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Benefit Plans
 12 Months Ended
Dec. 31, 2024
Retirement Benefits [Abstract]  
Benefit Plans Benefit Plans
ProAssurance maintains the ProAssurance Savings Plan that provides a vehicle for eligible employees to build retirement income. For the first quarter of 2023 and the year ended December 31, 2022, ProAssurance provided employer contributions to the plan of up to 5% of eligible contributions for qualified employees. Effective April 2023, ProAssurance increased the maximum employer contribution to the plan to 6% from 5% of eligible contributions for qualified employees. ProAssurance incurred expenses related to these savings plans of $5.9 million, $5.7 million and $4.3 million during the years ended December 31, 2024, 2023 and 2022, respectively.
ProAssurance also maintains the ProAssurance Plan that allows eligible management employees to defer a portion of their current salary. ProAssurance incurred nominal expense related to the ProAssurance Plan in each of the years ended December 31, 2024, 2023 and 2022. ProAssurance's deferred compensation liabilities totaled $33.8 million and $32.0 million at December 31, 2024 and 2023, respectively. The liabilities included amounts due under the ProAssurance Plan and amounts due under individual agreements with current or former employees.
Pension
ProAssurance sponsors NORCAL's frozen defined benefit plan, which covers substantially all NORCAL employees (except those that were previous employees of Medicus Insurance Company and FD Insurance Company, employees of PPM RRG as well as new hires after December 31, 2013). Benefits are based on years of service and the employee’s average of the highest five years of annual compensation. Annual contributions to the defined benefit pension plan are above the minimum
funding standards outlined in the Employee Retirement Income Security Act of 1974, as amended. ProAssurance makes contributions to the defined benefit pension plan with the goal of ensuring that it is adequately funded to meet its future obligations. ProAssurance did not make any contributions to NORCAL's defined benefit pension plan during the year ended December 31, 2024 and does not anticipate making any contributions in 2025. The defined benefit pension plan no longer has future service accruals or compensation increases because this plan was frozen effective December 31, 2015.
The PBO for pension benefits represents the present value of benefits earned as of December 31 for vested and non-vested employees. The following table provides a reconciliation of the changes in the PBO and fair value of plan assets for the years ended December 31, 2024 and 2023:
Year Ended
December 31
(In thousands)20242023
Change in benefit obligation:
PBO at beginning of period$74,710 $74,230 
Interest cost3,526 3,666 
Actuarial (gain) loss (1)
(4,437)1,824 
Benefits paid(4,251)(5,010)
PBO at December 31$69,548 $74,710 
Change in fair value of plan assets:
Fair value of plan assets beginning of period$76,136 $75,427 
Actual return on plan assets(418)5,719 
Benefits paid(4,251)(5,010)
Fair value of plan assets at December 31$71,467 $76,136 
Funded (underfunded) status of the plan$1,919 $1,426 
Amount recognized in Consolidated Balance Sheets at December 31 (2)
$1,919 $1,426 
Net actuarial (gain) loss recognized in AOCI and not yet reflected in net periodic benefit cost (income) $1,046 $1,495 
(1) The actuarial gain experienced in 2024 was largely driven by the increase in the discount rate from the prior year that was used to determine the projected benefit obligation at December 31, 2024.
(2) The funded balance is included as a component of other assets on the Consolidated Balance Sheets for the years ended December 31, 2024 and 2023.
The components of the net periodic benefit cost (income) for the years ended December 31, 2024, 2023 and 2022 were as follows:
(In thousands)Year Ended December 31
202420232022
Components of net periodic benefit cost (income):
Interest cost$3,526 $3,666 $2,885 
Expected return on plan assets(3,569)(3,545)(4,013)
(Gain) loss on settlement
— — 163 
Total net periodic benefit cost (income)*(43)121 (965)
Other changes recognized in OCI:
Net actuarial (gain) loss(449)(350)3,476 
Reclassification of gain (loss) on settlement
— — (163)
(Gain) loss recognized in OCI(449)(350)3,313 
Total recognized in net periodic benefit cost (income) and OCI$(492)$(229)$2,348 
*Net periodic benefit cost (income) is included as a component of operating expense on the Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2024, 2023 and 2022.
