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Segment Information
 12 Months Ended
Dec. 31, 2024
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, its Chief Executive Officer, 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 four segments that are organized around the nature of the products and services provided: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate. A description of each of ProAssurance's four operating and reportable segments follows.
•Specialty P&C focuses on Medical Professional Liability insurance and Medical Technology Liability insurance. Medical Professional Liability insurance is primarily comprised of medical professional liability products offered to healthcare providers and institutions. 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 Company also offers custom alternative risk solutions including assumed reinsurance, loss portfolio transfers and captive cell programs for medical 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. The Specialty P&C segment also includes the underwriting results from ProAssurance's previous participation in Lloyd's of London Syndicate 1729 and Syndicate 6131, which is currently in run-off. Effective September 2023, ProAssurance elected to discontinue its participation in the results of Syndicate 1729 beginning with the 2024 underwriting year which, due to the quarter lag, was not reflected in its results until the second quarter of 2024. For the 2023 underwriting year ProAssurance's participation in the results of Syndicate 1729 was approximately 5%. The Company ceased participation in Syndicate 6131 beginning with the 2022 underwriting year which, due to the quarter lag, was not reflected in its results until the second quarter of 2022.
•Workers' Compensation Insurance includes workers' compensation insurance products which are provided primarily to employers with 1,000 or fewer employees. The segment's products include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible policies and alternative market solutions. Alternative market program premiums 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 captive insurers unaffiliated with ProAssurance for two programs.
•Segregated Portfolio Cell Reinsurance includes the 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 individual company, agency, group or association, and the results of the SPCs are attributable to the participants of that cell. ProAssurance participates to a varying degree in the results of selected SPCs. SPC results attributable to external cell participants are reported as an SPC dividend expense (income) in the Segregated Portfolio Cell Reinsurance segment and in ProAssurance's Consolidated Statements of Income and Comprehensive Income. In addition, the Segregated Portfolio Cell Reinsurance segment includes the investment results of the SPCs as the investments are solely for the benefit of the cell participants, and investment results attributable to external cell participants are reflected in SPC dividend expense (income). The SPCs assume workers' compensation insurance, medical professional liability insurance or a combination of the two from the Company's Workers' Compensation Insurance and Specialty P&C segments.
•Corporate includes ProAssurance's investment operations excluding those reported in the Company's Segregated Portfolio Cell Reinsurance segment. In addition, this segment includes corporate expenses, interest expense, U.S. and U.K. income taxes and non-premium revenues generated outside of the Company's insurance entities.
The accounting policies of the segments are described in Note 1. The CODM evaluates the performance of the Specialty P&C and Workers' Compensation Insurance segments based on before tax underwriting profit or loss. The CODM also evaluates the Specialty P&C and Workers' Compensation Insurance segment's net loss and underwriting expense ratios in assessing each segment's financial performance. The net loss ratio is calculated as the segment's net losses and loss adjustment expenses incurred divided by net premiums earned. The underwriting expense ratio is calculated as the segment's underwriting, policy acquisition and operating expenses incurred divided by net premiums earned. The CODM evaluates the performance of the 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 Corporate segment is evaluated by the CODM based on its contribution to consolidated after-tax results. The CODM also evaluates the contribution of the Corporate segment to the consolidated underwriting expense ratio (Corporate operating expenses divided by consolidated net premiums earned) in assessing the segment's financial performance. 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 segment, and other assets are not managed at the segment level.
The tabular information that follows shows the financial results of the Company's reportable segments reconciled to results reflected in the Consolidated Statements of Income and Comprehensive Income. The CODM does not consider goodwill or intangible asset impairments, changes in the fair value of contingent consideration or transaction-related costs for completed business combinations, including any related tax impacts, in assessing the financial performance of its operating and reportable segments, and thus are included in the reconciliation of segment results to consolidated results.
Financial results by segment were as follows:
Year Ended December 31, 2024
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned$747,942 $167,610 $52,698 $— $— $968,250 
Net investment income— — 3,608 140,930 — 144,538 
Equity in earnings (loss) of unconsolidated subsidiaries— — — 22,203 — 22,203 
Net investment gains (losses)— — 2,369 (7,206)— (4,837)
Other income (expense)(1)
4,373 1,887 19 11,489 (4,258)13,510 
Net losses and loss adjustment expenses(2)
(578,486)(128,483)(32,466)— — (739,435)
Operating expenses(1)(2)(3)
(101,082)(43,875)(1,709)(40,008)3,085 (183,589)
Deferred policy acquisition costs amortization(2)
(102,125)(18,124)(16,354)— 1,173 (135,430)
SPC U.S. federal income tax benefit (expense)(4)
