

	March 31, 2020
(In thousands)	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities, available-for-sale
U.S. Treasury obligations	$	123,840	$	—	$	5,420	$	—	$	129,260
U.S. Government-sponsored enterprise obligations	12,205		—		205		—		12,410
State and municipal bonds	282,451		—		9,795		579		291,667
Corporate debt	1,302,979		1,163		20,157		33,255		1,288,718
Residential mortgage-backed securities	228,584		—		7,174		5,160		230,598
Agency commercial mortgage-backed securities	12,901		—		464		2		13,363
Other commercial mortgage-backed securities	80,470		—		1,446		2,792		79,124
Other asset-backed securities	244,526		—		1,130		9,132		236,524
	$	2,287,956	$	1,163	$	45,791	$	50,920	$	2,281,664



	December 31, 2019
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities, available-for-sale
U.S. Treasury obligations	$	109,060	$	1,533	$	126	$	110,467
U.S. Government-sponsored enterprise obligations	17,215		125		—		17,340
State and municipal bonds	287,658		9,110		675		296,093
Corporate debt	1,308,889		33,050		1,575		1,340,364
Residential mortgage-backed securities	205,588		3,139		319		208,408
Agency commercial mortgage-backed securities	8,054		182		15		8,221
Other commercial mortgage-backed securities	70,621		1,468		221		71,868
Other asset-backed securities	234,219		1,958		153		236,024
	$	2,241,304	$	50,565	$	3,084	$	2,288,785

The recorded cost basis and estimated fair value of available-for-sale fixed maturities at March 31, 2020, 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	$	123,840	$	28,290	$	79,453	$	21,059	$	458	$	129,260
U.S. Government-sponsored enterprise obligations	12,205		2,001		5,057		5,197		155		12,410
State and municipal bonds	282,451		22,973		113,255		123,840		31,599		291,667
Corporate debt	1,302,979		130,833		762,741		371,657		23,487		1,288,718
Residential mortgage-backed securities	228,584										230,598
Agency commercial mortgage-backed securities	12,901										13,363
Other commercial mortgage-backed securities	80,470										79,124
Other asset-backed securities	244,526										236,524
	$	2,287,956									$	2,281,664

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 March 31, 2020.

As a member of Lloyd's, ProAssurance is required to maintain capital at Lloyd's, referred to as FAL, to support underwriting by Syndicate 1729 and Syndicate 6131. At March 31, 2020, ProAssurance's FAL investments were comprised of available-for-sale fixed maturities with a fair value of $123.7 million and cash and cash equivalents of $12.5 million on deposit with Lloyd's in order to satisfy these FAL requirements.

The following tables provide summarized information with respect to investments held in an unrealized loss position at March 31, 2020 and December 31, 2019, including the length of time the investment had been held in a continuous unrealized loss position.



	March 31, 2020
	Total				Less than 12 months				12 months or longer
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Loss		Value		Loss		Value		Loss
Fixed maturities, available-for-sale
State and municipal bonds	$	26,636	$	579	$	26,636	$	579	$	—	$	—
Corporate debt	532,748		33,255		510,054		30,631		22,694		2,624
Residential mortgage-backed securities	66,200		5,160		62,274		5,143		3,926		17
Agency commercial mortgage-backed securities	311		2		—		—		311		2
Other commercial mortgage-backed securities	36,679		2,792		36,059		2,771		620		21
Other asset-backed securities	159,054		9,132		157,064		9,116		1,990		16
	$	821,628	$	50,920	$	792,087	$	48,240	$	29,541	$	2,680



	December 31, 2019
	Total				Less than 12 months				12 months or longer
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Loss		Value		Loss		Value		Loss
Fixed maturities, available-for-sale
U.S. Treasury obligations	$	25,959	$	126	$	15,305	$	103	$	10,654	$	23
State and municipal bonds	36,565		675		35,621		674		944		1
Corporate debt	128,254		1,575		88,582		932		39,672		643
Residential mortgage-backed securities	59,291		319		28,048		63		31,243		256
Agency commercial mortgage-backed securities	459		15		158		—		301		15
Other commercial mortgage-backed securities	18,339		221		16,924		206		1,415		15
Other asset-backed securities	48,912		153		37,322		145		11,590		8
	$	317,779	$	3,084	$	221,960	$	2,123	$	95,819	$	961

As of March 31, 2020, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 932 debt securities (39.4% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 547 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $2.0 million and $1.3 million, respectively. The securities were evaluated for impairment as of March 31, 2020.

As of December 31, 2019, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 263 debt securities (12.1% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 204 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.2 million and $0.1 million, respectively. The securities were evaluated for impairment as of December 31, 2019.

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.

Fixed maturity securities held in an unrealized loss position at March 31, 2020, excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue doing so. 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 March 31, 2020 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.



(In thousands)	Corporate Debt		Total
Balance December 31, 2019	$	—	$	—
Additional credit losses related to securities for which:
No allowance for credit losses has been previously recognized	1,163		1,163
Balance March 31, 2020	$	1,163	$	1,163

ProAssurance's equity investments are carried at fair value with changes in fair value recognized in income as a component of net realized investment gains (losses) during the period of change. Equity investments on the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 primarily included stocks, bond funds and investment funds.

ProAssurance's short-term investments, which have a maturity at purchase of one year or less, are primarily comprised of investments in U.S. treasury obligations, commercial paper and money market funds. Short-term investments are carried at fair value which approximates the cost of the securities due to their short-term nature.

