloyd's Syndicates segment is evaluated based on operating profit or loss, which includes investment results of investment assets solely allocated to Lloyd's Syndicate operations, net of U.K. income tax expense. Performance of the Corporate segment is evaluated based on the contribution made to consolidated after-tax results. ProAssurance accounts for inter-segment transactions as if the transactions were to third parties at
current market prices. Assets are not allocated to segments because investments, other than the investments discussed above that are solely allocated to the Segregated Portfolio Cell Reinsurance and Lloyd's Syndicates segments, and other assets are not managed at the segment level.
Financial results by segment were as follows:
 
Three Months Ended March 31, 2020
(In thousands)
Specialty P&C
 
Workers' Compensation Insurance
 
Segregated Portfolio Cell Reinsurance
 
Lloyd's Syndicates
 
Corporate
 
Inter-segment Eliminations
 
Consolidated
Net premiums earned
$
120,359

 
$
44,515

 
$
16,980

 
$
22,001

 
$
—

 
$
—

 
$
203,855

Net investment income
—

 
—

 
254

 
1,159

 
19,417

 
—

 
20,830

Equity in earnings (loss) of unconsolidated subsidiaries
—

 
—

 
—

 
—

 
(1,562
)
 
—

 
(1,562
)
Net realized gains (losses)
—

 
—

 
(3,207
)
 
81

 
(25,547
)
 
—

 
(28,673
)
Other income (expense)(1)
1,698

 
757

 
136

 
(232
)
 
633

 
(741
)
 
2,251

Net losses and loss adjustment expenses
(110,931
)
 
(29,769
)
 
(9,352
)
 
(14,780
)
 
—

 
—

 
(164,832
)
Underwriting, policy acquisition and operating expenses(1)
(29,585
)
 
(14,164
)
 
(5,079
)
 
(9,142
)
 
(4,827
)
 
741

 
(62,056
)
SPC U.S. federal income tax expense(2)
—

 
—

 
(222
)
 
—

 
—

 
—

 
(222
)
SPC dividend (expense) income
—

 
—

 
508

 
—

 
—

 
—

 
508

Interest expense
—

 
—

 
—

 
—

 
(4,129
)
 
—

 
(4,129
)
Income tax benefit (expense)
—

 
—

 
—

 
29

 
12,047

 
—

 
12,076

Segment operating results
$
(18,459
)
 
$
1,339

 
$
18

 
$
(884
)
 
$
(3,968
)
 
$
—

 
$
(21,954
)
Significant non-cash items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization, net of accretion
$
1,580

 
$
926

 
$
69

 
$
9

 
$
2,150

 
$
—

 
$
4,734


 
Three Months Ended March 31, 2019
(In thousands)
Specialty P&C
 
Workers' Compensation Insurance
 
Segregated Portfolio Cell Reinsurance
 
Lloyd's Syndicates
 
Corporate
 
Inter-segment Eliminations
 
Consolidated
Net premiums earned
$
124,067

 
$
45,939

 
$
19,502

 
$
18,641

 
$
—

 
$
—

 
$
208,149

Net investment income
—

 
—

 
448

 
1,006

 
21,364

 
—

 
22,818

Equity in earnings (loss) of unconsolidated subsidiaries
—

 
—

 
—

 
—

 
(810
)
 
—

 
(810
)
Net realized gains (losses)
—

 
—

 
2,141

 
178

 
34,304

 
—

 
36,623

Other income (expense)(1)
1,209

 
729

 
87

 
(146
)
 
905

 
(689
)
 
2,095

Net losses and loss adjustment expenses
(107,658
)
 
(30,443
)
 
(10,745
)
 
(10,909
)
 
—

 
—

 
(159,755
)
Underwriting, policy acquisition and operating expenses(1)
(29,615
)
 
(14,192
)
 
(5,235
)
 
(8,469
)
 
(4,570
)
 
689

 
(61,392
)
SPC U.S. federal income tax expense(2)
—

 
—

 
—

 
—

 
—

 
—

 
—

SPC dividend (expense) income
—

 
—

 
(4,787
)
 
—

 
—

 
—

 
(4,787
)
Interest expense
—

 
—

 
—

 
—

 
(4,330
)
 
—

 
(4,330
)
Income tax benefit (expense)
—

 
—

 
—

 
(304
)
 
(6,657
)
 
—

 
(6,961
)
Segment operating results
$
(11,997
)
 
$
2,033

 
$
1,411

 
$
(3
)
 
$
40,206

 
$
—

 
$
31,650

Significant non-cash items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization, net of accretion
$
1,736

 
$
977

 
$
46

 
$
(3
)
 
$
2,280

 
$
—

 
$
5,036

(1) Certain fees for services provided to the SPCs at Inova Re and Eastern Re are recorded as expenses within the Segregated Portfolio Cell Reinsurance segment and as other income within the Workers' Compensation Insurance segment. These fees are primarily SPC rental fees and are eliminated between segments in consolidation.
(2) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net operating results and are paid by the individual SPCs.


The following table provides detailed information regarding ProAssurance's gross premiums earned by product as well as a reconciliation to net premiums earned. All gross premiums earned are from external customers except as noted. ProAssurance's insured risks are primarily within the U.S.
 
Three Months Ended March 31
(In thousands)
2020
 
2019
Specialty P&C Segment
 
 
 
Gross premiums earned:
 
 
 
Healthcare professional liability
$
123,366

 
$
128,021

Legal professional liability
6,751

 
6,560

Medical technology liability
8,529

 
8,302

Other
377

 
136

Ceded premiums earned
(18,664
)
 
(18,952
)
Segment net premiums earned
120,359

 
124,067

 
 
 
 
Workers' Compensation Insurance Segment
 
 
 
Gross premiums earned:
 
 
 
Traditional business
47,485

 
49,285

Alternative market business
18,128

 
20,991

Ceded premiums earned
(21,098
)
 
(24,337
)
Segment net premiums earned
44,515

 
45,939

 
 
 
 
Segregated Portfolio Cell Reinsurance Segment
 
 
 
Gross premiums earned:
 
 
 
Workers' compensation(1)
17,513

 
20,496

Healthcare professional liability(2)
1,677

 
1,323

Other
—

 
120

Ceded premiums earned
(2,210
)
 
(2,437
)
Segment net premiums earned
16,980

 
19,502

 
 
 
 
Lloyd's Syndicates Segment
 
 
 
Gross premiums earned:
 
 
 
Property and casualty(3)
28,196

 
23,828

Ceded premiums earned
(6,195
)
 
(5,187
)
Segment net premiums earned
22,001

 
18,641

 

 

Consolidated net premiums earned
$
203,855

 
$
208,149

(1) Premium for all periods is assumed from the Workers' Compensation Insurance segment.
(2) Premium for all periods is assumed from the Specialty P&C segment.
(3) Includes a nominal amount of premium assumed from the Specialty P&C segment for the three months ended March 31, 2019.