— — (1,766)— — (1,766)
SPC dividend (expense) income— — (4,444)— — (4,444)
Interest expense— — — (22,342)— (22,342)
Income tax benefit (expense)— — — (10,401)— (10,401)
Segment results$(29,378)$(20,985)$1,955 $94,665 $— 46,257 
Reconciliation of segments to consolidated results:
Contingent consideration(5)
6,740 
Transaction-related costs, net(6)
(253)
Net income (loss)$52,744 
Significant non-cash items:
Depreciation and amortization, net of accretion$8,919 $5,020 $(2,129)$5,941 $— $17,751 
Year Ended December 31, 2023
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned$755,817 $160,034 $61,546 $— $— $977,397 
Net investment income— — 2,289 126,130 — 128,419 
Equity in earnings (loss) of unconsolidated subsidiaries— — — 6,791 — 6,791 
Net investment gains (losses)— — 3,680 5,148 — 8,828 
Other income (expense)(1)
4,695 1,854 5 8,307 (4,084)10,777 
Net losses and loss adjustment expenses(2)
(624,809)(139,322)(36,363)— — (800,494)
Operating expenses(1)(2)(3)
(93,612)(39,860)(2,086)(34,007)3,634 (165,931)
Deferred policy acquisition costs amortization(2)
(101,691)(15,201)(18,371)— 450 (134,813)
SPC U.S. federal income tax benefit (expense)(4)
— — (1,629)— — (1,629)
SPC dividend (expense) income— — (6,234)— — (6,234)
Interest expense— — — (23,150)— (23,150)
Income tax benefit (expense)— — — 545 — 545 
Segment results$(59,600)$(32,495)$2,837 $89,764 $— 506 
Reconciliation of segments to consolidated results:
Contingent consideration(5)
5,000 
Goodwill impairment
(44,110)
Net income (loss)$(38,604)
Significant non-cash items:
Goodwill impairment
$44,110 
Depreciation and amortization, net of accretion$10,581 $3,424 $(436)$12,446 $— $26,015 
Year Ended December 31, 2022
(In thousands)Specialty P&CWorkers' Compensation InsuranceSegregated Portfolio Cell Reinsurance CorporateInter-segment EliminationsConsolidated
Net premiums earned$793,400 $166,371 $69,810 $— $— $1,029,581 
Net investment income— — 1,029 94,943 — 95,972 
Equity in earnings (loss) of unconsolidated subsidiaries— — — 4,888 — 4,888 
Net investment gains (losses)— — (3,067)(39,090)— (42,157)
Other income (expense)(1)
5,122 2,201 2 6,198 (4,119)9,404 
Net losses and loss adjustment expenses(2)
(626,045)(111,407)(39,310)— — (776,762)
Operating expenses(1)(2)(3)
(102,052)(39,901)(248)(34,733)4,633 (172,301)
Deferred policy acquisition costs amortization(2)
(97,757)(14,836)(20,068)— (514)(133,175)
SPC U.S. federal income tax benefit (expense)(4)
— — (1,759)— — (1,759)
SPC dividend (expense) income— — (6,673)— — (6,673)
Interest expense— — — (20,372)— (20,372)
Income tax benefit (expense)— — — 5,423 — 5,423 
Segment results$(27,332)$2,428 $(284)$17,257 $— (7,931)
Reconciliation of segments to consolidated results:
Contingent consideration(5)
9,000 
Transaction-related costs, net(6)
(1,471)
Net income (loss)$(402)
Significant non-cash items:
Depreciation and amortization, net of accretion$10,473 $3,491 $1,186 $22,913 $— $38,063 
(1) Includes certain fees for services provided by the Workers' Compensation Insurance segment to the SPCs at Inova Re and Eastern Re which 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) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
(3) Primarily includes compensation-related costs, professional fees, software and equipment costs and management fees in the Specialty P&C, Workers' Compensation Insurance and Corporate segments. Operating expenses in the Segregated Portfolio Cell Reinsurance segment primarily include bank fees, professional fees, changes in the allowance for expected credit losses and policyholder dividend expense. The remaining operating expenses were comprised of individually insignificant components.
(4) 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 results and are paid by the individual SPCs.
(5) Represents the change in the fair value of contingent consideration issued in connection with the NORCAL acquisition and, for the year ended December 31, 2024, the reversal of a nominal amount of associated contingent investment banker fees accrued during purchase accounting, all of which are included as a component of consolidated net investment gains (losses) on the Consolidated Statements of Income and Comprehensive Income. See further discussion on the contingent consideration in Note 2.
(6) For the years ended December 31, 2024 and 2022, pre-tax transaction-related costs of approximately $0.3 million and $1.9 million, respectively, were included as a component of consolidated operating expense and a nominal amount and $0.4 million of the associated income tax benefit for the years ended December 31, 2024 and 2022, respectively, was included as a component of consolidated income tax benefit (expense) on the Consolidated Statements of Income and Comprehensive Income. For 2024, these costs represent actuarial consulting fees, after tax, paid in connection with the final determination of contingent consideration associated with the acquisition of NORCAL. For 2022, these costs represent the transaction-related costs, after-tax, associated with the acquisition of NORCAL.
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.
Year Ended December 31
(In thousands)202420232022
Specialty P&C Segment
Gross premiums earned:
MPL
$738,422 $738,496 $764,244 
Medical Technology Liability44,432 43,387 41,323 
Lloyd's Syndicates
13,875 19,310 27,486 
Other22,022 25,714 28,933 
Ceded premiums earned(70,809)(71,090)(68,586)
Segment net premiums earned747,942 755,817 793,400 
Workers' Compensation Insurance Segment
Gross premiums earned:
Traditional business183,520 174,743 179,558 
Alternative market business64,225 70,130 72,894 
Ceded premiums earned(80,135)(84,839)(86,081)
Segment net premiums earned167,610 160,034 166,371 
Segregated Portfolio Cell Reinsurance Segment
Gross premiums earned:
Workers' compensation (1)
58,419 65,001 68,548 
MPL (2)
2,540 5,705 10,799 
Ceded premiums earned(8,261)(9,160)(9,537)
Segment net premiums earned52,698 61,546 69,810 
Consolidated net premiums earned$968,250 $977,397 $1,029,581 
(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.