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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2020

Fair values of assets measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 are shown in the following tables. Where applicable, the tables also indicate the fair value hierarchy of the valuation techniques utilized to determine those fair values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. Assessments of the significance of a particular input to the fair value measurement require judgment and consideration of factors specific to the assets being valued.



	March 31, 2020
	Fair Value Measurements Using						Total
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets:
Fixed maturities, available-for-sale
U.S. Treasury obligations	$	—	$	129,260	$	—	$	129,260
U.S. Government-sponsored enterprise obligations	—		12,410		—		12,410
State and municipal bonds	—		291,667		—		291,667
Corporate debt, multiple observable inputs	—		1,285,278		—		1,285,278
Corporate debt, limited observable inputs	—		—		3,440		3,440
Residential mortgage-backed securities	—		229,905		693		230,598
Agency commercial mortgage-backed securities	—		13,363		—		13,363
Other commercial mortgage-backed securities	—		78,519		605		79,124
Other asset-backed securities	—		230,925		5,599		236,524
Fixed maturities, trading	—		47,680		—		47,680
Equity investments
Financial	14,953		—		—		14,953
Utilities/Energy	447		—		—		447
Consumer oriented	1,067		—		—		1,067
Industrial	1,286		—		—		1,286
Bond funds	34,923		—		—		34,923
All other	17,135		—		—		17,135
Short-term investments	336,426		10,914		—		347,340
Other investments	380		29,153		1,338		30,871
Other assets	—		465		—		465
Total assets categorized within the fair value hierarchy	$	406,617	$	2,359,539	$	11,675	2,777,831
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of:
Equity investments							22,939
Investment in unconsolidated subsidiaries							280,842
Total assets at fair value							$	3,081,612



	December 31, 2019
	Fair Value Measurements Using						Total
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets:
Fixed maturities, available-for-sale
U.S. Treasury obligations	$	—	$	110,467	$	—	$	110,467
U.S. Government-sponsored enterprise obligations	—		17,340		—		17,340
State and municipal bonds	—		296,093		—		296,093
Corporate debt, multiple observable inputs	—		1,335,285		—		1,335,285
Corporate debt, limited observable inputs	—		—		5,079		5,079
Residential mortgage-backed securities	—		208,408		—		208,408
Agency commercial mortgage-backed securities	—		8,221		—		8,221
Other commercial mortgage-backed securities	—		71,868		—		71,868
Other asset-backed securities	—		233,032		2,992		236,024
Fixed maturities, trading	—		47,284		—		47,284
Equity investments
Financial	40,294		—		—		40,294
Utilities/Energy	21,195		—		—		21,195
Consumer oriented	29,288		—		—		29,288
Industrial	26,440		—		—		26,440
Bond funds	58,346		—		—		58,346
All other	52,512		—		—		52,512
Short-term investments	317,313		22,594		—		339,907
Other investments	219		32,713		3,086		36,018
Other assets	—		760		—		760
Total assets categorized within the fair value hierarchy	$	545,607	$	2,384,065	$	11,157	2,940,829
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of:
Equity investments							22,477
Investment in unconsolidated subsidiaries							270,524
Total assets at fair value							$	3,233,830

Schedule of quantitative information regarding level 3 valuations

Quantitative Information Regarding Level 3 Valuations



	Fair Value at
($ in thousands)	March 31, 2020	December 31, 2019	Valuation Technique	Unobservable Input	Range (Weighted Average)
Assets:
Corporate debt, limited observable inputs	$3,440	$5,079	Market Comparable Securities	Comparability Adjustment	0% - 5% (2.5%)
			Discounted Cash Flows	Comparability Adjustment	0% - 5% (2.5%)
Residential mortgage-backed and other commercial mortgage-backed securities	$1,298	—	Market Comparable Securities	Comparability Adjustment	0% - 5% (2.5%)
			Discounted Cash Flows	Comparability Adjustment	0% - 5% (2.5%)
Other asset-backed securities	$5,599	$2,992	Market Comparable Securities	Comparability Adjustment	0% - 5% (2.5%)
			Discounted Cash Flows	Comparability Adjustment	0% - 5% (2.5%)
Other investments	$1,338	3,086	Discounted Cash Flows	Comparability Adjustment	0% - 10% (5%)

Schedule of fair value measurements - level 3 assets

The following tables (the Level 3 Tables) present summary information regarding changes in the fair value of assets measured at fair value using Level 3 inputs.