ProAssurance holds BOLI policies that are carried at the current cash surrender value of the policies (original cost $33 million). All insured individuals were members of ProAssurance management at the time the policies were acquired. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies. ProAssurance is the owner and beneficiary of these policies.



	Three Months Ended March 31
(In thousands)	2020			2019
Fixed maturities	$	18,285		$	17,517
Equities	1,909			4,823
Short-term investments, including Other	1,472			1,835
BOLI	456			453
Investment fees and expenses	(1,292		)	(1,810		)
Net investment income	$	20,830		$	22,818



	March 31, 2020	Carrying Value
(In thousands)	Percentage Ownership	March 31, 2020		December 31, 2019
Qualified affordable housing project tax credit partnerships	See below	$	42,079	$	46,421
Other tax credit partnerships	See below	1,763		2,085
All other investments, primarily investment fund LPs/LLCs	See below	327,530		310,314
		$	371,372	$	358,820

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. ProAssurance's ownership percentage relative to two of the tax credit partnership interests is almost 100%; these interests had a carrying value of $15.2 million at March 31, 2020 and $17.2 million at December 31, 2019. ProAssurance's ownership percentage relative to the remaining tax credit partnership interests is less than 20%; these interests had a carrying value of $26.9 million at March 31, 2020 and $29.2 million at December 31, 2019. 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 10.

Other tax credit partnerships are comprised entirely of an investment in a historic tax credit partnership. The historic tax credit partnership generates investment returns by providing benefits to fund investors in the form of tax credits, tax deductible project operating losses and positive cash flows. The carrying value of this investment reflects ProAssurance's total funded commitment less any amortization. ProAssurance's ownership percentage relative to the historic tax credit partnership is almost 100%. Since ProAssurance has the ability to exert influence over the partnership but does not control it, it is accounted for using the equity method. See further discussion of the entities in which ProAssurance holds passive interests in Note 10.

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 of the LPs/LLCs is greater than 25%, which is expected to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $41.0 million at both March 31, 2020 and December 31, 2019. ProAssurance's ownership percentage relative to the remaining investments and LPs/LLCs is less than 25%; these interests had a carrying value of $286.5 million at March 31, 2020 and $269.3 million at December 31, 2019. ProAssurance does not have the ability to exert control over any of these funds.

Equity in earnings (loss) of unconsolidated subsidiaries included losses from qualified affordable housing project tax credit partnerships and a historic tax credit partnership. Losses recorded reflect ProAssurance's allocable portion of partnership operating losses. Tax credits reduce income tax expense in the period they are recognized. Losses recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows:



	Three Months Ended March 31
(In thousands)	2020		2019
Qualified affordable housing project tax credit partnerships
Losses recorded	$	4,342	$	4,430
Tax credits recognized	$	4,369	$	4,531

Historic tax credit partnership
Losses recorded	$	323	$	189
Tax credits recognized	$	103	$	103

Due to the consolidated loss before income taxes recognized for the three months ended March 31, 2020, the tax credits generated in the first quarter of 2020 from tax credit partnership investments of $4.5 million were deferred and are expected to be utilized in future periods.



	Three Months Ended March 31
(In thousands)	2020			2019
Total impairment losses:
Corporate debt	$	(1,817	)	$	(136	)
Portion of impairment losses recognized in other comprehensive income before taxes:
Corporate debt	654			87
Net impairment losses recognized in earnings	(1,163		)	(49		)
Gross realized gains, available-for-sale fixed maturities	2,427			367
Gross realized (losses), available-for-sale fixed maturities	(1,403		)	(336		)
Net realized gains (losses), trading fixed maturities	103			(28		)
Net realized gains (losses), equity investments	15,190			1,790
Net realized gains (losses), other investments	48			379
Change in unrealized holding gains (losses), trading fixed maturities	(118		)	210
Change in unrealized holding gains (losses), equity investments	(38,477		)	32,394
Change in unrealized holding gains (losses), convertible securities, carried at fair value	(5,273		)	1,895
Other	(7		)	1
Net realized investment gains (losses)	$	(28,673	)	$	36,623

For the three months ended March 31, 2020, ProAssurance recognized credit-related impairment losses in earnings of approximately $1.2 million and non-credit impairment losses in OCI of approximately $0.7 million. The credit-related impairment losses related to four corporate bonds in the energy, consumer and entertainment sectors. The non-credit related impairment losses related related to three corporate bonds in the energy and consumer sectors. For the three months ended March 31, 2019, ProAssurance recognized a nominal amount of both credit related impairment losses in earnings and non-credit impairment losses in OCI, both of which related to a corporate bond.

ProAssurance recognized $28.7 million of net realized investment losses during the 2020 three-month period driven by the impact of decreases in fair value on its equity portfolio of $38.5 million and convertible securities of $5.3 million attributable to the recent disruptions in global financial markets related to COVID-19. During the 2019 three-month period, ProAssurance recognized $36.6 million of net realized investment gains driven by increases in fair value on its equity portfolio of $32.4 million due to the improvement of the market during the first quarter of 2019.



	Three Months Ended March 31
(In thousands)	2020		2019
Balance beginning of period	$	470	$	93
Additional credit losses recognized during the period, related to securities for which:
No impairment has been previously recognized	1,064		49
Balance March 31	$	1,534	$	142