Debt

6 Months Ended

Jun. 30, 2021

ProAssurance’s outstanding debt consisted of the following:


($ in thousands)	June 30, 2021		December 31, 2020
Senior Notes due 2023, unsecured, interest at 5.3% annually	$	250,000	$	250,000
Contribution Certificates due 2031, interest at 3.0% (effective interest rate at 4.35%) annually beginning April 2022	175,248		—
Mortgage Loans, outstanding borrowings are secured by first priority liens on two office buildings, and bear an interest rate of three-month LIBOR plus 1.325% (1.51% and 1.58%, respectively) determined on a quarterly basis	19,745		36,113
Revolving Credit Agreement, outstanding borrowings are not permitted to exceed $250 million aggregately; Revolving Credit Agreement expires in 2024. The interest rate (1.80%) was set at the time the borrowing was initiated	15,000		—
Total principal	459,993		286,113
Less unamortized debt issuance costs	1,130		1,400
Debt less unamortized debt issuance costs	$	458,863	$	284,713

Contribution Certificates

On May 5, 2021, NORCAL Insurance Company, successor to NORCAL Mutual Insurance Company, issued Contribution Certificates, which are due in 2031, to certain NORCAL policyholders in the conversion. The Contribution Certificates have a principal amount of $191 million and were recorded at their fair value of $175 million at the date of acquisition. The difference of $16 million between the recorded acquisition date fair value and the principal balance of the Contribution Certificates will be accreted utilizing the effective interest method over the term of the certificates of ten years as an increase to interest expense. In addition, interest is subject to be deferred if ProAssurance does not receive permission from the California Department of Insurance prior to payment. See Note 2 for additional information on the Contribution Certificates assumed in the NORCAL acquisition.

Mortgage Loans

During 2017, two of ProAssurance's subsidiaries, ProAssurance Indemnity Company, Inc. and ProAssurance Insurance Company of America, each entered into ten-year mortgage loans (Mortgage Loans) with principal amounts of $17.9 million and $22.6 million, respectively, with one lender in connection with the recapitalization of two office buildings. In June 2021, ProAssurance repaid the balance outstanding on the ProAssurance Indemnity Company, Inc. Mortgage Loan of $15.6 million; interest expense during the three and six months ended June 30, 2021 includes the write-off of the related unamortized debt issuance costs which were nominal in amount. In July 2021, ProAssurance repaid the balance outstanding on the ProAssurance Insurance Company of America Mortgage Loan of $19.7 million (see Note 17).

Covenant Compliance

There are no financial covenants associated with the Senior Notes or the Contribution Certificates due 2023 and 2031, respectively.

The Revolving Credit Agreement contains customary representations, covenants and events constituting default, and remedies for default. The Revolving Credit Agreement also defines financial covenants regarding permitted leverage ratios. ProAssurance is currently in compliance with all covenants of the Revolving Credit Agreement. In April 2021, ProAssurance amended and restated its Revolving Credit Agreement to allow for additional indebtedness of a subsidiary in preparation of the close of the NORCAL acquisition. This amendment to the Revolving Credit Agreement was previously filed as Exhibit 10.1 to ProAssurance's March 31, 2021 report on Form 10-Q.

The ProAssurance Insurance Company of America Mortgage Loan contains customary representations, covenants and events constituting default, and remedies for default. The Mortgage Loan also defines a financial covenant regarding a permitted leverage ratio. As previously discussed, this loan was repaid in July 2021; however, as of June 30, 2021, ProAssurance Insurance Company of America was in compliance with the financial covenant of the Mortgage Loan.

Additional Information

For additional information regarding ProAssurance's debt, see Note 11 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2020 report on Form 10-K.