The components of the change in amounts not yet recognized as components of the net periodic benefit cost (income) were as follows:
Year Ended
December 31
(In thousands)20242023
Items not yet recognized as a component of net periodic benefit cost (income) at beginning of period$1,495 $1,845 
Net actuarial (gain) loss(449)(350)
Items not yet recognized as a component of net periodic benefit cost (income) at December 31$1,046 $1,495 
Amounts recognized in AOCI$1,046 $1,495 
The weighted average discount rate used to determine the projected benefit obligation of the defined benefit pension plan for the years ended December 31, 2024 and 2023 were as follows:
December 31, 2024December 31, 2023
Weighted average discount rate5.51 %4.91 %
The weighted average discount rate and the weighted average expected return on plan assets used to determine net periodic benefit cost (income) for the years ended December 31, 2024 and 2023 were as follows:
December 31, 2024December 31, 2023
Weighted average discount rate4.91 %5.13 %
Weighted average expected return on plan assets5.25 %5.25 %
The long-term rate of return is based on the anticipated returns that will be earned by the portfolio over the long term. The weighted average expected return on plan assets is influenced, but not determined, by historical portfolio performance.
ProAssurance has engaged a certified investment adviser to manage the defined benefit pension plan’s assets. The investment strategy is to build an efficient, well diversified portfolio based on a long-term strategic outlook of the investment markets. The investment markets outlook utilizes both historically based and forward-looking return forecasts to establish future return expectations for various asset classes. These return expectations are used to develop a core asset allocation based on the specific needs of the pension plan. The core asset allocation utilizes investment portfolios of various asset classes and multiple investment managers to help maximize the defined benefit pension plan’s return, while providing multiple layers of diversification to help minimize risk. The defined benefit pension plan’s target allocations, by asset category as of December 31, 2024 and 2023, were as follows:
December 31, 2024December 31, 2023
Fixed maturities90 %90 %
Equity investments10 %10 %
100 %100 %
The pension plan's assets consist of investments in pooled separate accounts that invest in mutual funds, equity investments or debt securities. The fair values of the assets in the defined benefit pension plan, by asset category as of December 31, 2024 and 2023, were as follows:
December 31, 2024
(In thousands)Level 1Level 2Level 3Total*
Pooled separate account investments:
Large cap equity investments(1)
$5,219 $— $— $5,219 
International equity investments(2)
— 2,111 — 2,111 
Corporate and government debt(3)
— 64,137 — 64,137 
Total$5,219 $66,248 $— $71,467 
December 31, 2023
(In thousands)Level 1Level 2Level 3Total*
Pooled separate account investments:
Large cap equity investments(1)
$5,325 $— $— $5,325 
International equity investments(2)
— 2,280 — 2,280 
Corporate and government debt(3)
68,531 — — 68,531 
Total$73,856 $2,280 $— $76,136 
*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 judgement and consideration of factors specific to the assets being valued.
Management has determined that the NAV of the pooled separate accounts represents fair value because the NAV is published and available to current investors and is the basis for current transactions. Consequently, the pooled separate accounts are classified in the fair value hierarchy discussed in Note 2 based upon the ending NAV. The fair values of the underlying investments used to determine the NAV of the pooled separate accounts are primarily publicly quoted prices or quoted prices for similar assets in active or non-active markets, however other inputs may also be used as described below. Below is a description of the inputs and valuation methodologies used to determine the fair value of the Company's defined benefit pension plan assets:
(1) The portfolios invest primarily in publicly traded equity securities of large U.S. companies that are priced using the closing price of the applicable U.S. nationally recognized stock exchange.
(2) The portfolios invest primarily in publicly traded equity securities of non-U.S. companies that are priced using the closing price of the applicable foreign stock exchange, which may require certain liquidity adjustments for non-active markets.
(3) The portfolios invest in various fixed income securities, primarily of U.S. origin. These include, but are not limited to, corporate bonds and U.S. Treasury obligations. The majority of underlying securities were priced using quoted prices for similar assets or pricing models that consider current and historical market data, normal trading conventions, credit ratings and the particular structure and characteristics of the security being valued.
Based on current data and assumptions as of December 31, 2024, the following benefit payments are expected to be paid in future periods:
(In thousands)
2025$5,880 
20264,790 
20274,890 
20285,580 
20295,770 
Thereafter26,400 
Total$53,310