	March 31, 2020
	Level 3 Fair Value Measurements – Assets
(In thousands)	Corporate Debt			Asset-backed Securities			Other investments			Total
Balance December 31, 2019	$	5,079		$	2,992		$	3,086		$	11,157
Total gains (losses) realized and unrealized:
Included in earnings, as a part of:
Net investment income	—			—			—			—
Net realized investment gains (losses)	—			—			(222		)	(222		)
Included in other comprehensive income	(83		)	(122		)	—			(205		)
Purchases	—			3,422			—			3,422
Sales	(1,707		)	—			—			(1,707		)
Transfers in	945			605			—			1,550
Transfers out	(794		)	—			(1,526		)	(2,320		)
Balance March 31, 2020	$	3,440		$	6,897		$	1,338		$	11,675
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end	$	—		$	—		$	(222	)	$	(222	)



	March 31, 2019
	Level 3 Fair Value Measurements – Assets
(In thousands)	Corporate Debt			Asset-backed Securities			Other investments		Total
Balance December 31, 2018	$	4,322		$	3,850		$	3	$	8,175
Total gains (losses) realized and unrealized:
Included in earnings, as a part of:
Net investment income	2			(118		)	—		(116		)
Net realized investment gains (losses)	—			—			—		—
Included in other comprehensive income	3			157			—		160
Purchases	1,305			—			—		1,305
Sales	(136		)	(6		)	—		(142		)
Transfers in	—			1,200			—		1,200
Transfers out	(1,200		)	(951		)	—		(2,151		)
Balance March 31, 2019	$	4,296		$	4,132		$	3	$	8,431
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end	$	—		$	—		$	—	$	—

Schedule of investments in LLCs and limited partnerships

The amount of ProAssurance's unfunded commitments related to these investments as of March 31, 2020 and fair values of these investments as of March 31, 2020 and December 31, 2019 were as follows:



	Unfunded Commitments		Fair Value
(In thousands)	March 31, 2020		March 31, 2020		December 31, 2019
Equity investments:
Mortgage fund ⁽¹⁾	$	—	$	22,939	$	22,477
Investment in unconsolidated subsidiaries:
Private debt funds ⁽²⁾	$12,040		19,275		19,011
Long equity fund ⁽³⁾	None		4,863		5,293
Long/short equity funds ⁽⁴⁾	None		29,107		30,542
Non-public equity funds ⁽⁵⁾	$62,272		131,238		120,343
Multi-strategy fund of funds ⁽⁶⁾	None		1,993		1,951
Credit funds ⁽⁷⁾	$2,048		42,959		42,415
Long/short commodities fund ⁽⁸⁾	None		14,409		14,519
Strategy focused funds ⁽⁹⁾	$42,991		36,998		36,450
			280,842		270,524
Total investments carried at NAV			$	303,781	$	293,001

Below is additional information regarding each of the investments listed in the table above as of March 31, 2020.


⁽¹⁾	This investment fund is focused on the structured mortgage market. The fund will primarily invest in U.S. Agency mortgage-backed securities. Redemptions are allowed at the end of any calendar quarter with a prior notice requirement of 65 days and are paid within 45 days at the end of the redemption dealing day.

⁽²⁾

This investment is comprised of interests in three unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent; the other two do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from three to eight years.


⁽³⁾	This fund is a LP that holds long equities of public international companies. Redemptions are allowed at the end of any calendar month with a prior notice requirement of 15 days and are paid within 10 days of the end of the calendar month of the redemption request.

⁽⁴⁾

This investment is comprised of interests in multiple unrelated LP funds. The funds hold primarily long and short North American equities and target absolute returns using strategies designed to take advantage of market opportunities. The funds generally permit quarterly or semi-annual capital redemptions subject to notice requirements of 30 to 90 days. For some funds, redemptions above specified thresholds (lowest threshold is 90%) may be only partially payable until after a fund audit is completed and are then payable within 30 days.

⁽⁵⁾

This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years.


⁽⁶⁾	This fund is a LLC structured to build and manage low volatility, multi-manager portfolios that have little or no correlation to the broader fixed income and equity security markets. Redemptions are not permitted but offers to repurchase units of the LLC may be extended periodically.

⁽⁷⁾

This investment is comprised of four unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. A third fund focuses on private middle market company mezzanine loans, while the remaining fund seeks event driven opportunities across the corporate credit spectrum. Two funds are allowed redemptions at any quarter-end with a prior notice requirement of 90 days; one fund permits redemption at any quarter-end with a prior notice requirement of 180 days and one fund does not allow redemptions. For the fund that does not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to twelve years.


⁽⁸⁾	This fund is a LLC invested across a broad range of commodities and focuses primarily on market neutral, relative value strategies, seeking to generate absolute returns with low correlation to broad commodity, equity and fixed income markets. Following an initial one-year lock-up period, redemptions are allowed with a prior notice requirement of 30 days and are payable within 30 days.

⁽⁹⁾ This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is a LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. For both funds, redemptions are not permitted. Another fund is a LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LPs, one of which allows for redemption with prior notice.

Schedule of financial instruments not measured at fair value

The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category.



	March 31, 2020				December 31, 2019
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
BOLI	$	66,569	$	66,569	$	66,112	$	66,112
Other investments	$	2,907	$	2,907	$	2,931	$	2,931
Other assets	$	23,353	$	23,361	$	28,645	$	28,650
Financial liabilities:
Senior notes due 2023*	$	250,000	$	255,235	$	250,000	$	273,865
Mortgage Loans*	$	37,240	$	37,240	$	37,617	$	37,617
Other liabilities	$	22,495	$	22,495	$	27,953	$	27,953
* Carrying value excludes unamortized debt issuance costs.